The US tax system can be tricky – especially if you’re a nonresident.
Whether you’re earning money, investing in stocks, or just visiting and happen to win at a casino, it’s important to understand what kind of taxes you might need to pay.
In this guide, we’ll break down everything you need to know about income taxes in the US as a nonresident and how Sprintax can help you stay compliant and get any tax refund you may be due!
Understanding US tax residency
The first step to figuring out your tax responsibilities in the US is understanding whether you’re a resident or nonresident for tax purposes.
The IRS uses the substantial presence test and visa type to determine your residency status.
Most international students on F, J, M, or Q visas are considered nonresidents for their first few years in the US.
Short-term workers and other visitors often fall into the nonresident category as well.
Not sure about your residency status? Sprintax will determine your correct status automatically.
What is an ITIN and do foreigners need one?
If you’re not eligible for a Social Security Number (SSN) but still need to file a tax return, you’ll need to apply for an Individual Taxpayer Identification Number (ITIN).
An ITIN is required to:
- File a tax return (Form 1040-NR)
- Claim tax treaty benefits
- Receive a tax refund
- Report income to the IRS
Not sure how to get an ITIN?
Sprintax Returns can help you apply for your ITIN when you’re preparing your tax return!
Furthermore, check out this blog on how to apply for an ITIN from outside the US.
Do foreigners pay taxes in the US?
Yes—if you earn US-sourced income as a nonresident, you’re generally required to pay tax on it. This includes:
- Wages from a US employer
- Scholarship or grant income (in some cases)
- Rental income
- Business or freelance income from US clients
The federal tax rate in the US for foreigners typically starts at 10% and can go up to 37%, depending on income levels and type.
However, nonresidents cannot claim the standard deduction, which often leads to higher tax liability unless a tax treaty applies.
Need to file a tax return?
Sprintax Returns will prepare your 1040-NR form and ensure all treaty benefits are applied correctly.
How to open a bank account in the US for foreigners
Yes, nonresidents can open a US bank account. While not a tax issue directly, having a US bank account can make it easier to receive refunds and manage US income.
You’ll typically need:
- A valid passport
- A visa and supporting immigration documents
- Proof of address
- ITIN or SSN (some banks may allow you to apply without one initially)
Capital gains tax for foreigners
If you sell stocks or US real estate as a nonresident, you may be liable to pay capital gains tax. Here’s how it works:
- Stocks: Nonresidents are generally not taxed on capital gains from US stocks, unless you are present in the US for 183+ days in a calendar year.
- Real estate: Gains from the sale of US property are taxable. The FIRPTA (Foreign Investment in Real Property Tax Act) rule requires a portion of the proceeds to be withheld at the time of sale.
Sprintax can help you report real estate gains and claim any eligible refund.
Tax on gambling winnings
If you win big in Las Vegas or at any other US gambling venue, firstly – congratulations!
However, you should be aware that gambling winnings are subject to 30% withholding for nonresidents, unless they are exempt from a tax treaty.
You’ll need to report these winnings on your 1040-NR return to potentially claim a refund.
Can foreigners invest in US stocks?
Yes, and many do! But there are tax implications to consider.
- Dividends paid by US companies to nonresidents are generally subject to 30% withholding tax—though this may be reduced or eliminated by a tax treaty.
- You’ll need to complete Form W-8BEN and submit it to your broker to claim treaty benefits.
Sprintax Dividends can help you complete all your relevant forms in order to claim a dividend withholding tax (DWT) refund (in cases of over-withholding).
Can foreigners get a tax refund in the US?
Income tax refund and Social Security/Medicare refunds are two of the most common refunds available to nonresidents in the US.
Income tax refund
If too much was withheld from your paycheck or investment income, you may be entitled to a refund after filing your 1040-NR.
Social Security and Medicare tax refund
Some nonresidents—especially students, J-1 visa holders, and interns—are exempt from paying Social Security and Medicare taxes. If these taxes were incorrectly withheld from your paycheck, you may be able to claim a refund.
Sprintax Returns can help you claim a Social Security tax refund.
Let Sprintax help you stay tax compliant
Tax in the US can be complicated – but you don’t have to go it alone!
Sprintax is the only self-preparation software for nonresident federal and state tax returns.
We make it easy to:
- Determine your residency status
- File Form 1040-NR
- Claim refunds on income tax, Social Security, and more
- Complete your W-8BEN for dividend and investment income
️ Start your nonresident tax return with Sprintax today
