Do foreigners pay taxes in the US?
Yes, a non-US citizen can owe US tax for the 2025 tax year if they are a US tax resident or receive certain US-source income. For tax purposes, “foreigner” usually means a non-US citizen, but the real question is whether the person is a resident alien, nonresident alien, or dual-status taxpayer.
A resident alien generally reports worldwide income on Form 1040, while a nonresident alien usually reports US-source income on Form 1040-NR. The IRS explains these rules in its guidance on taxation of nonresident aliens and determining an individual’s tax residency status.
Taxes for Expats helps nonresident and international taxpayers file the right US return, claim treaty benefits when available, and avoid overpaying because the wrong form was used. Learn more about our services or contact us today to get started.
Quick answer: when foreigners owe US tax
Foreigners pay US taxes in 2026 when their 2025 facts connect them to the US tax system through residency, US work, US-source investment income, US real estate, or US-situs assets. The common decision rule is simple: status determines the return, and income source determines what the US can tax.
The IRS classifies non-US citizens as resident aliens or nonresident aliens, and Topic no. 851 on resident and nonresident aliens gives the basic framework. You can also review TFX’s guide to US tax rules for resident and nonresident aliens for a practical filing overview.
For 2025 returns filed in 2026, these 6 common taxpayer profiles show when foreigners have to pay taxes in the US.
| Person type | Common US connection or income | Taxed in the US? | Common form or tax mechanism |
|---|---|---|---|
| Foreign employee | US wages reported on Form W-2 | Usually yes | Form 1040-NR or Form 1040, plus state return where required |
| Foreign contractor | US-source services or a US trade or business | Often yes | Form 1040-NR, Form 1042-S, Form 8233 for treaty-exempt personal-service income, or Form W-8ECI when US-source income is effectively connected |
| Foreign investor | US dividends, certain interest, or stock sales | Usually dividends yes, stock gains often no for nonresident aliens | NRA withholding, Form 1042-S, Form 1040-NR if refund or reporting is needed |
| Foreign property seller | Sale of US real property | Yes, usually with 15% FIRPTA withholding | Forms 8288, 8288-A, and often Form 1040-NR |
| Foreign student or scholar | F, J, M, or Q visa income or excluded presence days | Sometimes yes | Form 1040-NR and often Form 8843 |
| Green card holder | Lawful permanent residence at any time in 2025 | Usually yes on worldwide income | Form 1040 or Form 1040-SR |
So, do foreign nationals pay US taxes? Yes. Whether foreign nationals pay US taxes depends on whether they meet the green card test, meet the substantial presence test, or receive taxable US-source income as a nonresident alien.
How much tax do foreigners pay in the US? For 2025, nonresident aliens generally pay graduated US tax rates on effectively connected income after allowable deductions; rates run from 10% to 37%, with the top rate applying to taxable income above $626,350 for single filers. FDAP income, such as many US dividends, is commonly withheld at 30% unless a treaty lowers the rate.
Foreigners have to pay US taxes only when a US rule actually applies. For workers, see TFX’s practical guide to tax tips for foreigners working in the US before deciding which return to file.
Resident alien vs nonresident alien: why status matters
A foreigner’s US tax status matters because resident aliens report worldwide income for 2025, while nonresident aliens usually report only US-source income. A non-US citizen is generally a nonresident alien unless they meet the green card test or the substantial presence test.
The green card test applies when a person is a lawful permanent resident of the United States at any time during 2025. That person is usually treated as a US tax resident unless resident status is formally abandoned or an exception applies.
The substantial presence test has 2 parts: at least 31 days in the US during 2025 and at least 183 weighted days over 2025, 2024, and 2023. The IRS counts all US days in the current year, one-third of 2024 days, and one-sixth of 2023 days. The IRS’s substantial presence test page explains the formula and common exclusions.
