Federal tax rate for International students

[toxicdevil]

Whats the Federal tax rate for International students?

[fuzzylogician]

It depends on the source of funding and your visa. Also depends on how much money you will be making. Also on whether or not your country of citizenship has a tax treaty with the US or not. This is the kind of question that Google can be very helpful with. I googled your question as is and found several helpful answers on the first results page. Maybe you should do that and come back with more specific questions if you're still confused. 

[toxicdevil]

On 2/21/2016 at 3:59 AM, fuzzylogician said:

It depends on the source of funding and your visa. Also depends on how much money you will be making. Also on whether or not your country of citizenship has a tax treaty with the US or not. This is the kind of question that Google can be very helpful with. I googled your question as is and found several helpful answers on the first results page. Maybe you should do that and come back with more specific questions if you're still confused. 

Money is around 1850 per month for 20Hr/week TA duty. University is in Blacksburg, VA.

My country has a treaty which exempts first $5000 from tax. Visa is F1 study visa.

I have calculated state tax which is <5%.

Still cant find any other info, mainy because I donot understand US tax system.

[fuzzylogician]

For starters, you can use a tax calculator. It's not going to be perfect because it doesn't take tax treaties into account, but it's a start. You can play with where the deduction comes in and see what it does to the numbers. I don't know which option is closer to the truth, but it at least gives you a ballpark. I don't think anyone here is in a position to give you any more detailed tax advice. As you say, it's complicated. 

https://www.calcxml.com/calculators/federal-income-tax-calculator

http://us.thetaxcalculator.net/

(there are others you can compare, as well)

*also btw, relevant information you didn't give us and is why all I can do is give you links: are you going to be paid over 9 months (I assume) or 12 months, or something else? What matters at the end of the day is how much you make *a year*.

[toxicdevil]

What are the different taxes that I will have to pay on my stipend?

I am an international student on F1 visa. My country has a treaty which exempts $5000 from tax.

Funding is TA 1850 per month for 20Hr/week TA duty in Blacksburg, VA. It is for 9 months so I am expecting an RA offer in the summers.

I think there are only two taxes: federal and state. Am I right? I have calculated state tax which is <5%. Can anyone help me with the Federal tax rate? How do I calculate it?

Also can someone help me understand the US tax system? Do I pay the taxes at the end of year or are they deducted automatically per month? 

In my country you often pay "advance tax" and "withholding tax" on things and you get it refunded when you file. Is it the same for USA? Any information about deductions or exemptions I may qualify for?

 

Let me know if you need any more info.

Edited March 4, 2016 by fuzzylogician
These questions from another post were merged into this thread.

[TakeruK]

Here is the short answer: Expect about 12% of your total stipend to be taxed federally. (It's a slight overestimate for most people). So, when you make your budget, remove 12%.

Long answer:  I find this page very useful in explaining the US tax system: https://en.wikipedia.org/wiki/Income_tax_in_the_United_States

Basically, it's a progressive tax system. The brackets that concern most grad students are 10% for the first $9275 of taxable income and 15% for the next bracket (up to $37,650, which is usually more than most stipends).

You have to determine your taxable income. Non-residents cannot take the standard deduction ($6300) but we do get the personal exemption ($4,000). Since you have a treaty for $5000 of non-taxable income, then if you meet the requirements of that treaty, the first $9000 of your income is non-taxable.

Quick estimate; 1850 per month for 12 months is 22,200. Subtract off $4000 (personal exemption) and $5000 (treaty) and your federal taxable income is $13,200. The first $9275 is taxed at 10%, so you owe $927.50 on that part. The remainder (13,200-9275=3925) is taxed at 15% so you owe $588.75 on that portion. Therefore the total tax you will probably owe is about $1520. Then you have to determine state taxes, which are a lot harder to do but it seems like it would be less. Since you have your treaty, it looks like your total tax will be more like 10% than 12%.

Of course, this is just my estimate based on my very limited knowledge---consult a tax lawyer in the US when you arrive if you are not sure! Or, you'll find that tax software does a very good job too.

Note: You may read about FICA payroll taxes (medicaid and social security). As a student, we do not have to pay these taxes, usually.

---

To your other questions:

1. Whether you get taxes withheld from your paycheck depends on the source of your income, your tax status and your school's HR office. For my school, they withhold 14% of all international student income. So, we always get money back at the end of the year when we file our return, because we always overpay. But for American students, if it's a fellowship income, they do not withhold taxes. Therefore, if you do not have taxes withheld, you may have to make quarterly tax payments (every 3 months) to avoid a fee at the end of the year. When you get your first paycheck, you will know right away if they withheld taxes or not and then take appropriate action.

2. Everyone's situation is different so it's hard to guess what deductions you would qualify for. Probably not very much though, as Non-Resident Aliens cannot take most of the deductions. One thing that is certain is that you can deduct expenses that you incur for 1) filing taxes and 2) buying mandatory school supplies such as books. Mandatory supplies are only specific things that you must absolutely have for the course, such as textbooks. Paper and pencils do not count unless the course specifies that you have to buy a specific type of pencil etc.

I would use tax software to help determine what kind of deductions are possible. It works very well, the software will ask you a lot of questions and from those answers, it will figure out what you are eligible for.

[toxicdevil]

@TakeruK One more thing. The tax year is from Jan-Dec right? So my first semester will be tax-free (I will earn almost 9000 till dec and personal exemption+treaty exemption = 9000).

How much time does the refund process take?

[TakeruK]

5 hours ago, toxicdevil said:

@TakeruK One more thing. The tax year is from Jan-Dec right? So my first semester will be tax-free (I will earn almost 9000 till dec and personal exemption+treaty exemption = 9000).

How much time does the refund process take?

Yes, that's correct. Unless you are already in the US (for an internship, another job, undergrad etc.), you would likely pay no (or very little) taxes in your first tax year in the US as you are only present for a few months. 

The refund process takes awhile. You have to mail in your tax return (no electronic filing allowed for us non-resident aliens) so you have to account for the time it takes for you to mail it in. I think the IRS says 4-6 weeks if you are asking for a refund check mailed to you. I always choose electronic bank transfer, and I see the money in my account approximately one month after I mail the return. Funny thing is, when I owe them money and send them a check, they always cash it within one week but it takes 4 weeks for me to get a refund