The short answer is:
- Even if being considered resident aliens, Chinese J-1 scholars who qualify under Article 19 of the China-U.S. Tax Treaty, and are exempt from U.S. income tax on their teaching and research income, for up to three years.
- This exemption applies regardless of their visa status change from F-1 to J-1.
Article 19 for Chinese J-1 scholars includes resident aliens #
The IRS official website provided the following China-U.S. Tax Treaty Documents:
From those documents, we know that:
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Chinese J-1 scholars can receive tax exemption on teaching and research income for up to 3 years:
ARTICLE 19 (Teachers, Professors and Researchers)
An individual who is, or immediately before visiting a Contracting State was, a resident of the other Contracting State and is temporarily present in the first-mentioned Contracting State for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or other accredited educational institution or scientific research institution in the first mentioned Contracting State shall be exempt from tax in the first mentioned Contracting State for a period not exceeding three years in the aggregate in respect of remuneration for such teaching, lectures or research.
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Note that, as shown in the Article 19 example below, the 3-year tax exemption period is cumulative and does not need to be consecutive:
ARTICLE 19 (Teachers, Professors and Researchers) - Technical Explanation
This article provides that a resident of a Contracting State who goes to the other Contracting State for the primary purpose of teaching, lecturing, or conducting research at an accredited educational institution or scientific research institution in that other State will be exempt from tax in that other State on the remuneration for such activities for a period of up to three years in the aggregate. Thus, for example, a resident of China who visits the United States to conduct research at the National Institute of Health (NIH) for two years, 1986 and 1987, returns to China for a year, and then comes back for another year of research at NIH in 1989 would be exempt from tax on his NIH remuneration for each of the three years. However, if he stayed at NIH in 1990 or returned at a later time the exemption would no longer be available. The exemption provided in this article is not available if the research is not undertaken in the public interest, but for the private gain of a specific person or persons.
This article is excepted from the “saving clause” of paragraph 2 of the Protocol, so its benefits are available to persons who otherwise qualify even if they become U.S. residents.
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Importantly, while resident aliens generally pay income tax, those who qualify under Article 19 are specifically exempted:
Protocal 1, Paragraph 2
Notwithstanding any provision of the Agreement, the United States may tax its citizens. Except as provided in paragraph 2 of Article 8, paragraph 2 of Article 17, and Articles 18, 19, 20, 22, 23, 24 and 26 of this Agreement, the United States may tax its residents (as determined under Article 4).
Changing from F-1 student to J-1 scholar does not affect the exemption #
The IRS official website provided the following Competent authority arrangement:
The document states that:
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The three-year count begins only when teaching, lecturing or research becomes the primary purpose of the visit. This excludes time spent as an F-1 student in the US for study purposes.
It is understood that the three-year exemption period begins to run from the first day the individual enters the first-mentioned Contracting State (hereinafter referred to as the “host state”) for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or other accredited educational institution or scientific research institution (the “entry date”). It is agreed that if an individual to whom Article 19 applies is present in the host state for the primary purpose of teaching, giving lectures, or conducting research for more than three years following the entry date, then the host state may begin to tax the individual’s remuneration for teaching, giving lectures or conducting research starting with the first day of the fourth year. Such an individual’s remuneration for the first three years will not lose its host state exemption.
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When changing from F-1 student to J-1 scholar, and the primary purpose shifts to teaching, lecturing or research, the 3-year tax exemption period begins / resumes.
It is further agreed that the three-year exemption period is suspended when an individual to whom Article 19 applies discontinues teaching, giving lectures or conducting research and departs the host state. Provided that the individual is, or immediately before returning to the host state was, a resident of the other Contracting State, the three-year exemption period resumes when the individual returns to the host state for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or other accredited educational institution or scientific research institution.
How to claim this exemption on form 8833, box 6: #
Use the 8833 form available on the IRS website.
In Box 6, put:
I, the taxpayer, am a citizen of the People’s Republic of China. I am filing Form 1040 for 2022 as a RESIDENT ALIEN. I am present in the United States on a J-1 visa for the primary purpose of teaching/conducting research at [INSTITUTION NAME].
As per Article 19 of the US-China Tax Treaty and the Competent Authority Agreement, I am entitled to full tax exemption on all my teaching and research remuneration. I am within my three-year exemption period which began on [START DATE]. Therefore, I am claiming complete exemption from U.S. tax on all my teaching and research income for the tax year [TAX YEAR].
TOTAL EXEMPTION: Full exemption on all teaching and research remuneration.