Hi everyone—2018 was the first year the tax reform took effect, so there are many differences in filing taxes this year compared with before. Below I’ll share some of my experiences from filing taxes this year. This article only describes the author’s personal tax-filing experience. I am not a CPA.
Major Changes
- The personal exemption was eliminated and folded into the standard deduction. This is unfavorable for Nonresidents (NR cannot use the standard deduction).
- Tax rates were lowered across brackets, resulting in an overall tax cut:
| 2017 tax | 2018 tax | ||||
|---|---|---|---|---|---|
| Rate | Single | Married Joint | Rate | Single | Married Joint |
| taxable income over | taxable income over | taxable income over | taxable income over | ||
| 10% | $0 | $0 | 10% | $0 | $0 |
| 15% | $9,325 | $18,650 | 12% | $9,250 | $19,050 |
| 25% | $37,950 | $75,900 | 22% | $38,700 | $77,400 |
| 28% | $91,900 | $153,100 | 24% | $82,500 | $165,000 |
| 33% | $191,650 | $233,350 | 32% | $157,600 | $315,000 |
| 35% | $416,700 | $416,700 | 35% | $200,000 | $400,000 |
| 39.6% | $418,400 | $470,700 | 37% | $500,000 | $600,000 |
- There are now limits on itemized deductions: the combined deduction for state tax/local tax is capped at $10,000 (unfavorable for people in high-property-tax/high-state-tax areas); mortgage interest is deductible only on the portion below $750,000 (unfavorable for borrowers in high-home-price areas)
Nonresident Alien
1040nr-ez: https://www.irs.gov/forms-pubs/about-form-1040-nr-ez
Because there is no personal exemption this year, according to the instructions, you must file if you have more than $5 of income. In general, if you meet the following conditions (see the instructions for details), you can use the simplified nr-ez version: no children or other dependents; income under $100,000; no stock income or investment dividends (bank interest does not count).
Otherwise, you need to use the much more complicated long form:
https://www.irs.gov/forms-pubs/about-form-1040-nr
When filling out 1040nr-ez, pay attention to the following:
- line 8: If your school W-2 income did not subtract the 5000 treaty amount, enter the amount after subtracting 5000 here. Then fill in treaty article 20 (c) on page2 J.
- line 11: itemized deduction: on nr-ez, enter the state and local income taxes paid here
- If you used an itemized deduction for state tax last year and received a 1099-G this year, the 1099-G should be entered on 1040nr-ez line 4 or 1040nr line 11
- For nr filers, basically only these two parts can be deducted; everything else is taxable income and the tax due is calculated based on the tax rate (see the tax calculation table at the end of the instructions).
- You do not need to report 1099-int issued by a bank, but 1099-misc for refer income does need to be reported: 1040nr-ez has no place to report 1099-misc income, so it needs to go on line 54 of 1040nr with Schedule SEC attached. It belongs to the fifth category under Noneffectively Connected Income. It is calculated at a flat 30% tax rate. (There is also a view that it should be reported on Line 21. Other income and taxed at normal income tax rates.)
- nr tax filing requires attaching Form 8843 to declare nr status
Resident Alien
Resident filing is relatively simple. If you do not have stock investment income, you can use some free tax software and file by directly importing your W-2. Or you can buy the appropriate version of tax software. This year there is only one 1040 form, and it is much more streamlined, so if you study it carefully it is not too difficult.
- Resident Alien can choose either the standard deduction of $12,000 for single / $24,000 for married filing jointly, or itemized deduction: state tax/local tax (capped at 10,000) + mortgage interest + large medical expenses > 12,000/24,000
- Resident Alien students and scholars can still use the 5000 treaty; see https://www.uscreditcards101.com/can-resident-alien-apply-tax-treaty/ for details
- Resident alien must report all types of income, including 1099-int, 1099-misc, etc. In effect, those amounts are directly added to income. 1099-int goes on Schedule B and 1040 line 2b. 1099-misc goes on Schedule 1 line 21 and is included in 1040 line 6.