Married Filing seperately - Tax Treaty deduction

[academicsheep]

I'm a resident alien filing Form1040, while my spouse is a non-resident alien (F1 international student). We are filing separately. I'm claiming itemized tax deductions for home ownership/property taxes. According to IRS rules, both me and my spouse should use itemized deductions.

As a F-1 student, my wife can claim tax deduction under US-India tax treaty benefit. Will this be treated as standard deduction? Is she allowed to do this?

[DaveF1006]

No. As an F1 student, she would need to file a 1040 NR return, which does not allow a standard deduction. As far as claiming a foreign tax credit on income earned in India, since she would be filing a 1040 NR, this income would not be required to be filed on a 1040 NR thus a Foreign Tax Credit would not be claimed if that is the deduction you are referring to under the US/India treaty.

Turbo Tax does not prepare 1040 NR returns but our affiliate at Sprint Tax does. Contact them for further information regarding the filing of a 1040 NR return.

[pk]

@academicsheep , having read through your post and  answer by my colleague @DaveF1006  ( and agreeing), I would like to draw attention to a few things:

(a)  US-India Tax treaty  requires an Indian student to be treated the same as a domestic student for  tax purposes.  Thus the limitation of 1040-NR  to allowing  ONLY itemized deduction is  rescinded and therefore an Indian student can choose standard deduction if it benefits him/her.

(b)  But this freedom  ( to be treated like domestic student ) comes with other  rules.   Married  tax payers filing separately ( MFS) are required to choose the same deduction method i.e. if one chooses itemized then the other must choose the same  type. 

(c) Also because you are married , you can indeed choose to file MFJ  ( if she has a tax id ) by requesting to be treated as a resident for tax purposes  ( because she is married to a Resident Alien  ( or Resident for Tax purposes).

Your suggested path would be considered double dipping  and would not be allowed.

Is there more I can do for you ?

Namaste ji

pk

[academicsheep]

Thank you for responding. Since she was a NR-Alien her W2 did not have any social sec wages (F-1 OPT visa employees don't have social security deductions). While reporting as MFJ, can i continue to use the same W2 she received from her employer?

[pk]

@academicsheep , even if your wife wants/needs to be treated as a resident, practical training with EAD, is still immune  from FICA tax -- TurboTax may require you to  file a schedule-SE where in  you  can declare that she being on OPT is immune  from FICA.

Hope this helps 

pk