How the ‘Tax Cuts and Jobs Act’ affects every nonresident student in the US
🎓 What you need to know about the GOP tax reform
We examine how the Tax Cuts and Jobs Act of 2017 (TCJA) affects the tax obligations of U.S. nonresidents.
In November 2017, President Donald Trump introduced the Tax Cuts and Jobs Act, a bill that significantly changes U.S. tax laws.
These changes affect all taxpayers, including international students, scholars, and exchange visitors.
Most of these amendments took effect in January 2018, changing how taxes are withheld and calculated.
It’s important to note that these updates do not affect the 2017 tax return season.
💡 Key changes under the new law
1️⃣ Personal exemption eliminated
🗓 Effective: December 31, 2017
The personal exemption of $4,050 has been reduced to $0.
➡️ This means all nonresidents now have a higher taxable income.
2️⃣ Standard deduction increases
🗓 Effective: December 31, 2017
The standard deduction rises from $6,350 to $12,000, but
⚠️ only Indian students and trainees (under the U.S.–India tax treaty) can claim it.
All other nonresidents cannot use standard deductions.
3️⃣ Tuition waivers under Section 529(c) now taxable
🗓 Effective: December 31, 2017
Previously, tuition waivers were non-taxable.
From 2018, these waivers are fully taxable, although scholarships under Section 117 remain non-taxable.
4️⃣ State and Local Taxes (SALT) capped at $10,000
🗓 Applies 2018–2025
Nonresidents can still claim SALT as an itemized deduction,
but the maximum deduction is now $10,000.
Most students won’t reach this limit, but high-tax states may be affected.
5️⃣ No more state tax deductions for previous years
🗓 Effective: December 31, 2016
You can no longer deduct state taxes from prior years paid in the current year.
6️⃣ Miscellaneous itemized deductions eliminated
🗓 Applies 2018–2025
This includes:
❌ Unreimbursed job expenses
❌ Tax preparation fees
❌ Investment expenses
From 2018, nonresidents and residents alike can no longer claim these deductions.
7️⃣ Moving expenses not deductible
🗓 Applies 2018–2025
Only U.S. Armed Forces employees can claim moving expenses.
Teachers and researchers are no longer eligible.
8️⃣ Casualty and theft loss deductions suspended
🗓 Applies 2018–2025
Only available in federally declared disaster areas.
9️⃣ Changes to “effectively connected income”
🗓 Effective: December 31, 2017
The definition of “trade or business” now excludes services performed by nonresident employees.
This could affect how FDAP income is treated and taxed.
🔟 Employer withholding changes
🗓 Effective: December 31, 2017
The W-4 form remains the same, but the calculation changed in 2018.
➡️ Nonresidents will be taxed on their full income, since they cannot claim standard deductions.
1️⃣1️⃣ New tax brackets introduced
🗓 Effective: December 31, 2017
| Income Range | Tax Rate |
|---|---|
| Up to $9,525 | 10% |
| $9,525–$38,700 | 12% |
| $38,700–$82,500 | 22% |
| $82,500–$157,500 | 24% |
| $157,500–$200,000 | 32% |
Tax tables for residents and nonresidents are updated under these new brackets.
📑 Procedure 88-24
This rule allowed scholarships to be treated as wages for withholding purposes.
Since personal exemptions and deductions are now gone,
➡️ Procedure 88-24 will no longer be applicable after 2018.
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