Topic Summary

• Many countries have tax treaties with the U.S. that allow their residents to earn income without being subject to income tax on those earnings in both countries.
• U.S. Tax Treaty provisions may not be honored by all state taxing authorities.
• Treaty benefits are tied to the residency of the country the individual established residency in before entering the U.S.
• Pay of professors and teachers may be exempt from U.S. income taxes for either two or three years if they are temporarily in the U.S. to teach or do research.
• Students and trainees from many countries are allowed to earn tax-free income in the U.S from the college or university they attend.
• Many treaties only allow students and scholars to engage in employment that is related to the reason they were admitted to the country.
• Capital gains from stock sales may be taxed at lower than 30%, if treaty provisions permit.
• Any dividends paid to a resident of a country that has a treaty providing lower rates of tax for dividend income require additional research and are Out of Scope for the VITA/TCE program. All others are taxed at 30%.
• Canada, India, and the People's Republic of China have unique provisions for students and scholars. For more information regarding the benefits of a particular country's tax treaty, see Publication 901, U.S. Tax Treaties or Publication 4011 for further details.