Based on our client scenario at TFX: a consultant spent 120 days in the US in 2025, 120 days in 2024, and 120 days in 2023. The weighted count is 120 + 40 + 20 = 180 days, so they do not meet the 183-day substantial presence threshold for 2025.
Resident aliens are the main case where non-US citizens pay taxes on foreign income because they generally file Form 1040 and report worldwide income. Nonresident aliens usually file Form 1040-NR and report US-source income, unless a treaty or special rule changes the result.
Some taxpayers are dual-status aliens in the same year, such as a person who becomes a green card holder in 2025 after previously being a nonresident alien. Read our guide to resident alien vs nonresident alien filing rules if your year includes a status change.
What types of US income are taxable for foreigners?
US income tax for foreigners starts with 2 categories for nonresident aliens: effectively connected income and FDAP income. For 2025 Form 1040-NR reporting, ECI is generally taxed on net income at graduated rates, while FDAP is generally taxed on gross income at 30% unless a treaty or Code rule reduces it.
Effectively connected income, or ECI, is income connected with a US trade or business. The IRS says personal services performed in the US are generally treated as a US trade or business, and our ECI tax guide explains how that income is reported.
FDAP means fixed, determinable, annual, or periodical income. Common examples include dividends, interest, rents, royalties, scholarships, fellowships, pensions, prizes, and certain compensation items. TFX’s FDAP income guide explains how withholding works for foreign persons.
The following 7 income types commonly create US tax exposure for foreigners in 2025:
- Wages: US-source wages for services performed in the United States are generally taxable and may appear on Form W-2.
- Contractor income: US-source nonemployee compensation may be ECI if it is connected with a US trade or business.
- Business income: Partnership income, sole proprietor income, or other US business income may be taxable as ECI.
- Dividends: US-source dividends paid by US corporations are generally FDAP income subject to 30% withholding unless a treaty reduces it.
- Rent and royalties: US rental or royalty income may be FDAP, or it may become ECI if a valid election or business connection applies.
- Scholarships and fellowships: Taxable US-source grants can be taxable, though some F, J, M, or Q visa recipients may qualify for a 14% withholding rate or treaty relief.
- US real property gains: Gains from selling US real property interests are generally taxed under FIRPTA rules.
US tax for foreigners is not one single tax. The same nonresident alien may have W-2 wages taxed at graduated rates, dividends withheld at 30%, and a US property sale subject to 15% FIRPTA withholding.
Do foreign workers and employees pay US taxes?
Yes, foreign workers pay taxes in the US when they earn taxable wages for services performed in the United States in 2025. A nonresident employee typically receives Form W-2 and files Form 1040-NR by April 15, 2026, if wages were subject to withholding.
Do foreign employees pay US taxes? Yes, do foreign employees pay US taxes has the same answer for most US wage situations: wages for work physically performed in the United States are usually US-source wages, even if the employer is foreign or the employee is not a US citizen.
The IRS applies special withholding rules to nonresident alien employees, including specific Form W-4 instructions and treaty-exemption procedures. If wages are exempt under a treaty, the employee may need Form 8233 before the exemption is applied.
Foreign students, scholars, teachers, researchers, and exchange visitors have extra rules for both income tax and day-counting. The IRS page on foreign students, scholars, teachers, researchers, and exchange visitors explains the exempt-individual rules for the substantial presence test.
Some F-1, J-1, and M-1 nonresident students may be exempt from Social Security and Medicare tax on authorized services connected with their visa purpose, generally during their first 5 calendar years in the United States.
Foreign workers pay US taxes under different rules when they are resident aliens, dual-status aliens, or nonresident aliens. For filing steps, see our Form 1040-NR guide for nonresident aliens, and for visa-specific filing issues, see our O-1 visa tax return filing rules.
Do foreign contractors pay US taxes?
Foreign contractors may owe US tax for 2025 when they perform services in the United States or operate a US trade or business. If the income is effectively connected with a US trade or business, the contractor generally reports it on Form 1040-NR and may deduct allowable connected expenses.
