[puneet24gupta]

I came to US on L1 visa (Company Transfer) with my wife (non-working) and son (Infant) on L2 Visa on Aug, 11 2007.
Located in Dallas/Tx with no state tax and getting US salary with tax witholding based on M5 status.
My total stay in L1 visa is <183, but stayed on B1 Visa in Feb-May 2007 for around 75-80 days and was getting per diem allowance and salary in India.

1. Does my stay on B1 visa will be computed for SPT or 183. If yes then can I file a Resident Alien?
2. If I only qualify for Non Resident allien Married filing Separately, do I get the standard deduction for myself and exemptions for my wife and son.
3. Have paid income tax to Indian govt. on my April - Aug 2007 Salary.
4. Does Tax status M5 means that the standard deductions for myself and exemptioms for my family has been provided.
5. Can I choose to file as Resident Status under First years of choice. What are the complications in this way?

Regards,
Puneet

[AtlantaTaxExpert]

Puneet:

1 & 3) You can file jointly with your wife and you BOTH choose to be treated as resident aliens for ALL of 2007. This will require that you claim ALL 2007 world-wide income on your tax return, but it allows you to claim your wife and child, PLUS a $10,700 standard deduction, PLUS the $1,000 Child Tax Credit.

2) You can if you file as a dual-status alien. You CANNOT claim the standard deduction nor the Child Tax Credit, but you can claim your wife and child as dependents and you will pay taxes ONLY on your U.S.-sourced income.

You may have to prepare the return BOTH ways to determine which way is best.

[puneet24gupta]

Thanks for your help Atlanta Expert.

1. To be treated as Resident allien filing jointly, I'm assuming that my stay on B1 Visa has been counted for 183 days calculation and can file by the April, 15 (don't have to wait for completion of 183 days in year 2008 and file extension).

2. But, my wife and son does not completes 183 days by Dec 31, 2007 - does that matter?

3. I have paid home loan interest (3800$) and done investment (1800$) for saving tax in India. Does all of these amount qualifies for the tax exemption here? Is it possible not to club my India income in US return and pay taxes on India only?

Regards,
Puneet

[AtlantaTaxExpert]

1-2) You qualify to file as a resident alien ONLY IF you file jointly with your wife. You will NOT have to wait because you have qualified for SPT; your wife will file as the non-resident alien spouse and youBOTh will have to sign a statement to that effect, so no efiling.

3) The home loan interest IS deductible, but probably will NOT exceed your $10,700 standard deducttion. You MUST claim the India-sourced income; that is black-letter law.

[puneet24gupta]

I appreciate your answers and impressed by your deep knowledge of taxes.

Will I be able to exclude my Foreign income from US taxation purpose either through Bonafide Residency Test or Physical Presence Test. I been into the US on B1/B2 visa on the following occasion before finally coming on L1 visa in Aug, 11 2007 till date:

Arrival Date Departure Date Total Days
------------- ------------------ ------------
2/24/2007 5/12/2007 78
8/5/2006 9/17/2006 42
11/25/2005 1/1/2006 36

What should be my tax home for year 2007?

[MukatA]

Once you decide to file joint return as residents, you must both declare your worldwide income for the year 2006.

For a major part of your income in India, you were in the U.S. so you will not meet both the Bonafide residency test and physical presence test. You will need to file Form 1116 to claim credit for the taxes paid in India.

Read: Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income

[puneet24gupta]

Thanks for quick reply sir.

Here you are referring 2006 worldwide income or the 2007 income? I thought I have to include my India income from Jan-Dec 2007.

[MukatA]

Yes, on your 2007 tax return you must declare worldwide income for 2007.
For filing as residents, only one spouse must meet the SPT (183 days) requirement.