H1B Visa Holders: Filing 1040 or 1040NR in 2026?

H1B Visa Holders

For H1B Visa holders filing in 2026, the choice between Form 1040 and Form 1040-NR is one of the most critical financial decisions you’ll make. This choice is dictated by your tax residency, which unlike your immigration status is calculated using a specific IRS formula.

Under the One Big Beautiful Bill (OBBB), the benefits of being a “Resident” (1040) have increased, but so has the complexity of reporting global assets.

1. The Deciding Factor: Substantial Presence Test (SPT)

You are considered a Resident Alien for tax purposes if you pass the Substantial Presence Test. To pass for the 2025 tax year, you must have been physically present in the U.S. for at least 31 days in 2025 AND 183 days over a three-year look-back period.

The 183-Day Formula:

• of the days you were present in 2025
• of the days you were present in 2024
• of the days you were present in 2023

2. When to File Form 1040 (Resident Alien)

If you pass the SPT (usually H1B holders who arrived before July 2025 or have been in the U.S. for multiple years):

• The Advantage: You can claim the Standard Deduction ($15,750 for singles / $31,500 for married in 2025) and various credits like the Child Tax Credit.
• The Responsibility: You must report worldwide income. This includes your Indian salary, NRE/NRO interest, and rental income from India.
• Compliance: You are likely required to file FBAR if your Indian accounts exceed $10,000.

3. When to File Form 1040-NR (Nonresident Alien)

If you arrived late in 2025 (e.g., October 2025) and have no prior U.S. history, you are a Nonresident:

• The Advantage: You only pay tax on U.S.-sourced income. Your Indian earnings before you moved are completely invisible to the IRS.
• The Disadvantage: No standard deduction. You must itemize deductions (like state taxes or charity), which are often lower than the standard amount.
• The Exception: Unlike H1B professionals, Indian students on F-1 status can use 1040-NR and still claim the standard deduction under Article 21.

4. The “Dual-Status” Conflict

Many H1B Visa  holders who move mid-year fall into the “Dual-Status” trap. You are a nonresident for part of the year and a resident for the rest.

• Manual Filing: Dual-status returns often cannot be e-filed through DIY software. They require a “Statement” (Form 1040-NR) attached to a “Return” (Form 1040).
• The Choice: You can sometimes elect to be treated as a Full-Year Resident to get the higher standard deduction, but this requires reporting your Indian income for the entire year.

How KKCA Secures Your Status

Filing 1040 when you should have filed 1040-NR (or vice versa) can create a “red flag” on your immigration record. At KKCA, we help you:

• Residency Strategy: We perform the SPT calculation and “First-Year Choice” analysis to see which status yields the highest refund.
• Treaty Protection: We apply the U.S.-India DTAA to ensure you aren’t paying double tax on your Indian income.
• Clean Record: We ensure your filing status matches your visa history, which is vital for your future Green Card “Public Charge” and compliance checks.

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: If I file 1040-NR, do I still pay Social Security and Medicare (FICA)? A: Yes. H1B holders are subject to FICA taxes from day one of employment, regardless of their tax residency status.

Q: Can I use TurboTax to file 1040-NR? A: No. TurboTax and FreeTaxUSA are for residents only. Filing a 1040 when you are a nonresident can be considered a fraudulent return.

Q: What if I meet the SPT but want to be treated as a Nonresident? A: You may be able to file Form 8840 (Closer Connection Exception) if you can prove your tax home is still in India and you spent fewer than 183 days in the U.S. in 2025.

Q: Does my tax residency affect my spouse? A: If you are a resident, you can often elect to treat your H4 spouse as a resident as well to file a joint return, even if they just arrived.

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.