Filing US Taxes as an H-4 Visa Spouse

The tax season might feel more confusing when your spouse has an H-1B visa, and you have an H-4. You might not be a U.S. citizen, and you could even be without any U.S. income, yet you still might need to file a tax return or be included in one.

In short, whether you need to file taxes on an H-4 spouse depends on your status as a U.S. tax resident, which is determined by the substantial presence test. If you don't qualify, you will be considered a non-resident alien by default. However, you and your spouse can still choose to file jointly by selecting resident treatment. In this blog, we will learn more about filing US taxes as an H-4 visa spouse.

Understanding Tax Residency for an H-4 Visa Spouse

The IRS determines your residency status based on the number of days you have been in the United States rather than the type of visa. This assessment is done through the substantial presence test, which states that you will be classified as a U.S. tax resident for the year if you have been physically present in the U.S. for:

• At least 31 days during the current year, and
• At least 183 days in total over three years. This is calculated as all days in the current year + 1/3 of the days from the previous year + 1/6 of the days from the year before that.

For example, if you arrived on an H-4 visa midway through the year and spent only 90 days in the U.S. that year, you generally would not satisfy the substantial presence test unless your weighted days from the previous two years also cause you to meet the test. It means this makes you a nonresident alien by default for that year.

Additionally, the green card test applies. If you have a green card at any point during the year, you will be considered a resident automatically, regardless of the number of days present.

Importance of Classification Between Resident Alien vs Nonresident Alien

The difference between a resident alien vs nonresident alien is important because it impacts almost every aspect of your tax return. The table below lists the difference between a resident alien and a nonresident alien:

You might not need to file at all if you are a nonresident alien H-4 spouse without US income. However, your tax situation will likely change if you choose a joint tax return with a foreign spouse or if you begin working in the U.S. (for instance, after obtaining an EAD).

Tax Filing When Married to a Non-U.S. Citizen

Being married to a non-U.S. citizen does not automatically complicate your taxes, but it does present a choice that will affect your tax bill. Generally, an H-1B holder married to an H-4 spouse for tax filing has three options:

• Married Filing Separately, with the spouse identified as a nonresident alien (NRA) on the return.
• Married Filing Jointly, where the nonresident spouse is treated as a U.S. resident for tax purposes.
• Head of Household, applicable in limited situations if the H-1B spouse qualifies.

Each of these options has significant implications, so it's important to understand option 2 in detail before jumping to conclusions.

Married Filing Jointly With a Nonresident Alien Spouse

According to Section 6013(g) of the tax code, a U.S. resident (or citizen) can opt to treat their nonresident alien spouse as a resident for tax purposes only for the purpose of filing jointly. This choice can be beneficial, as joint filing usually offers a larger standard deduction and broader tax brackets. However, it comes with considerations:

• Both spouses are subject to taxation on worldwide income: Once the joint election is made, the H-4 spouse's global income will be taxable in the U.S. as well, and not just US income.
• Election continues in future years: It will continue in subsequent years until it's revoked, terminated due to a divorce, or ended by death. It cannot be restarted once it's revoked.
• Tax treaty benefits may become limited.: Typically, if you choose this election, you won’t be able to claim tax treaty benefits from your home country for that year.
• Spouse will need a US taxpayer ID: This is where the ITIN usually comes in.

Filing Separately as a Nonresident Alien

If you opt against the joint election, the H-4 spouse generally does not need to file a U.S. return unless they have their own U.S.-source income. In such a case, the H-1B spouse files as Married Filing Separately, listing the H-4 spouse as a nonresident alien without a Social Security Number (SSN) or ITIN unless otherwise needed.

Moreover, if the H-4 spouse has US income, they must file their own Form 1040-NR to declare only their US source income, such as starting a job under an EAD.

How to Apply for an ITIN for a Spouse?

For those choosing the joint filing option, the H-4 spouse will need either an SSN or an ITIN. Since H-4 status typically does not make them eligible for an SSN (unless an EAD is held), most spouses apply for an ITIN using:

• Form W-7 (the ITIN application).
• Original or certified copies of identifying documents (usually a passport).
• The joint tax return submitted with the W-7 application, as the IRS typically processes both together.

You can expect the processing of an ITIN application along with a paper return to take several weeks to a few months, particularly during peak filing times. So, plan accordingly if you’re near the filing deadline.

Common Tax Situations for H-4 Visa Holders

Common Mistakes H-4 Spouses Should Avoid

Here are some common mistakes that H-4 spouses should avoid regarding US taxes:

• Delaying ITIN applications and missing the filing deadline.
• Assuming H-4 status means no tax filing obligations. However, that is wrong, and the filing requirement is based on residency and income, not the visa type.
• Making a joint election without understanding it brings worldwide income into consideration moving forward.
• Forgetting that reversing the joint election can be challenging once made.
• Overlooking foreign income or assets that may require separate reporting upon achieving resident status.

To Conclude

There is no universal answer for H-4 spouses. The right tax filing method will depend on the number of days spent in the U.S., income sources from both parties, and whether putting worldwide income into a joint return ultimately saves money. Given the variability of these details from year to year and by family situation, it's advisable to consult an expert tax professional at Savetaxs.

We have an entire team of experts who are experienced in cross-border cases and can review your numbers before filing. Our team can help you ensure an accurate and compliant US tax filing process. Contact us right away, as we are actively working 24/7 across all time zones.