TN visa taxes: Complete guide for Canadian and Mexican professionals

Written by  Mel Whitney, EA

Last updated Apr 10, 2026

Introduction

TN visa holders – Canadian and Mexican professionals admitted under USMCA – owe US federal income tax on US-source wages from the first day of US work. Tax residency, determined under the 183-day Substantial Presence Test in IRC § 7701(b), dictates the return: Form 1040 for resident aliens reporting worldwide income, or Form 1040-NR for nonresident aliens reporting only US-source income. FICA taxes – 6.2% Social Security and 1.45% Medicare – generally apply regardless of residency status.

The table below covers all key thresholds, forms, and deadlines for TN visa holders filing for the 2025 tax year – use it as a pre-filing checklist.

TN visa tax residency status

A TN visa holder becomes a US tax resident under the Substantial Presence Test when two thresholds are met: at least 31 days in the US during 2025 and a weighted 3-year total of 183 days or more under IRC § 7701(b). Before meeting that test, a TN holder is generally a nonresident alien taxed only on US-source income.

Substantial Presence Test formula

The SPT uses the following 4-step weighted formula:

1. Count all days present in 2025 at full value.
2. Count days present in 2024 and multiply by 1/3.
3. Count days present in 2023 and multiply by 1/6.
4. Add all 3 values. If the total is 183 or more, and 2025 presence is at least 31 days, the TN holder is a resident alien for US tax purposes.

Based on a TFX client scenario, a software engineer from Ontario started TN employment on February 15, 2025, and spent 320 days in the US during 2025, with no US days in 2024 or 2023.

SPT calculation: 320 + 0 + 0 = 320. The engineer meets SPT, files Form 1040 for 2025, and must report Toronto rental income as worldwide income.

Regular commuting days from Canada or Mexico to work in the US do not count for SPT if the worker regularly commutes on more than 75% of workdays during the working period. That rule is especially important for Canadian TN border commuters who live in Ontario or British Columbia and cross the border daily.

Resident alien vs. nonresident alien – practical difference

A full-year resident alien generally qualifies for the 2025 standard deduction of $15,750 for single filers or $31,500 for married filing jointly. But a first-year TN holder who is a dual-status alien generally cannot claim the standard deduction, even if SPT is met by year-end. This is the key dividing line for TN visa tax residency, and it also controls access to many credits and elections.

A nonresident alien who did not meet SPT files Form 1040-NR, reports only US-source income, and generally cannot claim the standard deduction. For a deeper breakdown, see resident vs. nonresident alien.

NOTE! Canadian TN holders who meet SPT may still claim nonresident treatment under the Canada–US treaty tie-breaker if Canada also treats them as a resident. That treaty override is separate from the basic SPT calculation and requires its own disclosure filing.

Which tax form does a TN visa holder file?

TN holders who meet the SPT file Form 1040 and report worldwide income. TN holders who did not meet SPT usually file Form 1040-NR and report only US-source income. For most TN employees, both returns are due April 15, 2026 and can be extended to October 15, 2026 with Form 4868, although a nonresident with no wages subject to withholding generally has until June 15, 2026 to file Form 1040-NR.

Unlike F-1 and J-1 visa holders, TN visa holders do not receive a general FICA exemption based on immigration status alone.

For most TN holders arriving mid-year, Form 1040-NR applies for the initial nonresident period; once SPT or a residency-starting rule is met, Form 1040 – or a dual-status return – becomes necessary.

For a full breakdown, see Form 1040 vs Form 1040-NR: full comparison. If the return is staying nonresident, Nonresident tax return service is the most relevant next step.

FICA taxes for TN visa holders: Social Security and Medicare

TN visa holders generally pay FICA taxes on US wages at 6.2% Social Security on the first $176,100 of 2025 wages and 1.45% Medicare on all wages with no cap. An additional Medicare tax of 0.9% applies above $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately. There is no general FICA exemption for TN visa holders.

Canadian TN holders may benefit from the US–Canada Totalization Agreement. The agreement coordinates coverage rules so temporary cross-border workers can avoid paying into both Social Security and the Canada Pension Plan on the same earnings in covered cases, and it can combine US and Canadian coverage credits when determining benefit eligibility.

