The Tax Moves Blog

Income Exclusions – A Relief for Workers

The One Big Beautiful Bill (OBBBA) introduces specific exclusions that directly benefit certain types of earnings for J-1 visa holders and other nonresident workers, provided they have a valid Social Security Number (SSN). These exclusions are designed to reduce the taxable income for individuals whose earnings may otherwise be modest or seasonal.

Tip Income

Under the new law, tips received by employees are tax-free up to $25,000 per year. This is particularly relevant for J-1 students or exchange visitors working in hospitality, restaurants, or service industries, where tipping forms a substantial part of income.

💡 Example: Maria, a J-1 student working as a server in a New York restaurant, earns $6,000 in tips over the summer. Thanks to the OBBBA, none of this tip income is subject to federal tax, effectively increasing her take-home pay and reducing her overall tax liability.

Overtime Pay

In addition, overtime earnings up to $12,500 annually are exempt from federal taxes. This applies to students or temporary workers who take on extra shifts beyond their standard schedule.

💡 Example: John, a J-1 research intern, works extra hours during peak project periods and earns $4,000 in overtime. This amount is now excluded from taxable income, lowering his overall tax burden and providing extra financial flexibility.

Why This Matters for J-1 Visa Holders

For J-1 participants, income is often limited and highly regulated, and every dollar matters. By excluding tips and overtime from taxation within the specified limits, the OBBBA ensures that short-term work programs and seasonal jobs remain financially viable. This is not only a benefit for students but also encourages compliance, as workers can report their actual income without facing unexpected tax liabilities.

The New 1% Tax on Money Transfers Abroad?

The One Big Beautiful Bill Act (OBBBA), enacted as Public Law 119-21 on July 4, 2025, introduces a 1% excise tax on remittance transfers made after December 31, 2025. This tax applies to most international money transfers unless the provider has an agreement with the U.S. Treasury. The tax is calculated based on the amount of the transfer, not the service provider’s fees. The One Big Beautiful Bill Act (OBBBA), enacted as Public Law 119-21 on July 4, 2025, introduces a 1% excise tax on remittance transfers made after December 31, 2025. This tax applies to most international money transfers unless the provider has an agreement with the U.S. Treasury. The tax is calculated based on the amount of the transfer, not the service provider’s fees.

For many J-1 visa holders, sending money back home is part of their exchange program experience. With the introduction of this tax, the cost of sending money abroad has increased.

💡 Example: A student who transfers $400 monthly to their family will now pay an additional $4 per month, or $48 per year, in remittance taxes.

The OBBBA also increases the backup withholding threshold to $2,000, which reduces the chances of having taxes withheld unexpectedly on small payments. Arnold & Porter

Affordable Care Act (ACA) Subsidy Restrictions

The OBBBA also modifies eligibility for ACA subsidies:

Income-Based Eligibility:

Lawfully present immigrants who earn less than the federal poverty level will no longer be eligible for ACA subsidies starting December 31, 2025.

Core Guides & Calculators

1. Learn everything about J1 visa taxes — our complete 2026 step-by-step guide for nonresident workers with W-2 income.

2. Estimate your refund instantly with our J1 visa tax calculator — no signup required.

3. Compare Form 1040 vs 1040NR for J1 visa holders and find out which one applies to you.

4. Understand the importance of your DS-2019 form — it defines your program, tax status, and eligibility.

Forms & Tax Documents

5. Did you receive a 1099 instead of a W-2? Here’s what to do — Form 1099 for J1 visa workers explained.

6. Learn how to apply for your SSN or ITIN as a J1 visa holder before filing your taxes.

7. Understand your IRS transcripts for J1 visa taxes — what they show and how to request them.

8. Received a Form 1042-S? Discover what it means and how to include it in your tax return.

9. Find your Form W-2 for J1 visa — and learn what each box means when you file.

10. File correctly using the official Form 1040NR for J1 visa holders — step-by-step.

11. Don’t forget your Form 8843 — it’s mandatory even if you had no income.

12. Check this J1 visa tax return example using Form 1040NR to understand how everything fits together.

Special Cases & IRS Resources

13. Missed the April deadline? Learn how to file J1 visa taxes after April and still get your refund.

14. Review official IRS guidance on Taxation of J-1 visa holders and resident status.

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