Do foreign contractors pay US taxes? Yes, do foreign contractors pay US taxes is a facts-and-source question. A nonresident contractor working from outside the United States for a US client may have different results from a contractor who physically performs services inside the United States.
The IRS guidance on effectively connected income says personal services performed in the United States are generally considered a US trade or business. Business activities generally need to be considerable, continuous, and regular before income is treated as ECI.
For contractors, the right withholding form depends on the payment. A nonresident alien claiming a treaty exemption for US personal-service compensation generally uses Form 8233. Form W-8ECI is for US-source income that is effectively connected with a US trade or business.
A narrow compensation exception can apply when the foreign person is present in the United States for 90 days or less during the tax year, receives $3,000 or less, and is paid by a qualifying foreign employer or office. If any condition fails, the exception does not apply.
Do foreign investors pay taxes on US stocks, dividends, and interest?
Foreign investors can owe US tax on 2025 US-source dividends, certain US-source interest, and investment income connected with a US trade or business. For many nonresident aliens, US stock capital gains are not taxable unless an exception applies, but US dividends are generally subject to 30% withholding unless a treaty reduces the rate.
Do foreign investors pay US taxes? Yes, do foreign investors pay US taxes depends on the income type. US dividends are usually taxable FDAP income, while gains from selling publicly traded US stock are often not taxable to a nonresident alien who is not present in the United States for 183 days or more during the calendar year.
The US dividend tax rate for foreigners is generally 30% for nonresident aliens unless an income tax treaty provides a lower rate. The IRS guidance on NRA withholding explains that US-source income paid to foreign persons is generally withheld at 30% unless a reduced treaty or statutory rate applies.
Do foreigners pay taxes on US stocks? Usually, nonresident aliens do not owe US tax merely because they buy US stock or later sell it at a gain, unless an exception applies. The tax when a foreigner buys US stock usually appears later through dividend withholding, not at the moment of purchase.
Based on our client scenario at TFX: a nonresident investor receives $1,000 of dividends from US stocks in 2025. With no treaty reduction, 30% withholding equals $300; with a treaty rate of 15%, withholding would be $150 if the broker has valid documentation.
Foreigners pay taxes on US interest income only in certain cases. US bank deposit interest paid to a nonresident alien is often treated differently from taxable FDAP interest, while other US-source interest may be subject to 30% withholding or a lower treaty rate.
The IRS page on withholding on specific income paid to foreign persons separates dividends, interest, capital gains, scholarships, royalties, and other payment types. Investors comparing US and non-US accounts can also review our guide to tax implications of foreign investing for broader cross-border context.
Do foreigners pay US tax when selling US real estate?
Yes, foreigners generally face US tax and withholding when they sell US real estate. For 2025 dispositions, FIRPTA commonly requires the buyer to withhold 15% of the amount realized and report the withholding on Forms 8288 and 8288-A.
The foreign owner US property sale tax issue is often misunderstood because 15% FIRPTA withholding is not the final income tax. It is a prepayment mechanism, and the seller may claim a credit or refund by filing Form 1040-NR after the sale.
FIRPTA can apply to sales of US real property interests, including direct sales of houses, condos, land, and certain entity interests. Our FIRPTA guide for foreign sellers explains the withholding process, and foreign property tax guide gives broader real estate context.
Based on our client scenario at TFX: a nonresident seller sells a Florida condo for $550,000 in 2025. If the buyer is not acquiring it for use as a residence and no exception or withholding certificate applies, 15% FIRPTA withholding would be $82,500. If the buyer will use the property as a residence, the default withholding may instead be 10%, or $55,000, because the amount realized is more than $300,000 but not more than $1 million.
