Regimes: 5
FICA exemption for nonresident alien students, teachers and researchers (F-1, J-1, M-1, Q-1)
OpenFor people relocating
Exemption from Social Security and Medicare (7.65% employee share)
Details
- Who
- Nonresident aliens in F-1, J-1, M-1 or Q-1 status: students, and J-1/Q-1 teachers and researchers for less than 2 calendar years.
- How it works
- Wages for services allowed by the visa status are exempt from Social Security and Medicare (7.65% employee share) while the person is a nonresident alien under IRC 7701(b); the exemption ends on a change of status (e.g. to H-1B) or on becoming resident. Federal and state income taxes still apply.
- Duration
- While you are a non-resident alien under IRC 7701(b) in F/J/M/Q status (for J-1/Q-1 teachers and researchers, usually under 2 calendar years)
- How to opt in
- Automatic if the work is allowed by USCIS and matches the purpose of the visa; tell your employer your status.
- Limits and risks
- Does not apply to J-2 dependants, to work outside the visa purpose, after a change of status (e.g. to H-1B) or on becoming resident; federal and state income tax still apply.
- Legal basis
- IRS, Alien liability for Social Security and Medicare taxes of foreign teachers, foreign researchers and other foreign professionals
- Checked
- 4 November 2026
Qualified business income deduction (Section 199A)
OpenFor the self-employed
Deduction of up to 20% of business income; from 2026 at least USD 400 if active business income is USD 1,000 or more
Details
- Who
- Individuals with business income from sole proprietorships, partnerships, S corporations, trusts and estates; not employees or C corporations.
- How it works
- Deduction of up to 20% of qualified business income (capped at 20% of taxable income less net capital gains); limits apply to specified service businesses and above income thresholds. Made permanent by the OBBBA (2025).
- How to opt in
- On Form 1040 — whether you take the standard deduction or itemize.
- Limits and risks
- Not for wages or C corporations; for specified service businesses and income above the threshold the deduction is limited or lost.
- Legal basis
- Internal Revenue Code § 199A; IRS, Business owners can claim a qualified business income deduction
- Checked
- 4 November 2026
Inversionista Residente Individual (Código de Incentivos, Ley 60-2019) — Puerto Rico, US territory
OpenFor investors
0% (applications by 31 Dec 2026) or 4% (later applications) Puerto Rico tax on dividends, interest and post-move gains
Details
- Who
- Individuals relocating to Puerto Rico (a US territory with its own tax system) who become bona fide residents with a decree; for applications after 31 Dec 2026 — not resident in Puerto Rico in the 6 years before relocating.
- How it works
- Preferential Puerto Rico tax on dividends, interest and post-move capital gains: decrees applied for by 31 Dec 2026 — 0% (until 31 Dec 2035); applications after 31 Dec 2026 — 4% until 31 Dec 2055 (Act 38-2026; pending Fiscal Oversight Board endorsement when checked). US citizens are exempt from federal tax only on Puerto Rico-source income; wages earned there remain subject to FICA.
- Duration
- Until 31 Dec 2035 (0%) or 31 Dec 2055 (4%)
- How to opt in
- Apply for a decree from the Puerto Rico government and move, becoming a bona fide resident of Puerto Rico.
- Limits and risks
- US citizens are exempt from federal tax only on Puerto Rico-source income; FICA still applies; genuine residence in Puerto Rico is required.
- Legal basis
- Código de Incentivos de Puerto Rico (Ley 60-2019), as amended by Ley 38-2026; DLA Piper summary
- Checked
- 4 November 2026
Foreign earned income exclusion (IRC § 911)
OpenOther
Up to USD 132,900 of foreign earnings (2026) free of federal income tax
Details
- Who
- US citizens and residents with a foreign tax home: bona fide residents of a foreign country for a full tax year, or physically present abroad 330 full days in 12 months
- How it works
- Earnings for work abroad are excluded from taxable income — up to USD 132,900 in 2026; a housing exclusion or deduction may be added. The remaining income is taxed at the rates that would apply without the exclusion.
- How to opt in
- Form 2555 attached to Form 1040 for the year.
- Limits and risks
- Does not reduce self-employment tax; does not cover pensions, investment income or pay from the US government; a resident alien can use the bona fide test only as a national of a treaty country.
- Legal basis
- 26 U.S.C. § 911; Rev. Proc. 2025-32, sec. 4.39; IRS, Foreign earned income exclusion
- Checked
- 4 November 2026
Enhanced deduction for seniors (IRC § 151(d)(5)(C))
OpenFor pensioners
Extra USD 6,000 deduction per person aged 65+
Details
- Who
- Taxpayers aged 65 or over at year-end with a Social Security number; married couples only on a joint return
- How it works
- An extra USD 6,000 deduction for each person aged 65+ (USD 12,000 if both spouses qualify) on top of the existing senior standard deduction. It is reduced by 6% of modified AGI over USD 75,000 (USD 150,000 joint). Applies for 2025 to 2028.
- Duration
- Tax years 2025 to 2028
- How to opt in
- On Form 1040; the SSN of each person aged 65+ must be shown.
- Limits and risks
- Phases out completely at higher incomes; foreign earnings excluded under § 911 count toward the threshold; married couples must file jointly.
- Legal basis
- 26 U.S.C. § 151(d)(5)(C) (Pub. L. 119-21, § 70103); IRS, Check your eligibility for the new enhanced deduction for seniors
- Checked
- 4 November 2026
DoubleTaxation