Managing Finances and Taxes as an International Student

Managing finances as an international student is one aspect many overlook but is important. Between tuition, living expenses, and unexpected costs, it’s easy to quickly lose control. Add taxes to the mix, and things can get even more complicated. But don’t worry—this guide will break it down for you step by step so you can navigate your finances confidently and avoid unnecessary stress.

Create a Realistic Budget

Your first step to financial stability is crafting a budget. A budget isn’t just about tracking your spending—it’s about understanding your financial priorities. Start by categorizing your expenses into essentials and non-essentials, for example:

Essentials: Tuition, rent, groceries, transportation, and utilities.

Non-essentials: Eating out, entertainment, subscriptions, and shopping.

Set aside a specific amount for each category and monitor your spending regularly. Tools like Mint or YNAB (You Need A Budget) can help you track and visualize your expenses in real time.

Pro Tip: Use the 50/30/20 rule as a starting point—allocate 50% of your income to needs, 30% to wants, and 20% to savings or debt repayment. Adjust as needed based on your situation.

Open a Local Bank Account

Having a local bank account simplifies financial management. It allows you to avoid foreign transaction fees, easily deposit checks, and make everyday payments. When choosing a bank, consider:

No monthly fees: Look for student-friendly accounts that waive maintenance fees and have no international wire transfer fees. We recommend Adro.

ATM access: Ensure there are ATMs near campus to avoid withdrawal charges.

Tax as an International Student

Filing taxes as an international student in the U.S. may seem daunting, so this section may be a little longer.

All international students on F-1 or J-1 visas are required to file taxes, even if they did not earn any income in the U.S. Filing taxes serves two main purposes:

• Compliance with U.S. laws: It confirms your status as a non-resident alien and ensures proper documentation.
• Reclaiming overpaid taxes: If you worked and had taxes withheld from your paycheck, you might be eligible for a refund.

There are several forms international students should be aware of.

Form 8843

• Who: All F-1 and J-1 visa holders, regardless of income.
• Purpose: Confirms your status as a non-resident alien for tax purposes.
• Details: Even if you didn’t earn income, you must submit this form to the IRS to document your time in the U.S.

Form 1040-NR (Non-Resident Alien Tax Return)

• Who: Students who earn income in the U.S. through on-campus jobs, internships, or other employment.
• Purpose: Reports income and calculates your tax liability.

State Tax Forms

• Who: Students who earn income in states that collect income tax (some states like Florida and Texas have no state income tax).
• Details: State tax laws vary, so check the specific requirements of your state. For example, some states may exempt certain income thresholds for students.

Employment and Taxes for International Students

International students on F-1 or J-1 visas are subject to U.S. federal and sometimes state income taxes for on-campus and off-campus employment. However, they are exempt from Social Security and Medicare taxes for the first five calendar years if they maintain non-resident status.

Steps to File Taxes for Both Employment Types:

1. Obtain your Form W-2 from your employer by January 31, summarizing earnings and taxes withheld.
2. Complete Form 1040-NR to report your income.
3. File state tax returns if required by your state.
4. Attach Form 8843 to confirm your visa status.

Key Differences:

• On-campus employment includes jobs within the university (e.g., library or dining hall), with earnings reported similarly but typically only subject to federal and state taxes.
• Off-campus employment, such as through CPT or OPT, requires employer authorization but follows the same tax filing steps. Employers may also provide a W-2 for off-campus roles, and tax exemptions for Social Security and Medicare still apply if non-resident status is maintained.

If you have not earned income during the tax year, you must still file Form 8843. This form is simple and straightforward but must be submitted by the tax deadline (typically mid-April).

Using Resources to File Taxes

Navigating tax filing can be overwhelming, but there are resources specifically designed for international students:

1. University International Offices: Many universities offer workshops or one-on-one sessions to guide you through the tax filing.
2. Tax Software for Non-Residents: Tools like Sprintax and Glacier Tax Prep are tailored for international students, ensuring compliance with non-resident tax laws.

How to File Taxes

1. Gather Necessary Documents:
   1. Form W-2 (from employers).
   2. Form 1099 (if you earned income as an independent contractor).
   3. Passport and visa information.
   4. Form I-20 or DS-2019.
   5. Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
2. Fill Out the Required Forms
   1. Use Sprintax or similar software to complete Form 8843 and Form 1040-NR
   2. Prepare your state tax return if applicable.
3. Submit Forms by the Deadline:
   1. Federal tax forms go to the Internal Revenue Service (IRS).
   2. State tax forms go to the respective state’s tax department.
4. Keep Copies for Your Records:
   1. Always save a copy of your filed tax forms and related documents for future reference.

Filing taxes as an international student may seem challenging, but breaking it into simple steps makes the process easier. Whether you work on or off campus, staying organized, using helpful resources, and filing on time will keep you compliant and stress-free.