[air2009]

Experts, please help

My wife and I lived in US for 5+years, and my wife didn’t work at all. I was on H1-B visa, and we left US in April 2008, which makes me on a dual status in 2008 for tax purpose. I have no income from US source after I left US, except interest from US bank account and dividends from my US brokerage account. I know I have to use 1040 as the statement for resident period, and 1040NR for non-resident period, and I cannot file jointly, but I still have questions about filing tax return as dual status.

1. On form 1040, I only have to fill out up to line 43--taxable income, which excludes all deductions and exemptions, or I also have to figure out the tax (line 41) using married filing separately rate (only allowed to use this rate for calculate the tax on dual status), is this correct? If I take exemption on form 1040, can I take another $3500 exemption for my wife? Because in the guideline, it says I cannot file jointly, that’s confused me if I can take this exemption or not.
2. On form 1040NR, I have to copy the total amount of taxable income on line 43-1040 to line 8(wages), or line 35(AGI), or line 40 (taxable income) on 1040NR? It makes me feel like I have made income during my non-resident period, so after I copy my income from 1040 to 1040NR, can I take exemptions from 1040NR again? Or if I take the credits and exemptions from 1040 for the income I earned during resident period, I only can take those exemptions on the income I earned in NR period, such as interests and dividends?
3. Or can I do calculation separately on 1040 and 1040NR, and finally copy the tax I have to pay from 1040 to 1040NR, then excludes the withheld and figure if there is a refund on 1040NR?

Thanks for your time and consideration. Really appreciate it.

[AtlantaTaxExpert]

1) You cannot file jointly on a dual-status return, but you CAN claim your wife as a dependent on Form 1040. You will use Married Filing Separately tax rates.

2) Transfer Line 43 or Form 1040 to Line 40 of Form 1040NR,then calaculate the tax from there.

[air2009]

AtlantaTaxExpert

Really thank you for the response.
More questions regarding your answers:
Answer 1. According to you, on 1040, I only can check married filing separately on filing status section, and write my wife's name on 6c--dependents in exemption section, rather than check 6b--spouse, am I right?

Answer 2. Does this mean I cannot take those exemptions on 1040NR after taking those exemptions from 1040 for the income earned as resident?

Thanks again for your expertise!

[AtlantaTaxExpert]

No, you actually list your wife AS A DEPENDENT in section #7.

You claim the exemptions and calculate the taxes ONLY ONCE, which is done, in your case, on Form 1040NR because you are an expatriate dual-status alien.

[air2009]

AtlantaTaxExpert

Firstly, thank you again.

As you said, I have to transfer TAXABLE INCOME of 1040 to 1040NR, that means I already took those exemptions and credits under 1040's rule, so I cannot take exemptions and credits using 1040NR's rule. If I show my wife as a dependent on 1040NR and cannot take any exemptions on that cause I am already done my deductions on 1040, what is the reason for that?

So my question is that I should calculate my taxable income on 1040 or 1040NR for the resident period? If I only can transfer my taxable income from 1040 to 1040NR, how can I claim my wife as a dependent on 1040 for exemptions?

Thank you so much!

[AtlantaTaxExpert]

You show her as a dependent on BOTH forms, but do NOT take the exemption on Form 1040. You take the exemptions on Form 1040NR and calculate the tax on Form 1040NR.

You need to show the exemptions on Form 1040 because the dependency exemptions MAY be limited by your U.S.-sourced income being less than the dependency exemption. Not likely, but possible.

[air2009]

Thanks,one more question:

Should I count the interests and dividends from my US saving account and brokerage account as the taxable income during my non-resident period,and show those on form 1040NR?

Thank you very much!

[AtlantaTaxExpert]

You do NOT pay taxes on the interest earned during your non-resident period, but you DO show it on Page 5 of the Form 1040NR.

You DO pay taxes on the dividends, however.