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Hi, I'm a German citizen who came to the US in December 2011 on a J-1 visa as a postdoctoral scholar at UCSD. I'm being paid directly by UCSD. I'm married to a US citizen but I have not applied for a green card so I'm a non-resident alien for tax purposes. I was told I can exclude my US-based income from UCSD from taxes for the first two years. Am I missing anything, should I tell UCSD to stop withholding taxes from my monthly salary?

What happens if I apply for a green card at any time during the two years or later?
Thank you very much for any help you can give me.
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Tax Professional Answers

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Gary Carter, PhD, MT, CPA
Article 20 of the US/German tax treaty allows a full exemption for income from teaching or research for up to two years if your stay is temporary. The provision that required a retroactive revocation of the provision if your stay exceeds two years was removed from the treaty in 2006. However, according to the new provision of the treaty, the exemption will not apply if you intend to stay permanently. Therefore, the exemption will not apply if you obtain a green card.

Although you could qualify for this exemption for federal tax purposes if your stay was temporary, the exemption does not apply for California tax purposes. Most states honor federal tax treaties, but California does not.
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