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My wife and myself are on a student visa and are from India. We are married filing separately this year.

According to the Usa-India tax treaty we are eligible for $6300 Standard deduction or itemized deduction if it's larger.

My wife's itemized deduction is more than the standard deduction hence she opted for that.

But my standard deduction is more than my itemized.

There is a clause that if my wife files itemized that I need to file itemized too.

May I keep the treaty as priority and file using standard deduction? Or succumb to the clause and file under itemized deduction?

Reference: http://www.form1040nr.com/thetaxreturn.php

Please advise!

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The IRS' primary reference Pub 519 Tax Guide for Aliens -- current year online (current and previous years downloadable in PDF from the Forms&Pubs section of the website) says NO:

Students and business apprentices from India. A special rule applies .... You can claim the standard deduction .... Use Worksheet 5-1 to figure your standard deduction. If you are married and your spouse files a return and itemizes deductions, you cannot take the standard deduction.

Note the last sentence, which is clearly an exception to the 'India rule', which is already an exception to the general rule that nonresident filers never get the standard deduction. Of course this is the IRS' interpretation of the law (which is defined to include ratified treaties); if you think they are wrong, you could claim the deduction anyway and when they assess the additional tax (and demand payment) take it to US Tax Court -- but I suspect the legal fees will cost you more than the marginal tax on $6300, even under Tax Court's simplified procedures for small cases.

  • +1 Nice answer! There is no tax treaty between the US and India (no Senate ratification) but a Double Taxation Avoidance Agreement (DTAA), and so what Pub 519 says is the IRS's interpretation of this DTAA. – Dilip Sarwate Apr 15 '17 at 14:18

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