US Tax Treaties for Expatriate Tax Returns and Nonresident Tax Returns


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Why Treaties May Benefit your Expat or Nonresident Tax Return Preparation:

Many specific and sometimes unique individual and business income tax benefits are available to nonresidents, expatriates and others under the tax treaties the United States has with other foreign countries. The US does not have tax treaties with all countries.

The United States has tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income. Under these same treaties, residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries. Most income tax treaties contain what is known as a "saving clause" which prevents a citizen or resident of the United States from using the provisions of a tax treaty in order to avoid taxation of U.S. source income.

If the treaty does not cover a particular kind of income, or if there is no treaty between your country and the United States, you must pay tax on the income in the same way and at the same rates shown in the instructions for the applicable U.S. tax return.

Many of the individual states of the United States tax income which is sourced in their states. Therefore, you should consult the tax authorities of the state from which you derive income to find out whether any state tax applies to any of your income. Some states of the United States do not honor the provisions of tax treaties.

Often to claim treaty benefits you must include form 8833 with your tax return.

Also with respect to US citizens and permanent residents, most US tax treaties have something referred to as a "savings clause".  Those provisions basically state that if you are a US Citizen or permanent resident, you cannot use treaty provisions to avoid US taxes that you would have to pay absent any contrary provision in the treaty. There are in some treaties special exceptions to these rules. Therefore each treaty must be reviewed carefully to determine if it benefits you.  Many of the treaties contain provisions not contained in other treaties.

Read the US Tax Treaty Applicable to Your Country of Residency or Applicable Situation Here






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