NOTE! Mexico and the US do not have a totalization agreement in force as of April 6, 2026. A US–Mexico Social Security agreement was signed in 2004, but it has not entered into force, so Mexican TN holders can still face parallel social-insurance costs in the two countries.

Self-employed TN holders reported on Form 1099-NEC generally owe 15.3% self-employment tax on 92.35% of net earnings: 12.4% Social Security up to the wage base and 2.9% Medicare with no ceiling. Quarterly estimated payments are generally made on Form 1040-ES because no employer is withholding the tax at source.

Canada–US tax treaty: Tie-breaker rules for TN visa holders

Canadian TN holders who meet SPT can invoke Article IV of the Canada–US treaty when the Canada Revenue Agency also treats them as Canadian tax residents. The treaty then assigns residence to one country under 4 ordered tests, and a TN holder who claims treaty nonresident status in the US must generally disclose that position on Form 8833 with Form 1040-NR.

Article IV of the US-Canada tax treaty applies the following 4 tie-breaker criteria in order of priority:

1. Permanent home location.
2. Center of vital interests.
3. Habitual abode.
4. Citizenship.

If those tests still do not resolve the residence, the US and Canadian competent authorities settle the issue by mutual agreement.

Based on a recent TFX client scenario: A mechanical engineer from Mississauga began TN work in Texas in January 2025 and spent the full year in the US, easily meeting SPT. The engineer kept a permanent home in Mississauga, used only temporary employer-provided lodging in Texas, and left a spouse and children in Canada.

CRA continued to treat the engineer as a Canadian resident, so Article IV pointed back to Canada, and the US filing position became Form 1040-NR plus Form 8833 rather than a full-year resident Form 1040.

TN holders claiming treaty nonresident status as dual-resident taxpayers must attach Form 8833 to Form 1040-NR. Failure to disclose a required treaty-based return position can trigger a $1,000 penalty for an individual under IRC § 6712, even if little or no US tax is ultimately due.

For full treaty provisions – withholding rates, RRSP treatment, pensions, and estate rules – see Canada vs US taxes compared (2026).

Form 8840 – Closer connection exception for TN visa holders

TN holders who spent fewer than 183 days in the US during 2025 can claim the closer connection exception under IRC § 7701(b)(3)(B) on Form 8840. That preserves nonresident alien status without using a treaty, and it is available to Mexican and Canadian TN holders alike if all required facts line up.

A TN holder must meet the following 4 conditions to qualify:

1. Be present in the US for fewer than 183 days during 2025.
2. Maintain a tax home in a foreign country for the entire year.
3. Have a closer connection to that foreign country than to the US through facts such as family location, housing, bank accounts, licensing, and social ties.
4. Not take steps toward lawful permanent resident status during the year.

For most TN employees, Form 8840 is due April 15, 2026. If no wages were subject to withholding, the due date is generally June 15, 2026. If the underlying filing deadline is properly extended, Form 8840 follows that extended deadline – which can be as late as December 15, 2026, for a June-due Form 1040-NR filer.

For the full rule set, examples, and filing mechanics, see IRS Form 8840: Closer Connection Exception – complete guide.

FBAR and FATCA for TN visa holders

TN holders who are US tax residents must file an FBAR if the aggregate value of foreign financial accounts exceeded $10,000 at any point in 2025. The form is FinCEN Report 114, filed online by April 15, 2026, with an automatic extension to October 15; FATCA Form 8938 is a separate IRS filing that starts at $50,000 for single filers living in the US or $100,000 for married filing jointly at year-end.

For penalties assessed on or after January 17, 2025, the maximum penalty for a non-willful FBAR violation is up to $16,536 per report. The maximum civil penalty for a willful FBAR violation is up to the greater of $165,353 or 50% of the balance at the time of the violation, and criminal violations can reach a $250,000 fine and 5 years in prison.

The Supreme Court confirmed in Bittner v. United States that the non-willful FBAR penalty applies per form, not per account. That matters for TN holders with multiple Canadian or Mexican accounts because one late FBAR can still be expensive, but the penalty base is materially narrower than the IRS had argued.

