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Financial Planning & Tax Implications for International Students

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Are you an international student attending school in the United States? It’s important to learn how your status and circumstances impact your finances and taxes. But where can you get the information you need to know so you can make smarter financial decisions both on and off campus?

The university you’re attending may offer useful resources through the financial aid office, but it may be difficult to get all of your questions answered, especially those better suited for an experienced financial professional.

To complement their own on-campus resources, prestigious institutions like the Harvard Business School now invite financial professionals who specialize in working with immigrants and foreign nationals to conduct educational sessions to answer the more complex questions often on the minds of international students.

If you are unable to attend such a session in-person, you’ll find answers below to several questions frequently asked by international students interested in enjoying life on campus more with less money stress.

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This page is organized into sections to help you quickly find the information you need and get answers to your questions:

  1. Q&A with Jane Mepham: Answers to Top International Student Questions
  2. Get Answers to Your Questions About Financial Planning for International Students
  3. Browse Related Articles

Q&A for International Students: Financial Planning & Tax Considerations

Answers to Top International Student Questions with Jane Mepham:

We asked Austin-based financial advisor Jane Mepham to answer questions she often hears from the international students she serves as clients and those she meets when conducting educational sessions on university campuses like the Harvard Business School.

Q: What are the financial things I need to consider the first year I get to the US on a student visa?

Jane: First, congratulations on getting admitted to the college and getting that visa. Financially you are getting into a system that’s probably very different from where you are coming from. Be patient with yourself.

Get a good handle on your budget, which is likely going to be more than you’ve planned for. In addition to the usual items, like accommodations (9-month versus 12-month lease), plan for other items like healthcare costs (which can be very expensive in the US), off-campus living, and travel costs in the country, as well as flying home.

Don’t forget the costs of a cell phone. You don’t want to be roaming in the US, as that can be very expensive. Try WhistleOut for cell phone plan shopping.

Open a bank account at a local credit union and understand the different types of accounts and the various fees. Each bank will require different forms for the account opening.

Understand the different options you have for money transfers, like Wise, and international wires.

Your bank account will thank you

We share useful money tips each week to help you enjoy life more with less money stress.

Q: As an international student, do I have to file taxes every year?

Jane: Yes, you must file taxes every year if you have US-sourced income.  Examples of US-sourced income are W-2 income, taxable stipend, grants, investment income, etc.

The number of days you are physically in the US will determine if you have to file as a tax resident or a tax-no-resident. The tax-residency status is not the same as immigration status.

With a few exemptions, if you are F1, J1, M, or Q visas, you have to wait for 5 calendar years, before you can start using the number of days you are physically in the US to determine your tax residency status.

This means most students will file taxes as non-residents. There are things you are not able to take advantage of as a non-resident. But one benefit is you don’t have to report your worldwide income.

Q: I have a scholarship for my studies, is this taxable?

Jane: If the scholarship is foreign-based, and your tax filing status is non-resident, you most likely don’t have to file taxes on that.

If the company or organization giving you the scholarship is US-based, and they pay this directly to the school, you most likely won’t have to pay taxes. But if they give you cash, to pay, they need to withhold a certain amount for taxes, which you can get back by filing.

Q: If I’m planning on staying in the US to work after I graduate, what financial considerations should I keep in mind?

Jane: Congratulations, this means you’ve landed a job on a work visa, or you OPT (Optional Practical Training).

You want to keep paying taxes either as a resident or non-resident. OPT is an extension of an F1 visa. So, the same non-resident tax requirements will apply.

If on an H-1B visa, you are most likely going to have to pay taxes as a resident. But you’ll need to pass the substantial presence test.

Keep in mind that the US will tax you on your worldwide income, which means including your assets in your home country.

This will also mean having to report overseas assets via the FBAR or other IRS forms. It’s important you adhere to the rules and do your best to comply.

Start working on building your US credit history

When you are finally ready to apply for your permanent residency, having paid your taxes in the past is considered a good thing. This guide will give you the top things to do in the first 3-6 months as you start working on your H-1B Visa.

Q: Can I invest in the US market as an F1 student?

Jane: Yes, you can, if you have the money. But be careful and make sure to understand the tax implications of some of these accounts. For example, you’ll be taxed a flat 30% on dividends and interest, but some of the taxes can be reduced by tax treaties if one exists between your home country and the US.

Are you looking for a financial professional who can speak with your international students?

If you’re a college faculty member looking for help answering the questions your international students have regarding the implications of being on an F1 Visa, Jane Mepham welcomes the opportunity to discuss scheduling a visit to your campus. To connect with Jane, please visit her website or send an email to jane@elgonfa.com.

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