Your First US Tax Return on H-1B: A No-Panic Guide
Resident vs. non-resident, the substantial presence test, India income, and the forms that actually matter.
Reviewed by Deepak Middha, CA, Series 65
Last reviewed April 12, 2026Full profile
Tax season in your first year is where most NRIs feel genuinely lost — new vocabulary, high stakes, and bad advice everywhere. Let's make it boring and clear: who counts as a resident, what income is reportable, and which forms actually matter.
The test that decides everything
- Your tax residency is set by the Substantial Presence Test, not your green card
- Residents are taxed on worldwide income; non-residents only on US income
- Many first-year H-1B holders are dual-status — non-resident part of the year, resident the rest
Are you a resident for tax purposes?
The IRS uses the Substantial Presence Test, not your visa. Broadly, you're a resident alien if you were physically in the US for at least 31 days this year and 183 days across a weighted three-year window. Residents are taxed on worldwide income; non-residents only on US income.
Worldwide income means India too
If you're a resident alien, your Indian salary (before you moved), rental income, savings interest, and mutual-fund gains are all reportable. The India–US treaty and the Foreign Tax Credit (Form 1116) usually prevent true double taxation — you credit taxes paid in India against your US bill — but you still have to disclose. See how the DTAA protects your income.
Don't skip these disclosures
- If your foreign accounts together crossed $10,000 at any point, you must file an FBAR (FinCEN Form 114) — separate from your return, with severe penalties for ignoring it
- FATCA (Form 8938) is a similar disclosure that kicks in at higher thresholds
- Disclosure is required even when no extra tax is owed
The forms checklist
Key takeaways
- W-2 from your employer
- 1099s for any interest, dividends, or freelance income
- Form 1040 — the main return
- Form 1116 if claiming the Foreign Tax Credit
- FBAR if foreign accounts crossed $10,000
- Form 8938 if you cross FATCA thresholds
DIY or hire a pro?
Hire an NRI CPA if
- You have India income this year
- You're dual-status in year one
- You have RSUs or stock comp
DIY software is fine if
- You're single and W-2 only
- You have no India income after moving
- Your return is otherwise straightforward
A CPA who specifically does NRI returns costs a few hundred dollars and prevents five-figure mistakes.
Have Indian income to report?
See exactly how the India-US treaty and Form 1116 stop you being taxed twice.
Coming from F-1 or OPT? Your rules just changed
If this is your first return after moving from student status, three things are different from every return you have filed before — and each one catches people out.
FICA now applies. As an F-1 student who was a nonresident, your wages were exempt from Social Security and Medicare. On H-1B that exemption is gone: 7.65% comes out of every paycheck. If you are still owed a FICA refund from an OPT year where an employer withheld it in error, that is a separate claim you can still pursue — see the F-1 tax calculator for the process.
Your residency may have flipped. F-1 students are exempt individuals for five calendar years, and the change of status to H-1B does not by itself make you a resident — but once your days start counting, the Substantial Presence Test can tip you over mid-year. That produces a dual-status year: nonresident for part of it, resident for the rest, taxed under different rules for each period, and not eligible for joint filing. Work out which side of the line you are on with the substantial presence test guide before you pick a form.
The India treaty deduction stops. If you were claiming the standard deduction on Form 1040-NR under Article 21(2) as a student, that specific benefit is a student provision. As a resident filing Form 1040 you get the ordinary standard deduction instead — which is usually better — but the mechanism is different and your software will handle it differently.
Common mistakes
- The year you become a resident is the year your Indian income becomes reportable — savings interest, mutual funds, rental income, all of it. It was invisible to the IRS while you were a nonresident. This is the single most common omission on a first H-1B return.
The bottom line
File on time, disclose everything, and keep your documents for seven years. The one caveat: the moment India income, dual-status, or RSUs enter the picture, hire an NRI-focused CPA. Do that and the IRS becomes a non-event.
