U.S. Income Tax

Once you arrive on-campus all students/visiting scholars are required to fill out W-4 forms (and other employment verification forms as needed) for United States income tax purposes. Students/scholars should use their local Carleton College address and not their home address; otherwise, important and urgent mail may be delayed for long periods of time. Scholarship, fellowship, or assistantship awards that exceed tuition & fees, minus the cost of course-required books, fees, supplies, and equipment — are all taxable income.

Some scholarships, maintenance allowances, prizes, and payments for teaching and research may be considered taxable income by the U.S. Internal Revenue Service (IRS). Students/scholars holding an F-1 or J-1 visa are subject to withholding and payment of federal and state income taxes unless they are exempt by a provision of a tax treaty.

The level of taxable earnings fluctuates and must be checked each year. During the month of January all persons employed by Carleton, including students/scholars, receive W-2 statements showing their total taxable earnings and withholdings. All F-1 and J-1 individuals are required to file the Income Tax Return before April 15 of each year, in consultation with ISL.

Carleton annually purchases Web-based computer software, Glacier Online Tax, designed to help non-resident aliens with student/scholar visas complete their income tax forms. There is also an annual tax help session with a local certified public accountant to answer additional questions.

New tax law for 2018 and Beyond

 The U.S. Congress and President passed a new tax law that took effect in the 2018 tax year. The unfortunate result is that many of you will have to pay significantly more taxes than you have in the past. 

What has changed?

In the past, for “non-resident” (F-1 or J-1 students) tax returns, you could subtract $4,050 (the personal exemption) from what you earned, to calculate your “taxable income”. If you earned less than $4,050, your taxable income was $0, so you did not have to pay any taxes. The new tax law has removed the $4,050 personal exemption. So, now you will have to pay  taxes on everything that you earn. 

Tax treaties

If you are a citizen of Bangladesh, China, France, Germany, India, South Korea, Morocco, Pakistan, Poland, Slovakia, Spain, Thailand or Canada, part of your income will be exempt from taxes, because of the tax treaty between your country and the U.S.

The following list shows the tax treaty countries and the amount of the tax treaty benefit (amount you can subtract from your income, to determine taxable income). You will only pay taxes (about 10% for federal taxes, and 5.5% for Minnesota taxes) on any amount you earn that is greater than the tax treaty benefit. If you earn less than the tax treaty benefit amount, you won’t have to pay any taxes.

  • Bangladesh ($8,000)
  • Belgium ($9,000)
  • Bulgaria ($9,000)
  • China ($5,000)
  • Cyprus ($2,000)
  • Czech Republic ($5,000)
  • Egypt ($3,000)
  • Estonia ($5,000)
  • France ($5,000)
  • Germany ($9,000)
  • Iceland ($9,000)
  • Indonesia ($2,000)
  • Israel ($3,000)
  • Latvia ($5,000)
  • Lithuania ($5,000)
  • Luxembourg (No Limit)
  • Malta ($9,000)
  • South Korea ($2,000)
  • Morocco ($2,000)
  • Netherlands ($2,000)
  • Norway ($2,000)
  • Pakistan ($5,000)
  • Philippines ($3,000)
  • Poland ($2,000)
  • Portugal ($5,000)
  • Romania ($2,000)
  • Slovak Republic ($5,000)
  • Slovenia ($5,000)
  • Spain ($5,000)
  • Thailand ($5,000)
  • Trinidad & Tobago ($2,000)
  • Tunisia ($4,000)
  • Canada ($10,000)
  • Venezuela ($5,000)

How much will you have to pay? 

You should expect to pay approximately 10% of what you earn for federal taxes, and 5.5% of what you earn for Minnesota state taxes. The change in the U.S. tax laws also impacts Minnesota taxes, because those are based on federal taxable income. For example, if you earn $3,000 in 2020, you should expect to pay about $300 in federal taxes and $165 in Minnesota state taxes.

Withholding

Carleton payroll may withhold some federal and state taxes from each of your paychecks. The taxes that are withheld are paid to the U.S. Internal Revenue Service and Minnesota Department of Revenue. When you complete your tax return at the end of the year, if the amount that was withheld is more than you owe, you get a refund, and if the amount withheld is less than what you owe, you have to pay additional taxes. Carleton normally withholds the minimum amount required. For 2018, it is likely that you will have to pay additional taxes at the end of the year, even if you have normally received a refund in the past (unless you are from a tax treaty country). You may check your pay stub in the Hub to see the amount of taxes withheld from your paychecks so far. Click on Payroll Earnings History and choose the most recent pay period. You will want to look under “taxes withheld” and Y.T.D (year to date) to see how much has been withheld so far in 2018. You may calculate how much tax you would expect to pay (look at gross income and multiply by 10% for federal taxes and 5.5% for Minnesota taxes) and subtract the amount already paid (federal and state taxes withheld).

What can you do? 

It is important to be aware of how much tax you will probably have to pay before April 15, 2021, and prepare for that. You may want to save money from each of your paychecks, or make sure you have enough money in your bank account, so that you will have enough to pay those taxes before April 15, 2021. If you pay your taxes late, you will have to pay more in penalties and interest. If you do not pay your taxes, there may be serious legal consequences, which could also negatively impact your immigration status.

Exceptions

If you have been an F-1 student in the U.S. for more than 5 years, or a J-1 student for more than 2 years, or are a U.S. citizen or legal permanent resident, then you will be considered a “resident” for tax purposes, and you will be able to take a “standard deduction”, which reduces the amount of your taxable income and the amount of taxes you will have to pay.

Tax workshop

We will have a Tax workshop at the start of Spring term to help you complete your non-resident tax return with a tax expert. Our staff is available to meet with you any time before then if you are concerned about taxes for 2020 or need help figuring out what to expect.