H1B Visa Holders
For H1B visa holders, 2026 is a landmark year for tax filing. With the implementation of the One Big Beautiful Bill (OBBB), the “standard” H1B tax return has been redesigned with new deductions for overtime and higher limits for state tax write-offs.
Whether you are in your first year of H1B or nearing your Green Card, understanding how to bridge your Indian financial interests with your U.S. tax residency is the key to avoiding IRS audits.
1. The Residency Transition: 1040 vs. 1040-NR
The biggest mistake H1B holders make is filing the wrong form. Your filing status is determined by the Substantial Presence Test.
- Resident Alien (Form 1040): If you were in the U.S. for more than 183 days in 2025, you are taxed on worldwide income.
- First-Year H1B: If you moved from India mid-year and don’t meet the 183-day test, you may be a Non-Resident (1040-NR) or Dual-Status.
- The Strategy: Filing as a Resident often allows for a “Joint Return” with your spouse, which significantly lowers your tax bracket.
2. Claiming the New 2026 Overtime Deduction
Under the OBBB, H1B professionals who put in extra hours can now keep more of their pay check.
- The Benefit: You can deduct up to $12,500 of qualified overtime compensation from your taxable income.
- The Rule: This applies to the 0.5x “premium” portion of your pay. If you are a salaried employee, you must ensure your W-2 or pay stubs explicitly break out overtime hours to qualify.
3. SALT Cap and State Taxes
Indian expats often settle in high-tax tech hubs like San Jose, Austin, or Seattle.
- The Update: The State and Local Tax (SALT) deduction cap has increased to $30,000.
- The Strategy: If your combined state income tax and property tax exceed $15,750 (the 2025 standard deduction), you should itemize on Schedule A to maximize your refund.
4. Disclosing Indian Assets (FBAR & FATCA)
Once you are an H1B Resident Alien, your Indian accounts are no longer private from the IRS.
- FBAR: Mandatory if your Indian bank accounts, PFs, or mutual funds exceeded $10,000 at any time.
- PFICs: Be careful with Indian Mutual Funds. They are taxed aggressively as Passive Foreign Investment Companies (PFICs) and require Form 8621.
How KKCA Secures Your Status
H1B holders face unique risks where tax errors can impact visa renewals. At KKCA, we protect you by:
- H1B-Specific Analysis: We calculate if “Dual-Status” or “Full-Year Resident” election is better for your specific move date.
- Treaty Application: We use the U.S.-India DTAA to ensure your NRO/NRE interest isn’t double-taxed.
- Compliance Audit: We review your FBAR and FATCA filings to ensure they match the data the IRS receives from Indian banks.
Call to Action
Looking for personalized tax services about your specific tax situation, please contact us. We are here to help you with your specific tax matters.
Frequently Asked Questions (FAQ)
Q: Can I claim my parents in India as dependents? A: No. Under current tax laws, dependents must generally be U.S. citizens, residents, or nationals, or residents of Canada or Mexico.
Q: I paid TDS in India on my rental income. Do I pay tax again in the U.S.? A: You must report the gross rental income, but you can claim a Foreign Tax Credit (Form 1116) for the TDS paid, which usually prevents double taxation.
Q: Is my Indian Provident Fund (PF) taxable in the U.S.? A: Employer contributions and accrued interest in a PF may be taxable annually unless you make a specific treaty election. It is also an FBAR-reportable account.
Q: Does my spouse need an SSN to file jointly? A: Your spouse needs either an SSN or an ITIN (Individual Taxpayer Identification Number). We can help you apply for an ITIN along with your tax return.
Disclaimer
This blog is intended for informational purposes only and does not constitute legal or tax advice. Please consult a qualified U.S. CPA or tax attorney for guidance specific to your situation.