(UNITED STATES) Nonresident aliens filing U.S. tax returns this season face a clear rule from the Internal Revenue Service: they generally cannot claim the standard deduction and must instead rely on itemized deductions tied to U.S. income. The restriction applies nationwide and remains unchanged this year, according to federal guidance and cross-border practitioners. The exception is narrow and treaty-based: certain Indian students and business apprentices may claim the standard deduction under the U.S.–India Income Tax Treaty. Everyone else must use Schedule A (Form 1040-NR) to list allowed costs that reduce taxable income.
At the center of the policy is the idea of “effectively connected income” (ECI). If a nonresident earns income that is effectively connected to a U.S. trade or business, they may claim specific itemized deductions, but not more. Expenses linked to income that is not connected to U.S. business activity are off the table. That distinction shapes how millions of international students, researchers, short-term workers, investors, and visiting professionals plan their U.S. filings each year.
Allowed itemized deductions for nonresident aliens
The IRS lists four main categories that nonresident aliens can claim on Schedule A:
- State and local income taxes
- Charitable contributions to U.S. organizations
- Casualty and theft losses in the United States (when requirements are met)
- Certain miscellaneous deductions tied to U.S. income‑producing activity
These limits matter because they determine whether a filer reduces their taxable base in a meaningful way or not at all. In many cases, workers with modest U.S. wages may still benefit from state tax deductions, while students who donated to qualified U.S. charities can also see relief.
For most filers, the process runs through Form 1040-NR, the nonresident return used to report U.S. income and claim deductions. The IRS posts the form and instructions on its site: Form 1040-NR and Schedule A (Form 1040-NR). If you itemize, you must attach Schedule A to your return. Without ECI, there is generally nothing to itemize, and no deduction is available.
Important: Deductions unrelated to U.S.-sourced, effectively connected income cannot be taken. Personal exemptions for the filer or dependents are not available to nonresident aliens.
Policy context and the U.S.–India treaty exception
The broad ban on the standard deduction for nonresident aliens does not apply to U.S. citizens or resident aliens, who may choose between the standard deduction and itemizing. That split treatment often surprises first‑time filers on temporary visas.
The U.S.–India treaty carves out a narrow benefit: Indian nationals who are students or business apprentices and are temporarily in the United States can claim the standard deduction. It does not extend to other Indian nationals or to nonresident aliens from other countries. According to analysis by VisaVerge.com, this small carve‑out can have an outsize impact on student budgets because the standard deduction can exceed what they would otherwise list under itemized deductions in a typical year.
Tax advisers stress that the treaty exception is specific and should be read carefully before claiming it. If the student or apprentice does not meet the treaty terms, the general rule applies and they must use itemized deductions (if they have ECI).
Filing checklist and step-by-step process
Use this sequence when preparing a nonresident return:
- Determine residency status for the tax year (nonresident vs. resident alien).
- Confirm whether you have effectively connected income (ECI) — common examples include wages from U.S. employment and business profits from a U.S. trade or business.
- Decide whether you can claim the treaty standard deduction as an Indian student or apprentice. If not eligible, prepare to itemize.
- Complete Form 1040‑NR and attach Schedule A if you have eligible itemized deductions.
Practical considerations and documentation
The list of allowable itemized deductions is short but meaningful:
- State and local income taxes — often the largest single write‑off for wage earners.
- Charitable contributions — must go to qualified U.S. organizations to count.
- Casualty and theft losses — strict thresholds, documentation rules, and must involve events in the United States.
- Miscellaneous deductions — must tie directly to U.S. income‑producing activity.
Filers should keep clean records: receipts, state tax withholding reports, and acknowledgment letters from charities to support claims.
While Indian tax law does not change U.S. deduction rules, Indian residents with U.S. income must still report that income in India and may seek a foreign tax credit there. That is handled on Indian returns and should be coordinated to prevent double taxation. Good documentation of U.S. itemized deductions can also help when foreign tax credits are later calculated in India.
Community and employer impact
- Employers with nonresident hires should communicate early about year‑end forms and withholding. State tax deductions on Schedule A often depend on proper state tax withholding during the year.
- International students working on campus may find state tax withholdings produce a modest refund when they itemize.
- If someone has little or no state tax withheld and no other eligible deductions, itemizing may not reduce tax much or at all.
Consider this example: a visiting researcher on a J‑1 visa (nonresident for tax purposes) earns U.S. wages. If the researcher pays state income tax and donates to a U.S. public charity, both items may go on Schedule A. If the same person has investment income from outside the United States that is not effectively connected, expenses tied to that foreign income cannot be deducted on the U.S. return. That distinction can lead to different outcomes even for households with similar incomes.
Warnings, deadlines, and resources
- Accuracy matters. Clerical errors—like listing a foreign charity or a non‑U.S. casualty loss—can delay processing and trigger notices.
- Use the latest IRS instructions posted with Form 1040‑NR and Schedule A (Form 1040‑NR).
- Review Publication 519 for definitions such as effectively connected income and for other nonresident rules.
Key takeaway: Most nonresident aliens cannot claim the standard deduction. Those with ECI can claim limited itemized deductions on Schedule A. Indian students and business apprentices who meet treaty terms have a special path to the standard deduction. Choices on the return should follow residency status, income type (ECI or not), and treaty terms, with careful documentation and timely filing so refunds are not delayed.
As of October 2025, no major changes have been announced in U.S. tax law that would expand or restrict itemized deductions for nonresident aliens, and the U.S.–India treaty provision for students and apprentices remains in force. That policy stability helps schools, employers, and international offices give consistent guidance.
This Article in a Nutshell
Most nonresident aliens must forgo the U.S. standard deduction and instead itemize eligible expenses on Schedule A (Form 1040-NR). Only deductions directly tied to effectively connected income (ECI) — such as state and local income taxes, charitable contributions to qualified U.S. organizations, U.S.-based casualty and theft losses, and certain miscellaneous deductions — are allowed. A limited exception under the U.S.–India Income Tax Treaty permits specific Indian students and business apprentices to claim the standard deduction. Filers should determine residency status, confirm ECI, keep careful documentation, and attach Schedule A when itemizing. Employers and international offices should advise nonresident hires about withholding and documentation. As of October 2025, no major policy changes have been announced.
