F-1 or H-1B to US tax resident: switching to Form 1040

You become a US tax resident in the first year your countable days pass the substantial presence test, and from then you file Form 1040 on worldwide income. For F-1 students that's usually year six, or the year after H-1B starts. The switch pulls your Indian accounts and mutual funds into US reporting.

When your US tax residency actually starts

Visa type doesn't decide your tax status. Days do. Under the substantial presence test in IRC Section 7701(b), you're a resident alien if you spent at least 31 days in the US this year and 183 weighted days over three years.

The weighting counts this year's days in full, last year's at one third and the year before at one sixth.

The catch is which days count. Days you spend as an exempt individual don't count at all, and that's where students and workers part ways.

F-1 and J-1 students: five calendar years, not five full years

An F-1 or J-1 student is exempt for up to five calendar years, and any part of a year counts as a whole one. If you landed in August 2021, 2021 used up a full year of the five.

IRS Publication 519 ends the exemption once you've been exempt "for any part of more than 5 calendar years". The only way out is to show you don't intend to live in the US permanently and have kept to your visa terms.

OPT is still F-1 status, so a student on STEM OPT in their sixth calendar year usually becomes a resident while still on F-1. You keep filing Form 8843 for the years your days are excluded.

H-1B: every day counts from day one

H-1B holders are not exempt individuals. The day your status changes from F-1 to H-1B, your US days start counting toward the 183-day test. If you came straight from India on H-1B, the count starts on the day you landed.

Your arrival year may not be your first resident year

When someone tells me they've been "in the US since 2020", I treat that as their arrival year, not their first resident year. I take the resident year from the H-1B start date, the I-94 and visa history, or the first resident return, then run the test.

Worked example. Priya arrived on F-1 in August 2021 and her H-1B started on 1 October 2025. Her student days from 2021 to September 2025 don't count, which leaves 92 counted days in 2025.

That's short of 183, so 2025 is a nonresident year on Form 1040-NR with Form 8843. In 2026 she's present from 1 January, passes the test, and her first full Form 1040 covers 2026.

What changes when you move from Form 1040-NR to Form 1040

On Form 1040-NR you report mainly US-source income. On Form 1040 you report everything, wherever it's earned, and you pick up disclosure forms that never applied before. If you want the side-by-side on status itself, the difference between resident and nonresident filing is laid out in full.

On client calls about this switch, the worry isn't the 1040 itself. It's the Indian accounts and funds that now have to be disclosed.

Your Indian income becomes US income

NRE account interest is tax-free in India while you're an NRI, but a resident alien reports it on the US return like any other interest. The same goes for NRO interest, Indian rent and Indian capital gains.

You can usually claim a foreign tax credit for Indian tax already paid. The mechanics of reporting Indian income don't change with how long you've been a resident.

Your Indian accounts need FBAR and possibly Form 8938

As a resident alien you file an FBAR (FinCEN Form 114) if your foreign accounts together topped $10,000 at any point in the year. It's due 15 April, with an automatic extension to 15 October. The FBAR threshold and deadlines apply to every rupee account you hold, NRE included.

Form 8938 is separate and has higher thresholds. A single filer living in the US files it when specified foreign assets top $50,000 on the last day of the year or $75,000 at any time. For married filing jointly, it's $100,000 and $150,000.

Many people end up filing both, and FBAR versus FATCA shows which accounts land on which form.

Your Indian mutual funds become PFICs

Indian mutual funds are PFICs (passive foreign investment companies) for a US person, and each one generally needs its own Form 8621 every year. On a student visa they didn't matter to the IRS. In your first resident year they do.

I'd sort out the mutual funds before you file your first resident return, not after. That return is where the election choices are cheapest to make, and how your starting value is set is covered in the PFIC first-year cost basis rules.

Social Security and Medicare withholding starts

Nonresident F-1 students working on OPT or CPT are generally exempt from Social Security and Medicare tax. The IRS states plainly that "the exemption does not apply to F-1, J-1, or M-1 students who become resident aliens", per its foreign student FICA guidance.

So a sixth-year STEM OPT student owes FICA even though the visa hasn't changed. If payroll keeps treating you as exempt, the shortfall is still yours, so tell your employer once your status flips.

The transition year: dual-status or the first-year choice

The year residency begins is often split. Under the substantial presence test, your residency starting date is generally the first day you're present in the US that year. Someone who arrives on H-1B in March is a nonresident before that date and a resident after it.

That's a dual-status year. You file Form 1040 marked "Dual-Status Return" and attach Form 1040-NR as the statement for the nonresident months. You can't take the standard deduction, so you itemize what's allowed.

If you don't pass the test in your arrival year but will pass the next year, Section 7701(b)(4) lets you elect resident treatment early. The first-year choice needs all of these:

• at least 31 days in a row in the US in the election year
• presence on at least 75% of the days from the start of that 31-day stretch to 31 December, with up to 5 days away counted as present
• a pass under the substantial presence test the following year

It mostly helps married couples who want to file jointly, through a separate joint-return election under Section 6013(g) or (h). The cost is that worldwide income from your start date becomes taxable in the US.

Who this applies to, and who it doesn't

This applies to you if you're on F-1, J-1, H-1B, L-1 or a similar work visa and your countable days now pass the test, or you're about to. It also covers F-1 students in their sixth calendar year who haven't changed visas.

It doesn't apply if you got a green card, which makes you a resident under a separate test regardless of days. Nothing changes on the Indian side either: your residency there under Section 6 of the Income Tax Act turns on days in India, so you stay an NRI for Indian tax.

What to do in your first resident year

1. Pull your visa history and I-94 and pin down your first resident year from counted days, not your arrival date.
2. Tell your employer when your FICA exemption ends, and check your W-2 for Social Security and Medicare withholding.
3. List every Indian account, deposit and policy with its peak balance in the year, in dollars.
4. List each Indian mutual fund and decide how you'll handle it before you file, not after.
5. Decide whether a dual-status return or the first-year choice fits, especially if you're married.
6. File Form 1040, the FBAR, Form 8938 if you cross its threshold, and one Form 8621 per fund.

The one judgment call worth paying for is step 5, because the first-year choice can't be revoked without IRS consent and it changes what's taxable.

Your next step

Before the year ends, write down your first resident year and list every Indian account and fund you hold. If the year is a dual-status one, or you're married and weighing the first-year choice, I'd talk it through with an InvestMates advisor before you file.