Immigration & Taxes:

Exclusions for Non-Resident Aliens From Their Gross Income

Nonresident aliens can exclude the following items from their gross income:

  • US source interest income that is not connected with a US trade or business is excluded if it the interest is earned through:
    1.Deposits with persons in the banking business
    2.Deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations
    3.Amounts held by an insurance company under an agreement to pay interest on them
  • Interest on obligations of a state or political subdivision, the District of Columbia or a US possession
  • US source interest income that is not connected with a US trade or business and that is portfolio interest on obligations issued after July 18, 1984
  • Income for personal services performed in the US as a nonresident alien is not considered to be from US sources and is exempt from taxes if the following three conditions are met:
    1.Your client performs personal services as an employee of or under contract with a nonresident alien, foreign partnership or foreign corporation, not engaged in a trade or business in the US; or they work for a business maintained in a foreign country or possession of the US by a US corporation, partnership, citizen or resident
    2.Your client performs these services while they are a nonresident alien in the US for a temporary period of not more than 90 days during the tax year
    3.Your client's pay is not more than $3,000 for their services rendered
  • They are a nonresident student or exchange visitor in the US under section 101(a)(15)(F), (J), or (Q) of the Immigration and Nationality Act, they can exclude pay received from a foreign employer from their gross income
  • Any annuity received under a qualified annuity plan or from a qualified trust is exempt for US income tax if it meets the following requirements:
    1.Your client receives the annuity only because of personal services they rendered outside of the US while they were a resident alien; or the personal services were performed in the US and they meet the three requirements discussed previously
    2.At the time that the first payment on the annuity is made, 90% or more of the employees for whom contributions or benefits are provided under the annuity plan are citizens or residents of the United States
  • Income of any kind that is exempt from US tax under a treaty that the US is a part of is excluded from their gross income. However, income on which the tax is only limited by treaty is included in gross income.