What Income Is Taxed(p5)

A nonresident alien usually is subject to U.S. income tax only on U.S. source income. See Table 1 for the factors that determine whether income is from U.S. sources. Under limited circumstances, certain foreign source income is subject to U.S. tax. See Foreign Income in chapter 4 of Publication 519.

U.S. source income includes, but is not limited to, the following.

1. Wages, salaries, commissions, fees, tips, etc., for services performed in the United States. For exceptions, see Employees of foreign persons, organizations, or offices, and Crew members, later.
2. Interest, with the following exceptions.
   1. Interest paid by certain resident aliens or domestic corporations if at least 80% of the payer's gross income for the 3 preceding years was from sources outside the United States.
   2. Interest on certain amounts paid by a foreign branch of a domestic corporation or a domestic partnership.
   3. Interest on deposits with a foreign branch of a domestic corporation or domestic partnership, but only if the branch is in the commercial banking business.
3. Dividends, with the following exceptions.
   1. Dividends received from a domestic corporation if the corporation elects to take the American Samoa economic development credit.
   2. Part of the dividends received from certain foreign corporations.
4. Rents and royalties from property located in the United States or from any interest in that property.
5. Gains, profits, and income from the sale or exchange of inventory in the United States you purchased outside the United States and its possessions.
6. Gains, profits, and income from the sale or other disposition of a U.S. real property interest.

A U.S. real property interest is any interest in real property (including natural deposits) located in the United States or the Virgin Islands and any interest (other than solely as a creditor) in certain domestic corporations holding U.S. real property interests.

For more information, see Publication 519.

Income for personal services performed in the United States as a nonresident alien is not considered to be from U.S. sources and is tax exempt if you meet all three of the following conditions.

1. You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or you work for an office or place of business maintained in a foreign country or possession of the United States by a U.S. corporation, a U.S. partnership, or a U.S. citizen or resident.
2. You perform these services while you are a nonresident alien temporarily present in the United States for a period or periods of not more than a total of 90 days during the tax year.
3. Your pay for these services is not more than $3,000.

If you do not meet all three conditions, your income from personal services performed in the United States is U.S. source income.

Compensation for services performed by a nonresident alien in connection with the individual's temporary presence in the United States as a regular crew member of a foreign vessel engaged in transportation between the United States and a foreign country or U.S. possession is not U.S. source income and is exempt from U.S. tax.