Tax Deductions for H1B Visa Professionals
For H1B professionals, the 2026 tax season (covering the 2025 tax year) brings a transformed landscape. The One Big Beautiful Bill (OBBB) has introduced brand-new “above-the-line” deductions that reduce your taxable income regardless of whether you take the standard deduction or itemize.
Knowing these specific categories can save an H1B household thousands of dollars in federal taxes.
1. The “No Tax on Overtime” Deduction
This is the single biggest update for H1B holders who work in engineering, healthcare, or tech roles with high hourly demands.
- The Benefit: You can deduct up to $12,500 ($25,000 for married couples) of “qualified overtime compensation.”
- The Calculation: This applies only to the “premium” portion (the extra 0.5x of your time-and-a-half pay).
- Requirement: Your employer must explicitly report this on your W-2. If you are a salaried H1B worker with an “overtime-exempt” status, you may not qualify unless your contract provides for additional hourly pay beyond 40 hours.
2. Increased SALT Deduction ($40,000 Cap)
For years, H1B holders in high-tax states like California, New Jersey, and New York were penalized by the $10,000 cap on State and Local Tax (SALT) deductions.
- The Change: The OBBB has increased the SALT cap to $40,000 for 2025 ($20,000 if filing separately).
- The Impact: If you pay $25,000 in state income tax and $10,000 in property tax, you can now deduct the full $35,000 (if you itemize), whereas previously you would have lost $25,000 of that deduction.
3. Student Loan Interest & Article 21
If you transitioned from an F-1 (student) to an H1B visa in 2025, you might still have a “treaty window.”
- Loan Interest: You can deduct up to $2,500 in student loan interest paid on qualified loans (subject to MAGI phase-outs).
- The Treaty Bonus: Indian citizens who were students or business apprentices immediately before becoming H1B holders may still claim the Standard Deduction ($15,750) even if they are non-residents, thanks to Article 21 of the U.S.-India Tax Treaty.
4. Personal Vehicle Loan Interest
For the first time in decades, interest on a car loan is deductible for personal use.
- The Limit: You can deduct up to $10,000 in interest paid on a loan for a new vehicle purchased after December 31, 2024.
- Constraint: The vehicle must have undergone final assembly in the United States (check your VIN). Used cars do not qualify.
How KKCA Secures Your Status
Many H1B professional default to the Standard Deduction because it’s “easier,” but with the new $40,000 SALT cap and car loan interest, itemizing is now the smarter move for most. At KKCA, we:
- Perform a “Dual Calculation”: We compare your return using the $15,750 standard deduction against an itemized return featuring your state taxes, mortgage interest, and charitable gifts.
- W-2 Analysis: We review your pay stubs to ensure your overtime “premium” is correctly identified to claim the new OBBB deduction.
- Article 21 Verification: We ensure that if you moved from F-1 to H1B, you aren’t leaving the standard deduction on the table during your non-resident months.
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 deduct the cost of my H1B visa processing fees? A: No. Legal and filing fees for the H1B visa are generally considered an employer expense. If you paid them yourself, they are usually considered a personal immigration expense and are not deductible.
Q: I moved from India for my job; can I deduct my moving expenses? A: No. The OBBB permanently eliminated the moving expense deduction for non-military taxpayers. However, if your employer reimbursed you, that reimbursement may be taxable income.
Q: Are my charitable donations to Indian NGOs deductible? A: Generally, only donations to U.S.-registered 501(c)(3) organizations are deductible. Donations made directly to Indian charities do not qualify unless the organization has a U.S. “Friends of” entity.
Q: Can I claim the new Overtime Deduction if I am a manager? A: It depends on your FLSA status. If you are classified as “exempt” and receive a flat salary regardless of hours worked, you typically do not have “qualified overtime compensation” as defined by the IRS.
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.