US International Tax Basics
Your tax obligations in the United States depends on your status. Chose the status representing what sort of person you are to know more about your obligations.
Foreign Persons
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US Persons
US Persons include US citizens, permanent residents (green card holders), resident aliens, and domestic US entities such as corporations, partnerships, trusts, LLCs organized or incorporated in the United States.
Dual Status Individuals
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Two types of income received from the US
ECI
ECI received by individuals, trusts and estates is taxed using progressive tax brackets on Form 1040-NR. Corporations are taxed on Form 1120-F. Withholding from ECI is taken as a credit and may be refunded.
ECI exempt from withholding includes:
- Business income sourced to the US.
- Some foreign income associated with a place of business in the US.
ECI that is not exempt from withholding tax includes:
- Wages and other compensation for personal services, including income received by Entertainers and Athletes. See Below.
- Pensions derived from personal services that you provided in the US after 1986.
- Partnership Income of a partnership engaged in a trade or business in the US, including the sale of partnership interest.
- Most gains from the sale of real properties.
30% Withholding on FDAP
FDAP income paid to a foreign person is taxed using a 30% withholding tax on the gross amount. Tax treaties may reduce the amount of withholding.
FDAP income generally exempt from withholding includes:
- Gains (many exceptions apply, including gains from real estate properties and intangible assets)
- Portfolio interest
- Bank deposits
- Some Original Issue Discount (OID)
- Some gambling winnings
- US Source transportation income subject to the 4% tax.