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Does a non resident alien(F1/F2 visa) need to pay tax on his…

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Does a non resident alien(F1/F2...
Does a non resident alien(F1/F2 visa) need to pay tax on his foreign interest income?
Does a non resident alien(F1/F2 visa) need to pay tax on his US business lending interest income?
Does a non resident alien(F1/F2 visa) need pay tax on his foreign (non US) business/trade income?
Does a non resident alien(F1/F2 visa) need pay tax on his foreign asset rent income?
Please answer with IRS reference documents.
Submitted: 7 months ago.Category: Tax
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Answered in 24 minutes by:
11/29/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,628
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi My name's Lane. the answer to your question is ... it depends.

...

If you are not a US citizen or resident alien (For example, if you are on an F-1 visa), you will be exempt from the Substantial Presence Test (SPT) for the first 2 (if non-student) or 5 (if student) calendar years that you are in the US.

...

It's this status that determines (1) Which tax form you file, and (2) How these different items are taxed.

...

So you MOST likely status is that of a NON-resident alien for tax purposes, which means that you are considered non-resident aliens (you said F1/F2 so IO'm guessing you asking for your spouse as well) for US tax purposes, you will need to file a Form 1040NR to report your US source income.

...

For NON-resident aliens, your foreign income OF ANY KIND - interest, earned, gains from sale of property, etc. is not taxed, because the US has no authority to tax a non-tax-resident.

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If you PASS the substantial presence test, hold a green-card, or are a U.S Citizen ALL worldwide income is taxed, regardless of your location or the source of your income.

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But as a NON-resident alien,you must also pay income taxes to the IRS but only on the income that’s effectively connected to the U.S., which generally includes the money you earn while in the U.S.

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You US lending interest, for example IS effectively connect income (ECI), so taxable on form 1040NR

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The rest of the income you've mentioned (for NON-resident) the US has no Jurisdiction to tax.

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NOW - if you ARE considered a tax resident (past the 5 year point as a student, 2 years as a non-student, so that the substantial presence comes into play and you are in the US for 183 days or more) then ALL of your income is taxable, because again, for US tax residents, ALL worldwide income is taxed.

...

https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens

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Customer reply replied 7 months ago
How is 2 years and 5 years measured?
Assume we come June 2014, which years are we exempt from the above foreign taxations? 2014, 2015 and 2016 or 2014 and 2015 only for two years?
My spouse is student, so if I become also student before 2 years expire, then it will be 5 years, right?
Customer reply replied 7 months ago
I meant 'foreign income taxation'
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

So sorry. I didn't get the alert that you had come back.

...

This gets complicated ... essentially it's a tax year determination.

...

in my experience, these surprisingly clear explanations and examples from IRS help to provide clarity as it relates to the possible scenarios

...

https://www.irs.gov/individuals/international-taxpayers/alien-residency-examples

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

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