TFX client scenario: A Canadian nurse on TN status in Texas kept a TD Canada account worth about $37,000 USD and a TFSA worth about $15,000 USD during 2025. The combined balance exceeded $10,000, so an FBAR was required. Because the issue involved late FBAR filing rather than an unfiled income tax return, the nurse used the IRS delinquent FBAR procedures with a reasonable-cause explanation rather than a streamlined domestic submission.

For full filing mechanics, deadlines, and correction options, see FBAR filing requirements and deadlines 2026.

TN visa tax withholding – employer and employee obligations

US employers hiring TN visa holders withhold federal income tax through Form W-4. Nonresident alien TN employees follow special IRS rules: use Notice 1392, check “Single or Married filing separately” on Step 1(c) regardless of actual marital status, write “Nonresident Alien” or “NRA” below Step 4(c), and do not write “Exempt” on the form.

This rule does not create a flat withholding tax. Employers add a payroll-only amount to the nonresident employee’s wages under Publication 15-T solely to calculate withholding, and that extra amount does not increase actual taxable wages, FICA, or Form W-2 compensation.

TN holders paid on Form 1099-NEC generally have no wage withholding, so they must make quarterly estimated tax payments on Form 1040-ES to avoid the underpayment penalty under IRC § 6654. The standard due dates are April 15, June 15, September 15, and January 15 of the following year, subject to weekend and holiday shifts.

A Canadian TN holder working remotely from Canada for a Canadian employer is performing services outside the US. That compensation is generally foreign-source compensation rather than US-source wage income, so it is not subject to regular US federal wage withholding solely because the worker holds TN status.

Special situations: Four TN visa tax scenarios

Four TN visa tax scenarios often require more than a basic SPT calculation:

1. first-year dual-status filing,
2. self-employment or Form 1099-NEC income,
3. filing with a foreign spouse who needs an ITIN, and
4. special treaty and Social Security issues for Mexican TN visa holders.

These are the high-risk areas where TN visa tax filing requirements usually become technical.

First-year dual-status alien filing

A TN holder who arrives during 2025 and becomes a resident alien before year-end is generally a dual-status alien – nonresident for the pre-residency portion of the year and resident from the residency starting date, which is usually the first day physically present in the US during 2025. That rule comes from Chapter 6 of IRS Publication 519, not from immigration status alone.

If the TN holder is a resident at year-end, Form 1040 is the main return, and Form 1040-NR is attached as a statement for the nonresident period. A dual-status year generally does not allow the standard deduction, which is one reason first-year TN filings often produce surprises.

The First-Year Choice in IRC § 7701(b)(4) is narrower than many summaries suggest. It can apply when the TN holder does not meet SPT in 2025 but does meet it in 2026, allowing US residence to start earlier in 2025 after a qualifying 31-day period and 75% presence test – but it does not automatically make the entire 2025 year a resident year.

TFX client scenario: A financial analyst from Mexico City entered on TN status on September 1, 2025 and spent 122 days in the US during 2025. The analyst did not meet SPT for 2025, and generally files Form 1040-NR, but if SPT is met in 2026, a First-Year Choice election may become available for part of 2025, depending on the 31-day and 75% presence rules.

For the full mechanics, see Dual-status alien: how to file US taxes – complete guide.

TN visa independent contractor: 1099-NEC taxes

TN holders receiving Form 1099-NEC rather than Form W-2 face the following 3 additional tax obligations:

1. Self-employment tax at 15.3% on 92.35% of net earnings, including 12.4% Social Security up to the wage base and 2.9% Medicare with no cap.
2. Schedule C reporting for business income and deductible expenses.
3. Quarterly estimated tax payments on Form 1040-ES to reduce the risk of an IRC § 6654 underpayment penalty.

TN status is employment-based and fact-specific under immigration law. A TN holder should confirm with an immigration attorney before operating as a US-based independent contractor or sole proprietor.

