Understanding the Tax Treaty Table for F1 & J1 Student Wages…

Understanding the Tax Treaty Table for F1 & J1 Student Wages…

If a student’s country of residence is  included in the table below and the criteria in Column B and Column C are met, wages qualify for a tax exemption, and the following tax form needs to be completed upon hiring:

Form 8233: Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual.

If a student’s country of residence does not appear in the table below, Form 8233 does not need to be completed.

Description of Table Columns

  1. Column A: Students’ country of permanent citizenship. This is used in completing Form 8233 line 12c.
  2. Column B: Maximum length of exemption. After the maximum number of years in the United States has been reached, the individual is subject to federal tax withholding.EXAMPLE: A student from Romania has $2,000 of student wages but has been in the United States for six years. The $2,000 is subject to taxation because the student has been in the United States over the five-year limit.
  3. Column C: Maximum earnings for exemption. The information in Column C is used for completing Form 8233 line 12b. Earnings above the annual maximum per year are subject to taxation. The one exception to this condition is for Canada. Wages below the $10,000 threshold are exempt. However, if wages exceed $10,000, the entire amount is taxable and not just the amount that exceeds $10,000.CANADA EXAMPLE: A student from Canada earns $12,000. Because it exceeds the $10,000 threshold amount, the entire $12,000 is taxable.Note that Table 2 of Publication 901 says that up to $10,000 of dependent personal services compensation paid by a U.S. resident (or foreign resident) to a Canadian resident is excludable under Article XV of the U.S./Canada treaty.

    That might imply that a canadian student  can exclude $10,000 of his $12,000 of wages from income. However, under the explanation on page 4 of Publication 901, if the taxpayer earns more than $10,000 the total amount is taxable. Therefore, the student cannot exclude any income under the treaty.

    OTHER EXAMPLE: A student from China has student wages of $6,000. Because the tax treaty exempts up to $5,000, only $1000 will be subject to federal taxation.

  4. Column D: The tax treaty article citation. This is used in completing Form 8233 line 12a.

  • Column A
  • Column B
  • Column C
  • Column D
  • Country of Residence
  • Maximum Presence in USA
  • Maximum Compensation
  • Treaty Article Citation
  • Bangladesh
  • No Limit
  • $8,000
  • 21(2)
  • Belgium
  • No Limit
  • $9,000
  • 19(1)(b)
  • Bulgaria
  • No Limit
  • $9,000
  • 19(1)(b)
  • Canada
  • No Limit
  • $10,000
  • XV
  • China, People’s Republic
  • No Limit
  • $5,000
  • 20(c)
  • Cyprus
  • 5 years
  • $2,000
  • 21(1)
  • Czech Republic
  • 5 years
  • $5,000
  • 21(1)
  • Egypt
  • 5 years
  • $3,000
  • 23(1)
  • Estonia
  • 5 years
  • $5,000
  • 20(1)
  • France
  • 5 years
  • $5,000
  • 21(1)
  • Germany
  • 4 years
  • $9,000
  • 20(4)
  • Iceland
  • 5 years
  • $9,000
  • 19(1)
  • Indonesia
  • 5 years
  • $2,000
  • 19(1)
  • Israel
  • 5 years
  • $3,000
  • 24(1)
  • Korea, South
  • 5 years
  • $2,000
  • 21(1)
  • Latvia
  • 5 years
  • $5,000
  • 20(1)
  • Lithuania
  • 5 years
  • $5,000
  • 20(1)
  • Malta
  • No Limit
  • $9,000
  • 20(2)
  • Morocco
  • 5 years
  • $2,000
  • 18
  • Netherlands
  • No Limit
  • $2,000
  • 22(1)
  • Norway
  • 5 years
  • $2,000
  • 16(1)
  • Pakistan
  • No Limit
  • $5,000
  • XIII(1)
  • Philippines
  • 5 years
  • $3,000
  • 22(1)
  • Poland
  • 5 years
  • $2,000
  • 18(1)
  • Portugal
  • 5 years
  • $5,000
  • 23(1)
  • Romania
  • 5 years
  • $2,000
  • 20(1)
  • Slovak Republic
  • 5 years
  • $5,000
  • 21(1)
  • Slovenia
  • 5 years
  • $5,000
  • 20(1)
  • Spain
  • 5 years
  • $5,000
  • 22(1)
  • Thailand
  • 5 years
  • $3,000
  • 22(1)
  • Trinidad and Tobago
  • 5 years
  • $2,000
  • 19(1)
  • Tunisia
  • 5 years
  • $4,000
  • 20
  • Venezuela
  • 5 years
  • $5,000
  • 21(1)

***Disclaimer: I am a tax accountant and a CPA licensed in Massachusetts , but I am not your accountant or advocate (Unless you have signed up to my services). This communication is not intended as tax advice, and no tax accountant -client relationship results**

« »