Hi, Taxexpert:
I came to U.S three years ago as J1, and then went back to china for two years waiver. Right now I came to U.S again as postdoc, holding H-1B visa. My question is : Am I qualified for tax exemption during the first three years according to US-china treaty?

Thanks

QUOTE,"Am I qualified for tax exemption during the first three years according to US-china treaty"--- You are not exempt from the substantial presence test unless you are present in the United States on an F, J, M or Q visa( depending on residency test UNDER THE US TAX CODE). Suppose you , as an H-1B visa holder, have been in the US for the entire tax year (once you entered the U.S. on your visa before January 1, 2010) or meet the substantial presence test (>183 days), then you are treated as a resident alien under the US tax code, and will have to file either Form 1040, 1040A ,1040EZ(1040a and 1040ez if not claiming your itemized deduction). You should pay all taxes as a resident aline should such as yoour FICA Taxes, Fed/State Taxes(for State taxes if applicable), SDI Taxes(in Ca but not in opther States)all withheld by your employer from your wages on a quarterly basis as you can see. You are able to claim all the exemptions and credits which are available to U.S. citizens.
Also as a resident alien , you also need to report ALL of your gross income not only from the US. But from abroad. All of your gross income is subject to U.S. taxation.
In return, If you fail the substantial presence test( I do not know how long you have been in the US in 2010), you are a nonresident alien. And as a nonresident alien, you need to file your tax return each year on only your US based income, which is subject to U.S. income tax.

h1-b is work visa. You do not get any treaty benefit if you are paid by U.S. employer. You will pay social security tax, medicare tax and income tax.

In your FIRST year on the H-1B visa, you can file as:

- a non-resident alien if you are in the U.S. for LESS than 183 days.
- a dual-status alien if you are in the U.S. for MORE than 183 days, but less than 365 days.
- a resident alien if you spent EVERY day in the calendar year in the U.S.

Note the resident alien requirement for the FIRST year: you must be physically present in the U.S. for EVERY DAY of the 365 day calendar year. If you arrive in the U.S on 2 January 2010, you must file a dual-status return for 2010. You will be able to file as a resident for the following years even if you spend some time outside of the United States, but NOT in the first year.

What if I'm H1-B visa holder and I stay for less than 183 days in US? Will I get tax exemption?

Probably not, because your income source is a U.S. source.

If you need professional tax help with this, email me at [email protected] or [email protected].

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