Married TN visa holder: ITIN and filing status options

A TN holder with a foreign spouse who has no US taxpayer identification number generally has the following 2 filing options:

1. Married filing jointly with a § 6013(g) election: Both spouses elect to be treated as US residents for the full year, both spouses’ worldwide income goes on Form 1040, and the foreign spouse must obtain an ITIN on Form W-7.
   This route can unlock the 2025 $31,500 standard deduction for MFJ and wider tax brackets, but IRS ITIN processing often takes up to 7 weeks and can run 9–11 weeks during peak season or from overseas.
2. Married filing separately without bringing the spouse onto a joint resident return: If the TN holder remains a nonresident, Form 1040-NR can usually be filed without obtaining an ITIN for the spouse. That keeps the spouse’s foreign income off the US return, but the standard deduction is generally unavailable, and rates are less favorable.

Mexican TN visa holders

Mexican citizens on TN visas follow the same core US federal tax rules as Canadian TN holders: the Substantial Presence Test in IRC § 7701(b), Form 1040 or Form 1040-NR depending on residency status, and the same FICA rates with no general TN exemption. The tax mechanics of TN visa taxes are federal, not nationality-specific.

The key treaty difference is that Mexican TN holders rely on the Mexico–US income tax treaty rather than the Canada treaty. Article 4 of that treaty uses the same broad tie-breaker sequence – permanent home, center of vital interests, habitual abode, then citizenship – and a Mexican TN holder claiming treaty nonresident status generally uses Form 8833 with Form 1040-NR.

Mexico and the US do not have a totalization agreement in force as of April 6, 2026. That means Mexican TN holders can face a double Social Security cost that Canadian TN holders may be able to avoid in covered assignments.

Canadian TN holders: Departure tax and CRA filing obligations

A Canadian TN holder who becomes a nonresident of Canada for tax purposes generally reports a departure date on the Canadian return and may face departure tax. Canada usually treats many assets as disposed of at fair market value on the departure date, which can trigger tax on unrealized gains even when nothing was sold in cash terms.

The CRA departure return covers January 1 through the date Canadian residency ends. Form T1161 is required when the total fair market value of reportable property exceeds CAD 25,000. The principal residence can often qualify for principal-residence relief, and for 2025 individuals, the ordinary capital gains inclusion rate remains 50% under the current CRA administration.

RRSP and RRIF plans are not subject to Canada’s deemed-disposition rules in the same way as ordinary investment accounts. For US purposes, eligible taxpayers generally benefit from automatic treaty deferral on undistributed RRSP or RRIF income under Rev. Proc. 2014-55, so a separate annual Form 8833 election is not generally required solely to defer US tax on RRSP growth.

TFX client scenario: A software developer from Toronto became a Canadian tax emigrant on June 1, 2025 and began full-time TN work in Seattle. The CRA emigrant return covered January 1 through May 31, 2025. A non-registered investment portfolio with CAD 80,000 of unrealized gain created departure-tax exposure under the 2025 50% inclusion rate, while the RRSP itself remained outside the ordinary deemed-disposition rule.

NOTE! A TN holder who later returns to Canada generally re-establishes Canadian tax residency from the date of re-entry. For a broader cross-border planning context, see US taxes in Canada: complete guide for 2026.

Conclusion

TN visa tax key facts – 2025 tax year

• ✓ SPT trigger: 183 weighted days under IRC § 7701(b).
• ✓ Filing form: Form 1040 for resident aliens or Form 1040-NR for nonresident aliens.
• ✓ FICA: 6.2% Social Security up to $176,100 plus 1.45% Medicare, with no general TN exemption.
• ✓ FBAR: required if foreign accounts exceed $10,000 in aggregate.
• ✓ Canadian treaty claims: Form 8833 for treaty-based nonresident positions.
• ✓ Closer connection: Form 8840 if current-year US presence is under 183 days, and all other conditions are met.

TN visa tax situations – especially dual-status years, treaty tie-breakers, first-year residency choices, Canadian departure tax, and FBAR reporting – can trigger expensive mistakes when handled incorrectly.

Taxes for Expats prepares Form 1040, Form 1040-NR, Form 8833, Form 8840, and FinCEN Form 114 for TN visa holders who need compliant cross-border filing. Our team has prepared 90,000+ returns. Schedule a free consultation today.