For a 2025 US real estate sale by a foreign seller, these 3 parties usually drive FIRPTA compliance.
| Party | Main responsibility | Common deadline or form |
|---|---|---|
| Buyer or transferee | Withhold the required FIRPTA amount and remit it to the IRS | Forms 8288 and 8288-A, generally due by the 20th day after disposition |
| Foreign seller or transferor | Provide correct taxpayer information and later claim credit or refund if eligible | Form 1040-NR with stamped Form 8288-A |
| Withholding agent or closing team | Coordinate withholding, forms, and reduced withholding certificate requests | Form 8288-B when reduced withholding is requested |
A seller may request reduced withholding with Form 8288-B when the expected tax is lower than the default withholding. The IRS page on reporting and paying tax on US real property interests and the official page for Form 8288-A explain the reporting mechanics.
Do foreigners pay US estate tax?
Yes, estate tax for foreigners in the US can apply when a nonresident noncitizen dies owning US-situs assets. A common filing threshold is $60,000 of US-situated assets, which can trigger Form 706-NA for a nonresident alien estate.
US-situs assets can include US real estate, tangible personal property located in the United States, and stock of corporations organized under US law. The IRS page on estate tax explains the federal estate tax framework, while the page for Form 706-NA identifies the return used for nonresident alien decedents.
Treaties can materially change the result, and not every US-connected asset is treated the same way. IRS guidance on nonresidents with US assets who must file estate tax returns notes that estate tax treaties may provide more favorable treatment, so families should confirm the treaty position before filing or transferring assets.
This area is high-risk because income tax residency and estate tax domicile are not always the same concept. A nonresident for Form 1040-NR purposes can still have US estate tax exposure if they own US-situs assets at death.
Do foreigners pay sales tax in the US?
Yes, foreigners pay sales tax in the US when they buy taxable goods or services in a state or locality that imposes sales tax. Sales tax is generally paid at purchase, regardless of citizenship, immigration status, or federal tax residency, and it is not reported on Form 1040-NR as a federal income tax.
The United States does not have a single national sales tax. Sales tax is administered at the state and local level, so the rate and exemptions can vary by state, city, county, product type, and transaction date.
USA.gov’s state and local tax agency directory is the practical starting point for sales tax questions by state. The IRS also provides a sales tax deduction calculator, but that tool is mainly relevant to taxpayers itemizing deductions on Forms 1040 or 1040-SR, not most Form 1040-NR filers.
Sales tax is not the same as income tax in the US for foreigners. A tourist may pay sales tax on a $900 laptop at checkout without ever filing a federal income tax return.
What US tax form do foreigners file?
The US tax return for foreigners depends on 2 facts: tax residency and income type. A resident alien usually files Form 1040, a nonresident alien usually files Form 1040-NR, and certain students or scholars may file Form 8843 even when no income tax return is required.
A nonresident alien who is engaged in a US trade or business during 2025 may need to file Form 1040-NR even if the business produced no income. A nonresident alien not engaged in a US trade or business may still need Form 1040-NR when US-source income was not fully satisfied by withholding or when they want to claim a refund.
Most foreigners choose between 2 main income tax returns, but withholding certificates and identity forms often decide whether the payer withholds correctly.
| Form | Who commonly uses it | Why it matters for 2025 |
|---|---|---|
| Form 1040 | Resident aliens and US citizens | Reports worldwide income and uses resident filing rules |
| Form 1040-NR | Nonresident aliens | Reports US-source income, ECI, treaty claims, and refund claims |
| Form 8843 | Certain F, J, M, or Q visa holders and medical-condition day exclusions | Explains excluded US days for the substantial presence test |
| Form W-8BEN | Foreign beneficial owners | Certifies foreign status and may claim treaty withholding rates |
| Form W-8ECI | Foreign persons with ECI | Certifies that income is effectively connected with a US trade or business |
| Form W-7 | People needing an ITIN | Requests an ITIN when the person needs a US taxpayer identification number and is not eligible for an SSN |
Form 1040-NR instructions for 2025 require Schedule OI and may require Schedule NEC, Schedule A-NR, or other schedules depending on the income. Nonresident aliens generally cannot use the foreign earned income exclusion on Form 2555 with Form 1040-NR.
