Foreign workers in the United States pay federal income tax at the same graduated rates as U.S. citizens, 10% to 37%, once they qualify as resident aliens for tax purposes. Work visa tax rates aren’t set by visa category; the IRS doesn’t publish an H-1B rate or an L-1 rate. What actually determines your paycheck is a combination of four things: whether you’re classified as a resident or nonresident alien, whether you owe Social Security and Medicare, whether a treaty between your home country and the U.S. reduces the bill, and where in the country you work.
Resident or Nonresident: The Classification That Sets Your Rate
Every foreign worker is sorted into one of two buckets. Resident aliens are taxed like U.S. citizens on worldwide income and get access to the standard deduction and the full range of filing statuses. Nonresident aliens are taxed only on U.S.-source income, generally can’t claim the standard deduction, and usually can’t file jointly with a spouse. Same salary, different bucket, different take-home.
Two tests decide which bucket you land in. The Green Card Test is automatic: if you hold a lawful permanent resident card at any point in the year, you’re a resident alien for that year. The Substantial Presence Test counts your days of physical presence. You need at least 31 days in the current year and at least 183 days over a three-year window, using a weighted formula: all days in the current year, one-third of the prior year’s days, and one-sixth of the days from two years back.1Internal Revenue Service. Substantial Presence Test An H-1B holder who arrived in January and worked the full year will typically pass the test by the second calendar year, if not sooner.
Workers who meet the day count but keep stronger ties to their home country can escape resident status by filing Form 8840 to claim the Closer Connection Exception, which requires a foreign tax home and more significant family, economic, and social ties abroad than in the U.S.2Internal Revenue Service. Closer Connection Exception to the Substantial Presence Test Skip that form, and the day count controls.
Many workers spend part of their arrival year as a nonresident and part as a resident. The IRS calls this a dual-status year. Your status on December 31 determines the main form you file, and only your U.S.-source income is taxable during the nonresident portion, while your worldwide income is taxable during the resident portion.3Internal Revenue Service. Taxation of Dual-Status Individuals There is also a first-year choice election that lets you be treated as a resident from the start of a 31-day period of presence, useful if you want the standard deduction or want to file jointly, but it’s irrevocable without IRS approval.4Internal Revenue Service. Tax Residency Status – First-Year Choice
Federal Income Tax Brackets for 2026
For tax year 2026, single filers face these federal brackets:5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
- 10% on taxable income up to $12,400
- 12% on $12,401 to $50,400
- 22% on $50,401 to $105,700
- 24% on $105,701 to $201,775
- 32% on $201,776 to $256,225
- 35% on $256,226 to $640,600
- 37% on income over $640,600
These rates apply to taxable income, not gross salary. Resident aliens can reduce taxable income using the standard deduction, which is $16,100 for single filers in 2026.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The first $16,100 of a resident alien’s earnings sits outside federal income tax entirely.
Nonresident aliens pay the same bracket percentages on wages effectively connected with a U.S. trade or business, but generally cannot take the standard deduction, so their effective rate on the same gross earnings runs higher.6Internal Revenue Service. Nonresident – Figuring Your Tax Students and business apprentices from India are the one significant exception, allowed to claim the standard deduction under Article 21 of the U.S.-India treaty.
Social Security and Medicare on Top
Most work visa holders owe FICA from their first paycheck: 6.2% for Social Security on the first $184,500 of 2026 earnings, plus 1.45% for Medicare with no cap, for 7.65% total.7Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates8Social Security Administration. Contribution and Benefit Base An additional 0.9% Medicare surtax applies to single filers on wages above $200,000.9Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
H-1B, L-1, and O-1 holders owe FICA regardless of how long they plan to stay. The narrow exemption applies to nonresident aliens on F, J, M, or Q visas whose work is consistent with the visa’s purpose.10eCFR. 26 CFR 31.3121(b)(19)-1 – Services of Certain Nonresident Aliens Once an F-1 or J-1 holder passes the Substantial Presence Test and becomes a resident, that exemption disappears and net pay drops by 7.65% with no change in gross salary.
