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.
- 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.
- Interest, with the following exceptions.
- 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.
- Interest on certain amounts paid by a foreign branch of a domestic corporation or a domestic partnership.
- 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.
- Dividends, with the following exceptions.
- Dividends received from a domestic corporation if the corporation elects to take the American Samoa economic development credit.
- Part of the dividends received from certain foreign corporations.
- Rents and royalties from property located in the United States or from any interest in that property.
- Gains, profits, and income from the sale or exchange of inventory in the United States you purchased outside the United States and its possessions.
- 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.taxmap/pubs/p513-001.htm#en_us_publink10008624
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.
- 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.
- 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.
- 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.
Table 1. Summary of Source Rules for Income of Nonresident Aliens Note:
For more details about the income source rules, see chapter 2 of Publication 519.
|Item of Income||Factor Determining Source|
|Salaries, wages, other compensation||Where services performed|
|Business income:|| |
| Personal services||Where services performed|
| Sale of inventory—purchased||Where sold|
| Sale of inventory—produced||Allocation|
|Interest||Residence of payer|
|Dividends||Whether a U.S. or foreign corporation*|
|Rents||Location of property|
| Natural resources||Location of property|
| Patents, copyrights, etc.||Where property is used|
|Sale of real property||Location of property|
|Sale of personal property||Seller's tax home (but see Personal Property, in chapter 2 of Publication 519, for exceptions)|
|Pension distributions attributable to contributions||Where services were performed that earned the pension|
|Investment earnings on pension contributions||Location of pension trust|
|Sale of natural resources||Allocation based on fair market value of product at export terminal. For more information, see Regulations section 1.863-1(b)|
a) Dividends paid by a U.S. corporation are foreign source
if the corporation elects the American Samoa economic
b) Part of a dividend paid by a foreign corporation
is U.S. source if at least 25% of the corporation's
gross income is effectively connected with a U.S.
trade or business for the 3 tax years before the
year in which the dividends are declared.