Tax Guide for Immigrants

You owe US tax on worldwide income once you meet the substantial presence test or hold a green card. If you lack an SSN, you file using an ITIN. Your immigration status does not change your tax obligations, and filing a return does not put your immigration case at risk.

TaxKiln Editorial · Last reviewed: May 26, 2026

The US tax system taxes based on residency and income source, not citizenship or immigration status. If you earn income in the United States, the IRS expects a return — and understanding the rules that apply specifically to immigrant filers can save thousands of dollars and prevent costly compliance mistakes.

Key mechanics

The Substantial Presence Test and Your Tax Residency

The IRS determines whether you are a US tax resident primarily through two tests: the green card test and the substantial presence test. The green card test is straightforward — if you hold a lawful permanent resident card at any point during the calendar year, you are a US tax resident for that entire year.

The substantial presence test uses a rolling three-year formula under IRC Section 7701(b). You count every day you were physically present in the US during the current calendar year, plus one-third of the days you were present in the immediately preceding year, plus one-sixth of the days you were present in the year before that. If the total reaches 183 or more, you meet the test and are treated as a US tax resident for the current year. For example, if you were present 120 days in 2026, 120 days in 2025, and 120 days in 2024, your count would be 120 + 40 + 20 = 180, and you would NOT meet the test.

There are important exceptions. Days spent in the US as an exempt individual — including certain students (F/J visas for up to 5 calendar years), teachers and trainees (J visas for up to 2 years), and foreign government-related individuals — do not count toward the substantial presence test. Additionally, even if you meet the 183-day threshold, you can claim the closer connection exception using Form 8840 if your tax home was in a foreign country and you maintained closer ties to that country throughout the year.

For your first year in the United States, you may qualify for dual-status treatment: you are a nonresident alien for the portion of the year before you met the substantial presence test, and a resident alien for the remainder. This matters because nonresident aliens are taxed only on US-source income, while resident aliens are taxed on worldwide income. Dual-status returns require careful allocation of income between the two periods and are filed using Form 1040 with a statement attached.

You are treated as a US tax resident if you are physically present in the US for at least 183 days under a weighted three-year formula, unless an exception applies. (IRC Section 7701(b)(3); Treas. Reg. 301.7701(b)-1 through 301.7701(b)-9)

ITINs: Filing Without a Social Security Number

An Individual Taxpayer Identification Number (ITIN) is a nine-digit number issued by the IRS to individuals who need to file a US tax return but are not eligible for a Social Security Number. ITINs are formatted like SSNs (9XX-XX-XXXX) but always begin with the digit 9 and have a middle digit range of 50-65, 70-88, 90-92, or 94-99.

To apply, you submit Form W-7 along with your federal tax return and original identification documents (or certified copies from the issuing agency). Acceptable documents include a valid passport (which serves as a standalone ID document), a national identification card, a US or foreign driver's license, a birth certificate (required for dependents under 18), and several others listed in the W-7 instructions. The IRS has also designated Certified Acceptance Agents (CAAs) at locations throughout the country who can verify your documents in person, allowing you to keep your originals rather than mailing them to the IRS.

ITINs expire if not used on a federal return for three consecutive tax years, or if issued before 2013 on a rolling schedule. Expired ITINs must be renewed before filing — otherwise your return will be processed, but any exemptions and credits claimed using the expired ITIN will be disallowed, and your refund will be delayed.

There is a critical distinction between ITINs and SSNs for credit eligibility. The Child Tax Credit ($2,200 per qualifying child for 2026) requires the child to have a valid SSN. ITIN holders claiming children without SSNs receive only the Other Dependent Credit at $500 per dependent. The Earned Income Tax Credit also requires a valid SSN for the filer, spouse (if filing jointly), and all qualifying children. This means ITIN filers are locked out of two of the largest refundable credits in the tax code.

ITINs allow tax filing without an SSN but do not confer eligibility for the CTC or EITC, which require valid Social Security Numbers. (IRC Section 24(h)(7) (CTC SSN requirement); IRC Section 32(m) (EITC SSN requirement); IRS Rev. Proc. 2015-32 (ITIN procedures))

Treaty Benefits and Foreign Account Reporting

The United States has income tax treaties with over 60 countries, and many of these treaties contain provisions that can substantially reduce the tax burden on immigrant entrepreneurs. Common treaty benefits include reduced withholding rates on dividends, interest, and royalties; exemptions for business profits earned without a permanent establishment in the US; and special rules for students and trainees.

