Moving to the United States is a big life change. Immigrants face many new challenges, including learning about the U.S. tax system. Paying taxes is a legal requirement for most people living or working in the U.S., even if they are not citizens. Understanding how taxes work and planning your finances can help you avoid problems and build a strong future.
In this article, we explain the basics of the U.S. tax system in simple words. We also share helpful financial planning tips for immigrants. If you are new to the country, this guide will help you feel more confident about your financial responsibilities.
Do Immigrants Need to Pay Taxes?
Yes. Most immigrants must pay taxes if they work in the U.S. or earn money in the country. This applies whether you are a permanent resident (green card holder), a person with a work visa, or even someone without legal status but still earning income.
The U.S. tax system is based on “worldwide income.” That means if you live in the U.S., you must report income you earn both in the U.S. and in other countries. This surprises many new immigrants. If you are unsure about your tax obligations, it’s smart to speak with an immigration lawyer or a tax advisor. They can explain your situation based on your visa type and income sources.
Understanding Tax Residency Status
One important term to learn is “tax resident.” Even if you are not a U.S. citizen or green card holder, you may still be considered a tax resident. The IRS (Internal Revenue Service) uses something called the “Substantial Presence Test” to decide this.
You are usually a tax resident if:
- You spend 183 days or more in the U.S. in a year, or
- You have a green card.
If you are a tax resident, you must file a U.S. tax return and report your worldwide income. If you are not a tax resident, you may only need to report income earned inside the U.S.
Understanding your tax residency status is the first step to filing correctly.
Common U.S. Taxes Immigrants Should Know
Here are the main types of taxes you may need to deal with:
1. Federal Income Tax
This is the tax the federal government collects from your income. Most people pay it through paycheck deductions. You must file a tax return every year to report your income.
2. State Income Tax
Many states also collect income tax. Each state has different rules and rates. Some states, like Texas and Florida, do not collect state income tax at all.
3. Payroll Taxes
These include Social Security and Medicare taxes. Your employer usually takes these out of your paycheck. If you are self-employed, you must pay them yourself.
4. Sales Tax
When you buy goods in the U.S., you often pay a sales tax. This is included at the time of purchase. Sales tax rates are different in each state and city.
5. Property Tax
If you own a home or land, you will pay property tax to your local government.
6. Capital Gains Tax
If you sell an investment (like a house or stocks) for more than you paid, you may need to pay tax on the profit.
Getting a Tax ID Number (ITIN or SSN)
To pay taxes and file a tax return, you need a tax ID number. This can be either:
- A Social Security Number (SSN) – If you have a work visa or green card.
- An Individual Taxpayer Identification Number (ITIN) – If you do not qualify for an SSN.
Even undocumented immigrants can apply for an ITIN and file taxes. Doing so can help show “good moral character,” which may be useful in future immigration processes.
How to File a Tax Return
Every year, most people in the U.S. must file a tax return by April 15 (or the next business day). You can file your taxes in several ways:
- By using tax software like TurboTax or H&R Block.
- With help from a certified public accountant (CPA).
- Through free programs like IRS Free File (if your income is low).
If you are new to the U.S., working with a professional can help you avoid mistakes.
Tax Credits and Benefits for Immigrants
Many immigrants don’t know that they may qualify for tax credits. These are benefits that can reduce the amount of tax you owe or increase your refund. Here are some examples:
1. Child Tax Credit (CTC)
If you have children and meet the income rules, you may receive money from the government through this credit.
2. Earned Income Tax Credit (EITC)
This is for low-to-middle-income workers. It can give you a refund even if you don’t owe taxes.
3. Education Credits
If you or your child attends college or university, you might get credits for tuition and school expenses.
To qualify for many of these credits, you must have a valid SSN and meet other conditions.
Financial Planning Tips for Immigrants
Financial planning helps you use your money wisely, save for the future, and avoid problems. Here are some simple tips for immigrants living in the U.S.:
1. Open a U.S. Bank Account
Choose a trusted bank or credit union. Having a checking and savings account helps you build financial history and manage your money safely.
2. Build Your Credit History
Credit is very important in the U.S. It affects your ability to rent an apartment, buy a car, or even get a job. Start with a secured credit card and pay bills on time.
3. Create a Budget
Write down your monthly income and expenses. This will help you control your spending and save for emergencies.
4. Start Saving Early
Try to save a little money from every paycheck. Over time, your savings will grow. Aim to build an emergency fund that covers at least 3–6 months of living expenses.
5. Learn About Retirement Accounts
You can save for retirement using special accounts like 401(k) or IRA. These accounts also give tax benefits. Even if you are not a citizen, you may be able to contribute.
6. Understand Insurance Options
Health care in the U.S. is expensive. Make sure you have health insurance. Also consider getting renters, car, and life insurance to protect yourself and your family.
Don’t Ignore Your Taxes
Some immigrants think they don’t need to file taxes if they earn little or are undocumented. But this is a mistake. Filing taxes:
- Shows you are following U.S. laws
- Helps with future immigration applications
- Can bring refunds or credits
- Builds your financial history
Missing tax deadlines or failing to file can lead to penalties, interest, or even legal trouble.
When to Get Help
Taxes in the U.S. can be confusing, especially if you have income from other countries or are self-employed. If you are unsure about what to do, it is a good idea to speak with a:
- Certified Public Accountant (CPA)
- Enrolled Agent (EA)
- Tax advisor who works with immigrants
You can also ask an immigration lawyer for help if you have questions about how your visa status affects your tax obligations.
Final Thoughts
The U.S. tax system can seem complicated, especially for immigrants who are new to the country. But with the right knowledge and support, you can manage your taxes and make smart financial decisions.
Paying taxes is not just a legal duty—it can also benefit you and your family. It helps you build a strong foundation in the U.S. and prepare for the future. Start by understanding your tax status, filing your taxes on time, and making a simple financial plan.
Knowledge is power—and in this case, it can also save you money and give you peace of mind.
