US-China tax treaty and how it relates to MD state taxes

My wife and I are both graduate students at a US university. I am a US citizen and she is a Chinese citizen and a US permanent resident through marriage. Under the US-China Tax treaty article 20c, she should be eligible to claim an exemption on $5000. I've been trying to make heads or tails of the IRS publications (4011, 519, 901). I'm not sure which forms to fill out. In 2017 before we were married and she was still a non-resident alien, she used Form 8233. But I think now as a resident alien, my understanding is that she should be filing Form 8833.

My questions are:

Which form(s) am I supposed to submit?
Assuming Form 8833 is correct, how do I fill this form out?
Do I need to submit any forms to her employer (she has two employers, the University and aUS government fellowship)?
How/where do I notate this $5000 on our form 1040?
I found this website from UT-Austin (https://global.utexas.edu/isss/advising-services/taxes/resident). Is this all I have to do or are there additional forms I need to submit with writing in the Tax Treaty article on my Schedule 1 line 8?
We are residents of Maryland, do I need to add this $5000 back in the additions section for the MD state taxes?
On my federal taxes, I have deductions from the tax treaty (1040 line 8), mandatory student fees (1040 line 10a from schedule 1 line 22), and charitable contributions (1040 line 10b). Do these need to be added back for my MD state taxes in the additions line (MD 502 line 5)?

Thanks so much for your help. I am so close to finishing up our taxes but just need to figure out this last part.

3712

Expert Alumni

Mar 11, 2021 1:53:48 PM

You do need to submit the form 8833 but TurboTax does not support that form. You will have to complete it online and mail your return in with a copy of it. Here is a link to the form including instructions:

https://www.irs.gov/forms-pubs/about-form-8833

You don't need to submit any forms to her employer.

Use these menu tabs to report the $5,000 exemption from tax on your tax return:

Income and expenses
Less common income
Miscellaneous income, 1099-A, 1099-C
Other reportable income
Enter a description of the treaty and the amount as a negative number

So, you will enter the income and then cancel it out with a negative entry.

The instructions to Maryland taxes does not address the issue of the treaty you cite, so you need to call them to find out if it is exempt at 1-800-638-2937.

Returning Member

Mar 11, 2021 5:07:46 PM

Thank you for your feedback. I was looking over the instructions for form 8833 and they referenced Regulations section 301.6114-1(c) (https://www.law.cornell.edu/cfr/text/26/301.6114-1). And under (c) Reporting requirement waived.

(c)(1)(iv) That a treaty reduces or modifies the taxation of income derived from dependent personal services, pensions, annuities, social security and other public pensions, or income derived by artistes, athletes, students, trainees or teachers;

So am I correct in assuming that since my wife is still a student, she does NOT need to submit form 8833? We should just be able to put in the treaty name/article used on the 1040 and list it is -$5000?

Expert Alumni

Mar 15, 2021 1:39:56 PM

Yes, you should be OK then to not file the form 8833, and list the description as you mention.

Why sign in to the Community?

US-China tax treaty and how it relates to MD state taxes