Tax Treaties: What’s The Deal?

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If you’re an international student in the US, a tax treaty could mean excellent news!

Under these treaties, residents of foreign countries are:

  • Taxed at a reduced rate
  • Exempt from US on income derived from specific sources earned within the US

 

Is your country in blue? Then it has a tax treaty with the US:

tax Treaty

If your country does not have a tax treaty with the US or the treaty doesn’t cover they type of income you earn, then you must pay tax on this income.

 

Saving Clause

Most tax treaties have a clause that preserves the right of each country to tax its own residents, so once you become a resident of the US, you will lose most of the tax treaty benefits. However, many treaties still allow you to claim certain benefits even if you become a US citizen or resident.

 

Non-Resident Aliens

If you are a non-resident alien, like most international students, a tax treaty will eliminate or reduce taxes on certain income and services, including; pensions, interest, dividends, royalties, and capital gains. For students, apprentices, and trainees, the limit to the benefits of the tax treaties is 4-5 years. For teachers and professors, the limit is around 2-3 years.

 

Requirements

You must meet certain requirements to avail of the benefits of a tax treaty:

  • Requirements as laid out in IRS Publication 901 (pdf)
  • You should have Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN)
  • Complete the correct tax treaty exemption forms

 

You can view the text of each treaty on the IRS website here.

 

How Sprintax can help?

When you do your online tax return with Sprintax, we will automatically check if you can avail of any tax treaty benefits, thus increasing your chances of a higher tax refund!

 

Find out more here.

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Stacy
Hey I'm Stacy! I'm dealing with US taxes and can't wait to help you prepare your tax return! I've been working with taxes for like forever, so you can totally trust my expertise. Sprintax can make things much easier for you. Check out my blog posts and feel free to ask me any questions.

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