Malta Tax Treaty for F-1 and J-1 Students: $9,000 Wage Exemption Under Article 20(2)

# Malta Tax Treaty for F-1 and J-1 Students: How to Claim Your $9,000 Wage Exemption

If you are a student from Malta studying in the United States on an F-1 or J-1 visa, you may be eligible to exempt up to $9,000 per year in wage income from US federal income tax under the US-Malta income tax treaty.

This guide explains who qualifies, how the exemption works, and how to claim it on your US tax return.

Who Qualifies?

To claim the Malta treaty wage exemption, you must meet all of the following conditions:

You are a resident of Malta (or were immediately before coming to the US) for purposes of the tax treaty.

You are in the US primarily for education or training — typically on an F-1, J-1, M-1, or Q-1 student or trainee visa.

You are a nonresident alien for US tax purposes (or a resident alien who qualifies under the treaty's saving clause exception).

Your income is from personal services — this includes wages from campus employment, teaching or research assistantships, OPT, and CPT.

How the Malta Treaty Exemption Works

Under Article 20(2) of the US-Malta income tax treaty, Maltese students and trainees who are in the United States primarily for education or training can exempt up to $9,000 per year in wages from US federal income tax.

The exemption works as a dollar cap: the first $9,000 of your annual wage income from personal services is exempt, and any amount above that is taxable at normal rates.

Example

Suppose you are a teaching assistant earning $16,000 per year:

Total wages: $16,000

Treaty-exempt amount: $9,000 (capped at $9,000)

Taxable wages: $7,000

If your total wages are less than $9,000, then your entire wage income is exempt. For instance, if you earned $1,500, the full amount would be exempt and you would owe no federal income tax on those wages.

Is There a Time Limit?

No. The Malta treaty has no time limit on the student wage exemption. You can claim the $9,000 exemption every year for as long as you remain in the United States for the purpose of your education or training. This applies even if you transition from nonresident to resident alien status for tax purposes, as long as the treaty's saving clause exception covers you.

State Tax Implications

Tax treaty benefits apply to your federal income tax return (Form 1040-NR). State tax treatment varies because states are not parties to federal tax treaties and decide independently whether to honor them.

States that honor federal treaty benefits (treaty-exempt income stays excluded):

New York: Honors the federal treaty through AGI conformity. The IT-203 starts from federal adjusted gross income, which already excludes your treaty-exempt wages. There is no add-back. Your treaty benefit carries through to your New York return.

Illinois: Honors the federal treaty. The IL-1040 begins from federal AGI, and Illinois has no modification requiring treaty-exempt income to be added back.

Most other states with income taxes also honor treaties through the same AGI conformity mechanism.

States that do NOT honor federal treaty benefits (treaty-exempt income is added back and taxed):

California: Explicitly rejects all federal tax treaties. Under Revenue and Taxation Code § 17024.5(b)(11), California does not adopt federal provisions relating to nonresident aliens. You must add your treaty-exempt amount back on Schedule CA (540NR), and California will tax it as California-source income.

12 other states also reject treaties: Alabama, Arkansas, Connecticut, Hawaii, Kansas, Kentucky, Maryland, Mississippi, Montana, New Jersey, North Dakota, and Pennsylvania.

If you study or work in one of the 13 states that reject treaties, you will owe state income tax on wages that are exempt at the federal level.

How to Claim This Benefit on Your Tax Return

When filing your US tax return (Form 1040-NR), the Malta treaty exemption is reported as follows:

Line 1a (Wages): Enter your total wages minus the treaty-exempt amount. If you earned $16,000, you would enter $7,000.

Line 1k (Tax treaty exempt income): Enter the exempt amount. In the example above, you would enter $9,000.

Schedule OI (Other Information), Item L: Report the treaty claim with:

- Country: Malta

- Treaty Article: 20(2)

- Exempt Amount: the dollar amount you are claiming

You should also have Form 8233 on file with your employer to reduce withholding during the year, and you may need to attach Form 8833 (Treaty-Based Return Position Disclosure) to your tax return if required.

What Income Qualifies?

The treaty exemption under Article 20(2) applies to compensation for personal services performed in the United States. This includes:

Wages from on-campus employment

Teaching assistant (TA) and research assistant (RA) stipends reported as wages

Wages earned during OPT (Optional Practical Training)

Wages earned during CPT (Curricular Practical Training)

Other employment compensation reported on Form W-2

It does not apply to:

Scholarship or fellowship grants (these may be covered under a different treaty article)

Investment income (interest, dividends)

Self-employment income (in most cases)

What Else Should Maltese Students Know?

Malta's treaty offers the same $9,000 annual exemption as Belgium and Bulgaria, with no time limit on the benefit. Maltese students studying in the US can also elect to be treated as resident aliens for US tax purposes under Article 20(3), though this election is irrevocable without IRS consent. Most students benefit more from remaining nonresident and claiming the treaty exemption.

File Your Malta Treaty Claim Accurately

Claiming your tax treaty benefit correctly can save you hundreds or even thousands of dollars in federal income tax. Our platform fully supports the US-Malta treaty under Article 20(2) and will automatically calculate your exempt amount, populate the correct lines on Form 1040-NR, and generate the required Schedule OI disclosure.

Start your nonresident tax return today to claim the treaty benefits you are entitled to.