Federal vs. State Tax Residency for J-1 Visa Holders

When you arrive in the United States on a J-1 visa for study, teaching, research, or training, it is common to have questions about your tax obligations. One of the most frequent is: Why does my federal tax residency not match my state tax residency? The answer lies in the fact that the IRS and state tax authorities use different rules to decide whether someone is considered a resident or nonresident for tax purposes. Understanding these differences is essential for accurate filing and avoiding mistakes.

The Tax Moves Blog

Aug 22, 2025 | J1 VISA, Learning IRS

U.S. Capitol building in Washington D.C., symbolizing federal legislation and the One Big Beautiful Bill Act affecting international students and J-1 visa holders

Federal Tax Residency

Determining your federal tax residency status is one of the first steps for J-1 visa holders in the United States. The IRS applies two main criteria: the Green Card Test and the Substantial Presence Test (SPT). Understanding these rules is essential because your residency status defines whether you file taxes as a resident (reporting worldwide income) or as a nonresident (reporting only U.S.-sourced income) [IRS, Publication 519].

1. Green Card Test

If the U.S. Citizenship and Immigration Services (USCIS) grants you a permanent resident card (green card), you are considered a tax resident from the first day of that calendar year, regardless of how many days you physically spent in the country. This rule applies automatically and leaves no flexibility once residency is granted. For J-1 visa holders, this situation is less common, but it sets a clear distinction between immigration status and tax residency.

2. Substantial Presence Test (SPT)

The SPT applies if you were in the U.S. for at least 31 days in the current year, and your total days of presence meet or exceed 183 days, calculated as: all days of the current year, one-third of the days from the previous year, and one-sixth of the days from the second year before. However, J-1 visa holders receive special exemptions. For tax purposes, students on J-1 visas do not count days for the first five calendar years, while teachers, trainees, and researchers are exempt for the first two years. During this time, they remain classified as nonresident aliens, even if physically present in the U.S. [IRS, Publication 519].

3. Exceptions and Practical Implications

There are exceptions, such as the Closer Connection Exception, which allows someone who meets the SPT to still be treated as a nonresident if they can prove stronger ties to another country (e.g., maintaining a home or primary family residence abroad). The practical impact is significant: federal residents must report worldwide income, while nonresidents only report U.S.-sourced income. For J-1 holders, understanding this distinction helps avoid errors in tax filing, prevents double taxation, and ensures compliance with IRS rules.

State Tax Residency

State tax residency is one of the most important yet misunderstood aspects of U.S. taxation. Unlike federal residency rules, which apply uniformly across the country, each state has its own standards to determine whether an individual is considered a resident for income tax purposes. These rules can be based on your legal home (domicile), the number of days you spend in the state (statutory residency), or a combination of both.

1. Domicile: Your Permanent Home

Most U.S. states determine tax residency based on domicile—your permanent legal home, the place you intend to return to after any time away. Evidence of domicile can include a driver’s license, voter registration, lease agreements, or primary banking relationships. As noted by Investopedia, “a person’s tax residency can be established through domicile (permanent home) or statutory residency” Investopedia.

2. Statutory Residency: The 183-Day Rule

Even if your domicile is elsewhere, many states consider you a resident if you spend 183 days or more in their jurisdiction within a calendar year. This “statutory residency” rule activates long-term tax obligations, regardless of where your home is. InvestGuiding highlights that time spent, even for brief visits, gets counted as full days in this calculation investguiding.com.

3. Dual Residency: Filing in More Than One State

If you split your time across multiple states say, living in one while working in another—you may end up as a resident of both. This could require filing tax returns in each jurisdiction. Fortunately, many states offer credits for taxes paid to avoid double taxation Investopedia.

Why Federal and State Residency Can Differ

The reason someone can be treated as a nonresident for federal tax purposes while simultaneously being considered a resident for state tax purposes lies in the fact that federal and state tax systems apply completely separate rules. At the federal level, the IRS relies on the Substantial Presence Test (SPT) and specific exemptions—for example, J-1 students are exempt for five calendar years and J-1 teachers or researchers for two—meaning a visa holder may remain a federal nonresident despite living in the U.S. under an exchange program irs.gov.

States, however, set their own criteria, often focusing on domicile (your permanent home, demonstrated through documents like a driver’s license, lease, or voter registration) or statutory residency, typically triggered by spending more than 183 days in the state (investopedia.com, fusiontaxes.com). Because these standards operate independently, it is possible for someone who qualifies as a federal nonresident to be treated as a state resident purely based on time spent or ties established locally.

young women reviewing J-1 visa tax documents on a laptop, using J1 Go Tax for accurate filing and guidance

This lack of alignment between federal and state rules often creates confusion and, without proper documentation, can lead to unexpected tax obligations or even state-level audits.

Key Tips for J-1 Visa Holders

Use your exemption period wisely: 2 or 5 years as a nonresident for federal purposes.
Always file Form 8843 annually, even if you had no income.
Check for tax treaties with your home country, which may reduce taxes on scholarships or wages.
Be aware of dual-status aliens: in transition years, you may need to file both Form 1040-NR and Form 1040.

Sprintax vs J1 Go Tax: Which Is Better?

- Sprintax is widely known, but it charges high fees.
- J1 Go Tax was built exclusively for J-1 visa holders.
- Our model: “No refund, no fee” → if you don’t get a refund, you don’t pay.
This makes filing risk-free.