To claim treaty benefits, you typically file Form 8833 (Treaty-Based Return Position Disclosure) with your return. Failure to disclose a treaty-based position can result in a $1,000 penalty per failure under IRC Section 6712, even if the underlying tax position is correct. Some treaties also include tie-breaker rules for individuals who might be considered tax residents of both countries — these rules typically look at permanent home, center of vital interests, habitual abode, and nationality, in that order.

If you maintain financial accounts outside the United States, you have two separate reporting obligations. First, if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar year, you must file FinCEN Form 114 (FBAR) electronically by April 15, with an automatic extension to October 15. The penalty for willful failure to file an FBAR can reach the greater of $100,000 or 50% of the account balance per violation. Second, under FATCA (the Foreign Account Tax Compliance Act), you must file Form 8938 if your foreign financial assets exceed $50,000 at year-end or $75,000 at any point during the year (thresholds double for MFJ filers). Form 8938 covers a broader range of assets than the FBAR, including foreign stock, securities, and interests in foreign entities.

Many immigrant entrepreneurs maintain bank accounts, property, or business interests in their country of origin. Even small balances can trigger these reporting requirements. The penalties for non-filing are severe, but the IRS offers streamlined filing compliance procedures for taxpayers who can certify that their failure to report was non-willful — a critical safety valve for immigrants who simply did not know about these requirements.

Foreign accounts over $10,000 aggregate require FBAR filing; foreign assets over $50,000 require Form 8938. Treaty positions must be disclosed on Form 8833. (31 USC Section 5314 (FBAR); IRC Section 6038D (FATCA/Form 8938); IRC Section 6712 (treaty disclosure penalty); IRC Section 894 (treaty benefits))

Self-Employment Tax and Business Structure for Immigrant Filers

Self-employment tax applies to immigrant filers the same way it applies to any US tax resident: 15.3% on net self-employment earnings (12.4% Social Security up to the $184,500 wage base for 2026, plus 2.9% Medicare on all earnings, plus 0.9% Additional Medicare Tax on earnings above $200,000 for single filers). If you meet the substantial presence test or hold a green card, your worldwide self-employment income is subject to SE tax.

However, the United States has bilateral Social Security agreements (called Totalization Agreements) with about 30 countries. If you are covered under the social security system of one of these countries, you may be exempt from US self-employment tax on the same earnings. To claim this exemption, you need a Certificate of Coverage from the foreign country's social security administration. This can save you the full 15.3% SE tax on qualifying earnings.

For ITIN holders, there is a practical complication: without an SSN, you cannot accumulate Social Security credits, meaning the 12.4% you pay toward Social Security provides zero future benefit to you. This is not a basis for exemption — you still owe the tax — but it is a financial reality worth understanding when planning your business finances.

The Qualified Business Income (QBI) deduction under IRC Section 199A allows eligible self-employed individuals to deduct up to 20% of their qualified business income from their taxable income. This deduction is available to all eligible filers regardless of immigration status or whether they file with an SSN or ITIN. For a self-employed immigrant with $50,000 in net business income, this can reduce taxable income by $10,000, saving $1,200-$2,200 in income tax depending on their marginal bracket.

Self-employment tax at 15.3% applies to all US tax residents on net SE earnings. Totalization agreements may exempt earnings already covered by a foreign social security system. (IRC Section 1401 (SE tax rates); IRC Section 233 (Totalization Agreements); IRC Section 199A (QBI deduction))

Relevant credits & deductions

Name	Description	IRS form / schedule
Foreign Tax Credit	Dollar-for-dollar credit for income taxes paid to a foreign government on the same income that is taxed by the US. Prevents double taxation for immigrant filers who maintain income sources in their country of origin.	Form 1116
Foreign Earned Income Exclusion	Allows qualifying individuals to exclude up to $132,900 (2026) of foreign earned income from US taxation. Requires a tax home in a foreign country and meeting either the bona fide residence or physical presence test. Primarily relevant for immigrants who spend significant time abroad.	Form 2555
Other Dependent Credit	A $500 non-refundable credit for dependents who do not qualify for the Child Tax Credit — including children claimed with an ITIN rather than an SSN. This is often the only dependent credit available to ITIN filers.	Schedule 8812
Self-Employment Tax Deduction	Deduction for 50% of self-employment tax paid, taken as an adjustment to income on Schedule 1. Available to all self-employed filers regardless of immigration status.	Schedule 1, Line 15

State variance

California

CA does not recognize federal tax treaties for state income tax purposes. Income exempt under a treaty federally may still be taxable on your CA return. CA also has its own ITIN acceptance procedures and offers the CalEITC to ITIN filers.

