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Non-Resident Alien ("NRA") Taxpayers
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Introduction
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Many
"foreign" individuals invest in the U.S. without fully comprehending their tax
consequences. An NRA 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. 
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Income
Taxes
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An NRA 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.
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Capital
Gains
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Gains (profits) from the sale of stocks and securities or any other non-real estate
asset by an NRA is generally not taxable to an NRA. 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.
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Gifts
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A gift by an NRA to a U.S. taxpayer (a U.S. resident or
citizen) is usually non-taxable to the NRA 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 NRA are not reportable.
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Additional Information
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For more
information on the U.S. tax consequences for an NRA, see the Tax Prophet's section on Foreign Taxpayers.
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| All contents copyright © 1995-2003 Robert L. Sommers, attorney-at-law. All rights reserved. This internet site provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet® is a registered trademark of Robert L. Sommers.
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