Taxing Non-Residents: A U.S. Perspective

Abstract

As globalisation increases, so does the need for understanding multijurisdictional taxation. Which countries will try to tax the international traveller’s income? Treaties can clarify the tax implications, but too many treaties could become overwhelmingly complex. When treaties do not exist, each host country must establish a set of rules for taxing non-citizens. This chapter describes the basic U.S. income tax laws for taxing resident and nonresident aliens who come to the United States. If international visitors meet the criteria for being a ‘resident alien’, then the U.S. tax system will tax them on their worldwide income and allow them the same deductions and credits that U.S. citizens enjoy. On the other hand, ‘non-resident aliens’ are only taxed on their U.S. source income, and they are entitled to fewer deductions and credits. This chapter explains the general concepts along with a few details about how these rules are applied.