Tax Guide for TN Visa Holders in the U.S.

If you’re working in the United States under a TN visa, understanding your U.S. tax obligations is critical. Many professionals from Canada and Mexico enter the U.S. under TN status but are unsure whether they are considered U.S. tax residents, how to avoid double taxation, or what IRS forms they must file.

Let’s understand how U.S. taxation works for TN visa holders, what you’re required to report, and how to plan proactively.

Understanding U.S. Tax Rules for TN Visa Holders

1. Are TN Visa Holders Required to Pay U.S. Taxes?

Yes. If you earn income in the United States, you must pay U.S. taxes on that income.

However, your tax treatment depends on whether you are classified as:

Resident Alien for tax purposes
Nonresident Alien for tax purposes

This classification is not based solely on your visa type. Instead, it depends on the Substantial Presence Test (SPT).

2. What Is the Substantial Presence Test?

The IRS uses the Substantial Presence Test to determine if a TN visa holder is a U.S. tax resident.

You meet the test if:

You were physically present in the U.S. at least 31 days in the current year, and
The total of:
- All days in the current year
- 1/3 of days in the previous year
- 1/6 of days in the second previous year
equals 183 days or more.

Why This Matters

Nonresident Aliens pay tax only on U.S.-source income.
Resident Aliens pay tax on worldwide income (including Canadian or Mexican income).

This is one of the most important distinctions for TN professionals.

3. Which Tax Forms Do TN Visa Holders File?

Your filing depends on residency status:

If You Are a Nonresident Alien:

File Form 1040-NR
Report only U.S.-source income
Cannot claim the standard deduction (with limited exceptions for Canadians and Mexicans)

If You Are a Resident Alien:

File Form 1040
Report worldwide income
Eligible for standard deduction and certain credits

Other common forms may include:

FBAR (FinCEN Form 114) – if foreign bank accounts exceed $10,000
Form 8938 (FATCA) – for foreign financial assets
Form 8833 – to claim treaty benefits

4. Do TN Visa Holders Pay Social Security and Medicare Taxes?

Most TN visa employees working under W-2 employment must pay:

Social Security tax
Medicare tax

Unlike some other visa categories, TN visa holders are generally not exempt from FICA taxes.

However, totalization agreements between the U.S. and Canada or Mexico may provide relief in specific cross-border situations.

5. How to Avoid Double Taxation

Many TN visa holders worry about being taxed twice — once in the U.S. and once in their home country.

Relief is available through:

The U.S.–Canada Tax Treaty
The U.S.–Mexico Tax Treaty
Foreign Tax Credits
Tax treaty residency tie-breaker rules

For example, a Canadian TN professional may still be considered a Canadian tax resident depending on ties (home, spouse, dependents), which requires careful planning.

6. Foreign Bank Accounts & Asset Reporting

If you maintain bank accounts, investments, RRSPs, or financial accounts outside the U.S., you may need to file:

FBAR (if total exceeds $10,000 at any time)
FATCA reporting (Form 8938)

Penalties for noncompliance are severe — even if no tax is owed.

7. State Tax Considerations for TN Visa Holders

Federal tax is only part of the equation.

States like Texas and Florida have no state income tax.
States like California and New York aggressively apply residency rules.

You may be considered a state resident even if you are a federal nonresident.

8. Common Tax Mistakes TN Visa Holders Make

Assuming visa status determines tax residency
Failing to track days for Substantial Presence Test
Not reporting foreign accounts
Ignoring treaty benefits
Filing the wrong tax form (1040 vs 1040-NR)
Overpaying taxes due to lack of planning

Proper tax planning for TN visa holders can significantly reduce your overall tax burden.

9. Tax Planning Strategies for TN Visa Professionals

Managing days in the U.S. to control residency status
Using foreign tax credits properly
Timing bonuses and stock compensation
Structuring cross-border investments efficiently
Planning for green card transition

If you expect to transition to permanent residency, tax strategy should begin early.

Need Expert TN Visa Tax Guidance?

Cross-border taxation is complex. One misstep can trigger audits, penalties, or double taxation.

If you’re a TN visa professional and want accurate filing, treaty optimization, and proactive tax planning, consult a CPA experienced in cross-border taxation today.

Schedule a consultation with Saluja & Associates CPA and ensure your TN visa tax strategy is done right.