According to a popular business magazine The Business Times, H1B Visa is a U.S. Visa for individuals employed by companies located in the U.S. The H1B Visa is only applicable to educated individuals; hence job opportunities could require theoretical or technical knowledge in the field of work. According to STILT.com, a lot of H1B Visa holders want to invest their money in a profitable venture, such as the stock market, and they feel that they are withheld from making investments due to their visa status. But are they right, and can an H1B Visa holder invest in stocks?
If you’re an H1B Visa holder, the great news is that you’re free to invest in stock trading in the U.S. without any hindrance provided you have a Social Security number (SSN) and a personal bank account.
As an H1B visa holder, you can open an account with any stockbroker platforms like Ameritrade, TradeKing, etc. As recurrently mentioned, you will be required to provide your details, such as Social Security Number and others. After creating an account, you can begin stock trading conveniently and securely. In the rest of this article, we will provide you with interesting and beneficial information about this question; let’s begin!
Legal Regulations and Rules to Consider Before Investing in Stocks While on H1B Visa
Investing in stocks is a simple method of multiplying wealth. The word “stock” is the name given to a share of a company’s ownership purchased by you. Since you’re coming to the U.S. for work, with the use of an H1B Visa, you are only permitted to work for a single employer until the termination of your contract. The only instance where an H1B Visa holder can use for different employers is if he/she has a Form I-129 petition gotten from each of his/her employers.
There aren’t any citizenship requirements for H1B Visa holders looking forward to trading stocks in the U.S. However, they are expected and required to consult with a certified investment firm to use the services of a professional. Under the Securities Act of 1993, an H1B is expected to register all his securities. Registering your securities as an H1B Visa holder will help make informed decisions regarding what stocks to trade.
Another legal regulation to consider is the Securities Exchange Act of 1932. This act holds the basis with which Congress created the Securities and Exchange Commission. This act enables the stockbroker companies to remit annual reports to the SEC’s EDGAR database, making this data available for public viewing.
However, H1B Visa holders are not allowed to take stock trading as a full-time job. However, if you plan on making stock trading a full-time job, you need to visit your immigration attorney. On the other hand, you can opt for another type of trading to avoid your Visa from being disqualified.
Day Trading Versus Delivery Based Trading for H1B Visa holders. Is Day Trading Even Legal on H1b Visa?
When stock trading, you have to understand that there are two main types of stock trading; day trading and delivery based trading. Day traders are active traders known for executing intraday strategies. It can also be referred to as the practice of buying and selling securities during a single trading day. Previously day trading usually occurred at stockbroking companies due to funding capabilities. But currently, any individual with enough funding can open stock market trades in the comfort of his/her home. On the other hand, delivery-based trading refers to buying stocks/shares and holding them for a specific period.
H1B Visa holders cannot perform day trading activities since their Visa was provided to them in a contract with their employment company. Your employers expect you to work for them full-time without any distractions. It is however advisable, for individuals who want to perform day trading to do so in an on and off manner. But such can also be seen as delivery-based trading, so it is best to perform delivery based trading activities.
However, if you are looking forward to taking up day trading as a full-time job, then, as mentioned earlier, you should seek the assistance of your immigration attorney. H1B Visa holders can meet with their immigration attorney to help them switch their visa types, but if they are willing to invest without changing Visa, we’re more than happy to take you through the interesting process in this article.
Tax Liability of Stock Trading for H1B Visa Holders
Irrespective of the type of trading you partake in, you are required to pay all taxes on your stock earnings in the U.S. Once you have started earning money from your stock trades, it would be great if you got a tax consultant to help you with filing taxes and tax reports. However, if you lost money during your open trades, it may be deducted from your tax, giving you rebates or any other advantages.
Alternative Investment Options for H1B Visa Holders
There are lots of investment options open for individuals with all types of Visas. The foreign country you’re seeking to invest in makes provision for you to make investments there with other benefits aside from financial services. These “other benefits” could include a reduction in tax rates, reduce bills, etc. When investing in a foreign country, most individuals consider reduced tax rates as a significant reason to make such investments.
Aside from stock trading, there are other types of favorable investments an H1B Visa holder can partake in, and they will be discussed below.
Investing in TRADITIONAL IRAs
A traditional IRA or (Individual Retirement Account) is one that permits an individual to direct their untaxed incomes into investments that grow without being taxed. Individuals who invest in traditional IRAs are not taxed on their IRS income until they make a withdrawal of their fund. Some limits to the IRA contributions can be found on the IRS website.
EMPLOYEE STOCK PURCHASE PLANS (ESPP)
An Employee Stock Purchase Plan (ESPP), involves a system where a company presents stocks at a discounted price for the company’s employees to purchase. The amount of the purchased stock is deducted in installments from the employee’s salary till the purchase date. It would be best if you didn’t sell your stocks within a year of purchase to avoid being taxed by the IRS.
401k and 401k Matching
The 401K investment is another easy form of investment, besides real estate. For individuals planning on retiring from work, 401ks are a great option. Since you have significantly contributed to your company in terms of employment, etc., your employer can match your 401k contributions and increase your retirement benefits.
A 401k account is a retirement account that is planned from the period you start working. It is an excellent source of building funds, but the interest added to your money is only minimal compared to other investments. However, you can also choose what to do with the money in your 401k account by investing it in the equity market via stocks, REITs, and bonds. Another advantage of opening 401K accounts is that the money invested in these accounts is untaxed.
Opening TAXABLE INVESTMENT ACCOUNTS (TIA)
Taxable accounts allow investors to withdraw their investment funds at any period. However, there aren’t any tax benefits available to people who open this type of accounts. H1B Visa holders can open accounts with brokerage companies like Vanguard, M1, or Robinhood to begin investing.
There are three (3) main types of assets in TIAs, and they include Stocks or Equities, Bonds, and other cash equivalents.
Investing in your place of residence
Another great option of investing without liabilities and fewer tax deductions is to invest in your current or future place of residence. It can similarly be called real estate investment and doesn’t require much from an H1B Visa holder.
Buying and selling a house is an excellent investment since land isn’t in any way mobile. Many people even go as far as owning countless properties and putting them up for rent or sale as a form of investment.
In the U.S., stock trade is a popular means of multiplying and increasing wealth. Still, many people, especially H1B visa holders, think that there are many limitations and protocols to be taken care of before investing in stocks.
However, this article has disproved that thought by informing you that H1B visa holders can invest in stock markets, provided they observe the stipulated guidelines and rules. There are two (2) major types of stock trade for workers: Day trading and delivery based trading. Day traders are full-time traders, while a delivery based trader trades once, only to sell their stock at a larger profit at future dates.
As an H1B visa holder, you are not expected to partake in day trading because your employer expects your full efforts to increase their business. You also do not have an option but to obey since you didn’t pay for your Visa yourself. However, you can make plans by making other investments that provide benefits outweighing stock investments. Irrespective of your decision, investing in the stock markets is a great choice and useful advice to anyone looking forward to improving his/her state of living.