Texas

No state income tax, which simplifies filing for immigrant entrepreneurs. However, the franchise tax (0.375%-0.75% on gross receipts over $2.47M) applies to businesses regardless of the owner's immigration status.

New York

NYC imposes its own income tax (3.078%-3.876%) on top of NY state tax. The state follows federal treaty provisions for nonresidents but applies its own sourcing rules for income earned in New York.

Worked example

Carlos Mendoza, a Houston, TX-based ITIN-holding self-employed contractor (drywall and painting), in 2026:

Carlos holds an ITIN and has been in the US for 4 years. He earned $48,000 net self-employment income in 2026. He has two children, both with ITINs (no SSNs). He files as Head of Household. He has no foreign accounts or treaty benefits. Texas has no state income tax.

Financial calculation for worked example:

Gross self-employment income:                    $48,000
  Less: 50% SE tax deduction                      ($3,394)
  Less: QBI deduction (20% of $48,000)             ($9,600)
  Adjusted Gross Income:                             $44,606
  Less: Standard deduction (HOH)                  ($19,450)
  Taxable income:                                    $25,156
  Federal income tax (10% on $16,550 + 12% on $8,606): $2,688
  Self-employment tax (15.3% on $48,000 x 0.9235):   $6,788
  Other Dependent Credit (2 children x $500):        ($1,000)
  Note: No CTC — children have ITINs, not SSNs
  Note: No EITC — filer has ITIN, not SSN
  Total federal tax liability:                        $8,476
  Effective federal rate on $48,000 net income:       17.7%

Frequently asked questions

What happens if I miss the April 15 tax deadline?+

If you owe tax, the IRS charges two separate penalties: failure to file (5% of unpaid tax per month, max 25% under IRC §6651(a)(1)) and failure to pay (0.5% per month, max 25%). File Form 4868 for an automatic 6-month extension — but the extension only extends the FILING deadline, not the PAYMENT deadline. Interest accrues from April 15 regardless. If you have a clean 3-year history, you may qualify for First Time Abatement (FTA) to waive the failure-to-file penalty.

Do I need a CPA or can I file my own taxes?+

Most self-employed people with straightforward Schedule C income can file using tax software (TurboTax, FreeTaxUSA, TaxAct). Consider a CPA or Enrolled Agent (EA) if you have: an S-Corp election, multi-state filing, rental property with cost segregation, your first year of self-employment (to set up correctly), or an IRS notice. EAs are federally licensed and often less expensive than CPAs. The IRS Volunteer Income Tax Assistance (VITA) program offers free help for incomes under $67,000.

How do quarterly estimated tax payments work?+

Self-employed people must pay estimated tax quarterly (April 15, June 15, September 15, January 15) if they expect to owe $1,000 or more. The safe harbor under IRC §6654 is paying at least 100% of prior-year tax (110% if AGI exceeded $150,000). Use Form 1040-ES or pay via IRS Direct Pay or EFTPS. Missing payments triggers an underpayment penalty calculated per quarter — even if you pay everything at filing time.

Does filing a tax return affect my immigration case?+

No. IRC Section 6103 prohibits the IRS from sharing taxpayer information with immigration authorities. Filing a return is a tax obligation, not an immigration action. In fact, a consistent filing history is often viewed favorably in immigration proceedings as evidence of good moral character and compliance with US law.

Can I claim the Earned Income Tax Credit with an ITIN?+

No. The EITC requires a valid Social Security Number for the filer, their spouse (if filing jointly), and every qualifying child. ITIN holders are not eligible. However, several states have created state-level EITC equivalents for ITIN filers, including California (CalEITC), Colorado, Connecticut, Illinois, Maryland, Maine, Minnesota, New Jersey, New Mexico, Oregon, and Washington.

What happens if I did not know about the FBAR requirement and have not filed?+

The IRS offers Streamlined Filing Compliance Procedures for taxpayers who can certify that their failure to file FBARs was non-willful (due to negligence, inadvertence, or misunderstanding, not intentional avoidance). Under these procedures, you file the last 3 years of amended returns and 6 years of FBARs with no penalties. This is a critical lifeline — the standard FBAR penalty for non-willful violations is up to $10,000 per account per year.

I earned income in my home country before moving to the US mid-year. Do I owe US tax on that income?+

It depends on your residency status. If you are treated as a dual-status alien for the year, income earned before your residency starting date is taxed only if it is US-source income. Income earned after your residency starting date is taxed on a worldwide basis. If you elect to be treated as a full-year resident (for example, to file jointly with a US citizen spouse), all worldwide income for the entire year becomes taxable, though you may claim foreign tax credits for taxes paid abroad.

Last reviewed: May 26, 2026