A nonresident alien with US wages subject to withholding generally files by April 15, 2026. A nonresident alien without wages as an employee subject to US withholding generally files by June 15, 2026.
Can foreigners get a US tax refund?
Yes, foreigners can get a US tax refund for 2025 if too much federal tax was withheld, a treaty benefit was not applied, FIRPTA withholding exceeded the final tax, or payroll taxes were incorrectly withheld. The taxpayer usually must file the correct return or refund claim to get the money back.
US tax refund for foreigners often starts with Form 1040-NR, especially when Form 1042-S, Form W-2, or stamped Form 8288-A shows withholding. The IRS says a nonresident alien should file Form 1040-NR when they want to claim a refund of overwithheld or overpaid tax.
Refund timing depends on how the return was filed. The IRS refund tool generally shows current-year e-filed return information 24 hours after acceptance and paper-return information about 4 weeks after mailing through its refund status system.
A refund is not automatic just because withholding looks high. The return must match the taxpayer’s residency status, treaty claim, income category, and taxpayer identification number.
Common mistakes foreigners make with US taxes
Foreigner US tax obligations often go wrong because the taxpayer files the wrong form, assumes withholding is final, or ignores state tax. For 2025 returns, the biggest risk is treating immigration status, visa category, or citizenship as the only deciding factor.
The following 7 mistakes commonly cause avoidable tax bills, lost refunds, or IRS notices:
- Filing Form 1040 instead of Form 1040-NR: A nonresident alien who files as a resident may incorrectly report worldwide income or claim benefits they cannot use.
- Filing Form 1040-NR when resident status applies: A green card holder or substantial presence taxpayer may need Form 1040 unless an exception or treaty position applies.
- Missing state income tax: A worker may owe state tax even when the federal return is correct.
- Ignoring treaty paperwork: Treaty benefits often require documentation, such as Form 8233 for certain compensation or Form W-8BEN for investment income.
- Assuming FDAP withholding is always final: A taxpayer may need Form 1040-NR to claim a treaty refund or report other taxable income.
- Not claiming FIRPTA overwithholding: A seller can lose access to a large refund if Form 1040-NR and stamped Form 8288-A are not handled correctly.
- Using the wrong taxpayer identification number: An ITIN application error can delay refund processing and treaty claims.
Foreigners have to pay US taxes when the law applies, but they also have the right to claim treaty benefits, refunds, deductions for ECI, and corrected withholding when supported by the facts. The right filing position can reduce stress and prevent the same issue from repeating in the next tax year.
FAQ
The following 6 answers summarize common US tax questions for non-US citizens filing or reviewing 2025 tax-year obligations in 2026. Each answer depends on residency status, income source, treaty position, and the form used.
Yes. Can foreigners get tax refund in US is best answered through the return process: a nonresident alien may claim a refund by filing Form 1040-NR when too much tax was withheld on wages, Form 1042-S income, or FIRPTA withholding.
Yes. Do foreigners working in US pay taxes generally depends on whether the work was physically performed in the United States and whether a treaty or visa-specific rule changes the withholding or filing result.
Yes, but not on every investment item. US dividends are commonly subject to 30% withholding or a lower treaty rate, while many nonresident aliens are not taxed on US stock capital gains unless an exception applies.
Foreigners may pay US tax on dividends from US stocks, but nonresident aliens often do not pay US tax on gains from selling publicly traded US stocks. Exceptions can apply, including certain 183-day presence situations, effectively connected income, and US real property holding company rules.
Yes. Foreigners pay sales tax in the US at checkout when they buy taxable goods or services in a state or locality with sales tax, and this is separate from federal income tax filing.
The main obligations are identifying resident or nonresident status, reporting 2025 US-source income, filing Form 1040 or Form 1040-NR when required, giving payers the right withholding certificate, and keeping documentation for treaty or refund claims.
