If you’re working in the US on an H-1B visa and considering changing employers, it’s important to understand how this move can affect your tax situation. While the core tax rules remain the same, factors such as timing, residency status, and payroll withholdings can create potential complications.
H-1B Visa and Tax Residency
The H-1B visa is a nonimmigrant work visa that allows foreign nationals to work in the US for a specific employer. From a tax perspective, H-1B visa holders are generally classified as either:
- Nonresident Aliens (NRA): If they do not meet the Substantial Presence Test (SPT) – which requires being in the US for at least 183 days over a three-year period, following a weighted calculation.
- Resident Aliens for Tax Purposes: If they meet the SPT, they are taxed like US citizens on worldwide income.
Changing employers does not automatically affect tax residency status, but gaps in employment and time spent outside the US could impact whether you continue to meet the SPT.
Payroll Taxes and Employer Withholding
When switching employers, your new employer will need to withhold the correct federal, state, and local taxes from your paycheck. Here are key considerations:
- FICA Taxes (Social Security & Medicare): H-1B workers are subject to FICA taxes, unlike certain other visa holders (e.g., F-1 or J-1 students). Your new employer should continue withholding these taxes.
- State Tax Implications: If your new job is in a different state, you may face different tax rates and state residency rules. Some states do not have income taxes (e.g., Texas, Florida), while others have high tax rates (e.g., California, New York).
- W-4 Adjustments: When joining a new employer, you’ll complete a new Form W-4 to determine your federal income tax withholdings. Errors in filing this form could lead to over- or underpayment of taxes.
Impact on Tax Filings
Switching employers means you’ll receive multiple W-2 forms at tax time—one from each employer. This can lead to:
- Higher-than-expected tax liabilities if withholdings were not properly calculated.
- Potential overpayments if both employers withheld Social Security tax beyond the annual limit ($168,600 in wages for 2024). You can claim a refund when filing your tax return.
Additionally, if you worked in multiple states, you may need to file multiple state tax returns, depending on state residency rules and employer location.
Gaps in Employment and Tax Considerations
If you experience a gap between jobs, consider:
- Maintaining H-1B Status: Ensure the new employer properly files the H-1B transfer petition before you start working.
- Tax Residency Impact: If a long employment gap leads to extended time outside the US, it could affect your Substantial Presence Test calculation for tax residency.
- Health Insurance and Benefits: If your employer provides health insurance through a pre-tax payroll deduction, a gap in coverage could affect both taxes and healthcare access.
Foreign Income and Expatriation Considerations
If you move back to your home country or work remotely for an overseas employer while on an H-1B visa, you may have new tax obligations:
- The US taxes residents on worldwide income, so remote work abroad could still be taxable in the US.
- If you lose US tax residency, foreign income may only be taxable in your home country, depending on tax treaties.
Changing employers on an H-1B visa doesn’t dramatically alter your US tax obligations, but it does introduce new considerations for payroll taxes, state residency, and year-end filings. Proper planning can help you avoid surprises and ensure compliance with tax laws. Keeping detailed records of your income sources and deductions can also make tax filing easier and more accurate. If you’re unsure how your job change will impact your taxes, consulting a tax professional can help you stay on track.