Workers from countries with a bilateral totalization agreement can be exempt from U.S. Social Security even on visas that would otherwise require FICA. About 30 countries have these agreements, including Germany, Italy, the United Kingdom, Canada, South Korea, and Japan.11Social Security Administration. U.S. International Social Security Agreements Your home country’s social security agency issues a certificate of coverage, which your U.S. employer uses to justify not withholding. Without the certificate, the employer withholds.
If your employer withholds FICA in error, ask for a correction first. If they refuse, file Form 843 with the IRS to claim a refund, attaching your W-2 and an explanation.12Internal Revenue Service. Instructions for Form 843
Treaties Can Change the Rate Entirely
The U.S. has income tax treaties with dozens of countries, and the benefits vary widely. A researcher from China may have a specific dollar amount of wages exempt for up to three years. A worker from Canada may only get relief on certain passive income. Two people on the same visa, doing the same job at the same salary, can pay noticeably different tax simply because of where they’re from.
To claim treaty benefits on wages, file Form 8233 with your employer before the income is paid.13Internal Revenue Service. Claiming Tax Treaty Benefits For passive income, file Form W-8BEN with the payer. Skip these forms and the full statutory rate gets withheld; you’d have to claim a refund at filing time.
One catch trips up many workers. Most U.S. treaties include a saving clause that lets the U.S. tax its own residents as if the treaty didn’t exist.14Internal Revenue Service. Tax Treaties Can Affect Your Income Tax Once you become a resident alien, the saving clause generally shuts off your treaty benefits. Some treaties preserve exceptions for scholarships, teaching income, or pensions, but those exceptions are narrower than the original benefits. A treaty exemption you relied on during your first year may be gone by year two.
State and Local Tax on Top of Federal
Federal tax is only part of the deduction from your paycheck. Most states impose their own income tax. A handful levy none on wages, which can save a high earner thousands each year. Others use graduated rates that climb above 10% on higher incomes. State taxable income is generally built on a base similar to your federal figure, with state-specific tweaks.
Some cities and municipalities add another layer, typically 1% to 4%, occasionally higher. In a high-tax state and city, a top-bracket worker can face a combined federal, state, and local marginal rate above 50%. In a no-income-tax state, the same salary carries only federal and FICA. The address of your employer matters as much as the number on your offer letter.
Which Return You File and When
Residency status controls the form. Resident aliens file Form 1040 and report worldwide income. Nonresident aliens file Form 1040-NR and report only U.S.-source income and income effectively connected with a U.S. business.15Internal Revenue Service. About Form 1040-NR, U.S. Nonresident Alien Income Tax Return Both are due April 15 if you had U.S. wages subject to withholding. Nonresident aliens with no wages subject to withholding get an automatic extension to June 15. Nonresident F, J, M, and Q visa holders with no taxable income still file Form 8843 by June 15.
Tax Clearance Before You Leave the Country
Most work visa holders need a sailing permit, a tax clearance certificate, before departing the U.S. You obtain one by filing Form 2063 if you had no taxable income and owe nothing, or Form 1040-C if you had taxable income and need to settle up.16Internal Revenue Service. Departing Alien Clearance (Sailing Permit) The exemptions are narrow and mostly apply to F and J students whose only income was authorized employment or study allowances, short-term B-1 visitors, and diplomats. Most H-1B, L-1, and O-1 holders don’t qualify for an exemption. The IRS advises applying at least two weeks before departure and no more than 30 days ahead. Appointment availability at some offices is limited, so waiting can delay your flight.
What Happens If You Don’t File
The failure-to-file penalty is 5% of unpaid tax for each month or partial month a return is late, capped at 25%.17Internal Revenue Service. Failure to File Penalty A separate failure-to-pay penalty of 0.5% per month runs on any balance due. When both apply, the IRS reduces the filing penalty by the payment penalty for the first five months; after that, the payment penalty continues on its own.
The bigger risk is on the immigration side. Visa renewals and adjustment-of-status applications can be complicated by unfiled returns or outstanding tax debt. The IRS and immigration authorities are separate agencies, but immigration officers reviewing status changes do look at tax compliance, and a pattern of missed filings raises problems that cost far more to fix later than the taxes would have cost to pay on time.