Non-Resident Alien Taxpayers Introduction   Many "foreign" individuals invest in the U.S. without fully comprehending their tax consequences. A non-resident alien for U.S. tax purposes is a non-U.S. resident and a non-U.S. citizen. In most cases, with proper tax planning, taxes can be minimized or even avoided.

Income Taxes   A foreign taxpayer is taxed on his or her U.S. source income at a flat rate of 30%, unless there is a lower treaty rate available. U.S.-source income includes, rents, wages, dividends, interest, royalties, licenses and other ordinary income payments (called "fixed or determinable, annual or periodic" payments). The sourcing rules are complex and often depend on where the non-resident alien is physically present when earning the income or the location of the person or entity paying the funds.

Capital Gains   Gains (profits) from the sale or stocks and securities or any other non-real estate asset by a non-resident alien is generally not taxable to a foreign taxpayer. Gains from the sale of real estate located in the U.S. is always a taxpayer event, whether the asset is held directly by the individual or by certain U.S. corporations or partnership. The tax is enforced through withholding rules.

Gifts   A gift by a non-resident alien to a U.S. taxpayer (a U.S. resident or citizen) is usually non-taxable to the non-resident alien or the U.S. recipient, unless the gifts involves U.S. real property or tangible personal property located within the U.S. Although the gift is non-taxable to either the donor (giver) or donee (recipient), there are gift-tax reporting rules that may apply. Generally, gifts totaling less than $100,000 per calendar year made by an non-resident alien are not reportable.

Additional Information   For more information on the U.S. tax consequences for non-resident aliens, see the Tax Prophet's section on Foreign Taxpayers.

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