Tax Deductions for H-1B Visa Holders: What You Can and Can’t Claim

If you’re an H-1B visa holder working in the United States, understanding tax deductions can help you lower your taxable income and maximize your tax refund. While H-1B workers must follow the same tax laws as U.S. citizens and residents, there are some key differences in what deductions and credits you may qualify for.

This guide breaks down which deductions H-1B holders can and cannot claim, ensuring you stay compliant with IRS rules while optimizing your tax return.

1. Do H-1B Visa Holders Qualify for Tax Deductions?

Yes, H-1B visa holders can claim tax deductions, but eligibility depends on tax residency status.

• Non-Resident Aliens (NRAs): Limited tax benefits. Generally, NRAs can only claim deductions related to income earned in the U.S.

• Resident Aliens: Can claim standard deductions, itemized deductions, and tax credits like U.S. citizens.

  
  

To determine your tax residency, use the Substantial Presence Test (SPT), which considers the number of days you have spent in the U.S. over the past three years. If you meet the SPT, you are considered a resident alien for tax purposes and can claim more deductions.

2. Tax Deductions H-1B Holders Can Claim

If you qualify as a resident alien, you may be able to deduct the following expenses:

A. Standard Deduction

• Resident aliens can claim the standard deduction, which for 2023 tax returns is:

  • $13,850 for single filers

  • $27,700 for married couples filing jointly

  • $20,800 for heads of household

• Non-resident aliens generally cannot claim the standard deduction, except for Indian citizens under a U.S.-India tax treaty.

  
  

B. State and Local Taxes (SALT Deduction)

If you live in a state with income taxes, you can deduct state and local income taxes paid throughout the year. This is especially useful for H-1B holders in high-tax states like California, New York, and Illinois.

C. Job-Related Expenses (Only for 1099 Independent Contractors)

• If you work as an independent contractor (1099 worker), you may deduct:

  • Home office expenses (if you work from home exclusively for business).

  • Work-related travel expenses (flights, hotels, meals).

  • Professional fees (certifications, industry courses).

• H-1B workers who are W-2 employees cannot deduct these expenses under current tax laws.

D. Retirement Contributions (401(k) and IRA Contributions)

H-1B workers contributing to a 401(k) plan can deduct up to $22,500 in 2023 (or $30,000 if age 50 or older). Contributions to a Traditional IRA (up to $6,500) may also be tax-deductible if you meet income limits.

E. Medical and Dental Expenses

If your out-of-pocket medical expenses exceed 7.5% of your adjusted gross income (AGI), you can claim a deduction for the amount above that threshold. This applies to doctor visits, surgeries, prescriptions, and some insurance premiums.

F. Charitable Donations

Donations to qualified U.S. charities can be deducted if you itemize your deductions. Be sure to keep receipts and ensure the charity is IRS-approved.

3. Tax Deductions H-1B Holders Cannot Claim

Some deductions are not available to H-1B workers, especially those classified as non-resident aliens. These include:

• Work-related moving expenses (except for military personnel).

• Unreimbursed job expenses for W-2 employees (e.g., uniforms, commuting costs).

• Foreign tax credits for income earned outside the U.S. (H-1B workers are only taxed on U.S. income).

  
  

4. Tax Credits H-1B Holders Can Claim

H-1B holders may also qualify for tax credits, which reduce tax liability dollar-for-dollar. Some common credits include:

• Child Tax Credit – If you have a dependent child with a valid Social Security Number, you may qualify for up to $2,000 per child.

• Education Tax Credits – If you pay for higher education in the U.S., you may qualify for credits like the Lifetime Learning Credit (LLC).

• Earned Income Tax Credit (EITC) – Available to low-income filers who meet income thresholds.

  
  

5. Filing Taxes as an H-1B Holder

A. Which Tax Forms to Use?

• Form 1040-NR: For non-resident aliens.

• Form 1040: For resident aliens (same as U.S. citizens).

B. When to File?

• The tax deadline is April 15 each year.

• Non-resident aliens who owe no tax and don’t have wages withheld have until June 15 to file.

C. ITIN vs. SSN

If your spouse or dependents don’t qualify for an SSN (Social Security Number), they must obtain an ITIN (Individual Taxpayer Identification Number) to be listed on your tax return.

6. Common Tax Mistakes H-1B Holders Should Avoid

• Claiming incorrect deductions – Ensure you qualify before taking deductions, especially if you are a non-resident alien.

• Failing to file state taxes – Some states (like California) tax foreign workers even if they leave the U.S.

• Not reporting worldwide income – Resident aliens must report all income, even from foreign sources.

• Overpaying taxes – Many H-1B workers overpay taxes due to misunderstandings about deductions. A tax professional can help optimize your return.

  
  

7. Should You Hire a Tax Professional?

If your tax situation is straightforward, you may be able to file on your own using tax software like TurboTax or H&R Block. However, if you:

• Have income from multiple states,

• Are applying for a green card, or

• Need help with complex deductions,

…it may be best to hire a CPA or tax professional who specializes in H-1B visa tax filings.

Final Thoughts

Understanding tax deductions can save H-1B visa holders thousands of dollars each year. If you qualify as a resident alien, you can claim many of the same deductions as U.S. citizens. If you’re a non-resident alien, your deductions may be more limited, but there are still ways to minimize your tax liability.

The key to maximizing deductions is knowing your residency status, keeping detailed financial records, and filing correctly. If in doubt, consulting a tax professional can help ensure compliance while optimizing your return.