Tax Obligations for L-1 Visa Holders in the US

What Are the Tax Obligations for L-1 Visa Holders?

L-1 visa holders transferred to the US by their employer become subject to US taxation quickly - often within the first year. Unlike some visa categories, the L-1 carries no exemption from the Substantial Presence Test (SPT). This means you will likely be treated as a US resident alien and taxed on your worldwide income, including income earned in your home country, within your first or second year in the US.

How Quickly Do L-1 Holders Become Resident Aliens?

The Substantial Presence Test

The SPT counts your days of physical presence in the US using this formula:

• All days in the current year
• One-third of days in the prior year
• One-sixth of days two years prior

If the total reaches 183 or more, you pass the SPT and are a resident alien for the current year. An L-1 holder who arrives in January and stays through December will typically pass the SPT by late March or April of year two - often by the first year if present for 183+ current-year days.

Once you pass the SPT, you report worldwide income on Form 1040, just like a US citizen.

L-1A vs. L-1B: Any Tax Differences?

The L-1A (managers and executives) and L-1B (specialized knowledge workers) are taxed identically. The distinction matters for immigration purposes (L-1A can lead to an EB-1C green card), but not for how the IRS calculates your taxes. Both categories follow the same resident alien rules once the SPT is passed.

FICA Taxes: From Day One

L-1 visa holders are subject to FICA taxes immediately upon beginning work in the US. This means:

• Social Security: 6.2% withheld on wages up to $176,100 (2025 wage base)
• Medicare: 1.45% withheld on all wages (plus 0.9% additional Medicare tax on wages above $200,000 for single filers)

Your employer matches the Social Security and regular Medicare contributions. If you were paying into your home country's social insurance system, a totalization agreement may affect your obligations.

Totalization Agreements

The US has totalization agreements with Brazil and many other countries. If your home country employer is maintaining your contributions to your home country's social security system while you work in the US, you may be exempt from US Social Security and Medicare taxes for a temporary period. You will need a Certificate of Coverage from your home country's authority.

Reporting Worldwide Income

Once you are a resident alien, you must report all income from all sources worldwide on Form 1040. This includes:

• Salary and bonuses paid by your US employer
• Salary components paid by your home country entity (even if deposited in a foreign account)
• Rental income from property you own abroad
• Investment income from foreign brokerage or bank accounts
• Dividends from foreign stocks

Avoiding Double Taxation: The Foreign Tax Credit

Form 1116

If you pay taxes on income in your home country, you can generally claim a Foreign Tax Credit on Form 1116 to offset your US tax liability on that same income. The credit is limited to the US tax attributable to the foreign income - it prevents double taxation but does not produce a windfall.

For L-1 holders who continue to receive part of their compensation from the home country entity, the Foreign Tax Credit is often essential.

FBAR and FATCA: Foreign Account Reporting

FinCEN 114 (FBAR)

If you have foreign bank, brokerage, or investment accounts with a combined maximum balance exceeding $10,000 at any point during the calendar year, you must file FinCEN 114, the Report of Foreign Bank and Financial Accounts. The deadline is April 15, with an automatic extension to October 15. Penalties for willful non-filing start at $10,000 per violation.

Form 8938 (FATCA)

Form 8938, filed with your Form 1040, is required if your foreign financial assets exceed:

• $50,000 on the last day of the year, or $75,000 at any point during the year (single filer living in the US)
• $100,000/$150,000 (married filing jointly, living in the US)

Thresholds are higher for those living abroad.

Common L-1 Filing Requirements Summary

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L-1 tax situations often involve compensation split across two countries, foreign account balances, and treaty questions. Get Your Personalized Form List to see which forms apply to your specific situation.