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Publication 513

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 paid from the United States or the District of Columbia, or by a noncorporate resident or domestic corporation, 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 a 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 dividend 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.
  7. Certain guarantees of indebtedness.

Employees of foreign persons, organizations, or offices.(p7)

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.

Crew members.(p7)

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 IncomeFactor Determining Source
Salaries, wages, other compensationWhere services performed
Business income: 
 Personal servicesWhere services performed
 Sale of inventory—purchasedWhere sold
 Sale of inventory—producedAllocation
InterestResidence of payer
DividendsWhether a U.S. or foreign corporation*
Dividend equivalent payments Whether paid on or after September 14, 2010
RentsLocation of property
 Natural resourcesLocation of property
 Patents, copyrights, etc.Where property is used
Sale of real propertyLocation of property
Sale of personal propertySeller's tax home (but see Personal Property, in chapter 2 of Publication 519, for exceptions)
Pension distributions attributable to contributionsWhere services were performed that earned the pension
Investment earnings on pension contributionsLocation of pension trust
Sale of natural resourcesAllocation based on fair market value of product at export terminal. For more information, see Regulations section 1.863-1(b)
Guarantee of indebtedness  Guarantees issued after September 27, 2010, to noncorporate residents, domestic corporations, and certain foreign persons if guarantee associated with foreign person's U.S. trade or business.

 *Exceptions include:

a) Dividends paid by a U.S. corporation are foreign
  source if the corporation elects the American
  Samoa economic development credit.

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.