A foreign individual may be subject to U.S. taxes upon leaving the country. This is particularly relevant for temporary visa holders, such as those on H-1B or L-1 work visas. Generally, there is no “exit tax” when they depart from the U.S., but there are important tax considerations to keep in mind.
Let’s explore some of these considerations:
Individuals on temporary work visas, such as H-1B or L-1, are usually classified as nonresident aliens for tax purposes. However, if they meet the substantial presence test, their status may change to that of resident aliens. As nonresident aliens, they are generally taxed only on their U.S.-source income, rather than on their worldwide income. All compensation for services physically performed within US borders is considered US-source income, regardless of the employer’s location or the place of payment.
Temporary work visa holders are required to pay U.S. federal income tax on all compensation earned from services performed in the United States. They are subject to the same graduated tax rates that apply to U.S. citizens, with tax brackets ranging between 10% to 37% (as of 2025), depending on their income levels. However, lower tax treaty rates may apply in certain circumstances.
Unlike the 30% flat withholding rate applicable to artists and entertainers using the information provided on Form W-4. Additionally, temporary workers are generally subject to Social Security and Medicare taxes (FICA) on their U.S.
Temporary work visa holders are not required to pay a formal “exit tax” when leaving the United States at the end of their work assignments. Similar to artists and athletes, they likely to file a departing alien return using either Form 1040-C or Form 2063 before departing the country. However, this procedure is less commonly used by standard work visa holders compared to entertainers.
All temporary workers should submit a final tax return for the year of their departure. This includes Form 1040-NR for nonresident aliens or Form 1040 for those who qualify as resident aliens by meeting the substantial presence test.
After leaving the United States, former temporary work visa holders should report any address changes to the IRS using Form 8822 to ensure receipt of tax documents and correspondence. They should continue reporting and paying taxes on any US-source income, which includes deferred compensation, bonuses received after their departure, and investment income from US sources.
Any US financial accounts should either be closed or maintained in compliance with US reporting requirements. If the individual has deferred compensation arrangements, stock options, or retirement accounts in the US, they need to ensure proper reporting of these items on future tax returns when the income is recognized.