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When foreign nationals move to the United States for work, study, or family reasons, their tax situation often becomes more complex. Income may be taxed in both the U.S. and the home country, and rules around residency, treaties, and foreign income can be difficult to interpret.
This guide explains how the U.S. determines tax residency, when worldwide income rules apply, how tax treaties and the Foreign Tax Credit (FTC) may offer relief, and why certain income types - such as foreign pensions, rental income, and investments - often raise double taxation questions.
This guide provides foreign nationals living in the United States with an overview of how double taxation may arise and how U.S. rules interact with home-country tax systems.
By reading this guide, you will understand:
This guide is educational in nature and does not constitute personalised tax, legal, or investment advice.
Every year, individuals from around the world move to the United States for work, education, investment, or family reasons. When they do, they often face a U.S. tax system that is significantly different from the systems in their home countries. A common concern is whether income could be taxed twice-once in the U.S. and once in the home country.
Foreign nationals frequently ask:
This guide provides a neutral, factual overview of how double taxation may occur, how the United States treats foreign nationals, and how tax treaties and domestic rules may influence outcomes.
It is educational information only and not tax or legal advice.
The U.S. tax system classifies individuals as either:
based on U.S. domestic rules.
Generally taxed on worldwide income, similar to U.S. citizens.
Generally taxed only on:
Certain income categories may be taxed at flat rates unless treaty reductions apply.
Where double taxation arises depends on both:
Foreign nationals may become U.S. tax residents based on the Substantial Presence Test (SPT).
SPT counts days in the U.S. using a three-year formula:
If the total equals 183 days or more, the individual is generally considered a U.S. tax resident for that year.
Tax residency, not immigration status, controls U.S. tax treatment.
Double taxation may occur when:
In each case, U.S. domestic law and the home country’s law must be considered.
The United States has income tax treaties with more than 60 countries.
These treaties serve important functions, including:
Foreign nationals typically review:
Treaty eligibility can vary depending on timing, residency, and income type.
Many foreign nationals in the U.S. come from non-treaty countries, which may include:
In these situations:
Double taxation questions become more complex without a treaty framework.
Once an individual becomes a U.S. tax resident, the U.S. generally taxes worldwide income, including:
Foreign nationals must typically file Form 1040 (U.S. resident return), reporting global income and may need to file additional international tax forms.
Treaty rules may influence outcomes depending on country of residence prior to arrival.
Non-resident aliens (NRAs) are taxed on:
Treaty withholding rates may reduce U.S. tax depending on the country of residence.
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Below is a neutral list of income types frequently evaluated for cross-border taxation:
Some countries tax income earned while physically present in their territory.
The U.S. may tax worldwide income once residency begins.
Timing matters.
Common considerations:
May be taxed in:
Some countries tax bank interest.
The U.S. taxes interest for tax residents.
Foreign capital gains rules differ widely.
The U.S. taxes capital gains for U.S. tax residents.
Foreign pension treatment varies, depending on:
Treatment depends on:
These cases often require multi-country analysis.
Although this article does not provide personalised advice, individuals commonly review the following mechanisms in coordination with tax professionals:
Suitability depends on the individual’s circumstances and jurisdictions involved.
For U.S. tax residents:
For foreign nationals moving to the U.S.:
FTC relief depends entirely on specific circumstances.
Yes. If an individual becomes a U.S. tax resident:
Examples vary significantly by country.
A common misconception is that "sending money to the U.S." or “remitting funds” triggers taxation.
If the money transferred is not income, then transferring it does not usually create tax.
However:
This depends on the facts of each case.
If an individual qualifies as a tax resident of both the U.S. and their home country, treaties provide tie-breaker tests, often based on:
Tie-breaker rules determine which country has primary taxation rights.
Not available for non-treaty countries.
U.S. tax residents may need to file:
These are reporting requirements, not tax recommendations.
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Foreign pooled investment vehicles may be classified as PFICs under U.S. rules.
Examples may include:
PFIC rules may create reporting requirements and may influence U.S. taxation.
Again, this varies by investment structure and personal circumstances.
These examples do not represent actual clients or outcomes.
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Skybound Wealth USA supports individuals with:
Conflict Disclosure:
Skybound Wealth USA may receive advisory fees when individuals choose certain services involving assets under management.
Individuals should evaluate all available options before making decisions.
If you would like to understand how U.S. tax rules interact with income from your home country, you may schedule a discussion with Skybound Wealth USA.
With a career built on delivering the highest standards of financial advice and a passion for developing others to do the same, Tom Pewtress is a senior leader at Skybound Wealth Management. Known for his deep technical expertise and hands-on experience across global markets, Tom ensures both clients and advisers are equipped with the knowledge, tools, and strategies to succeed, no matter how complex the situation.
This material is for general informational purposes only and does not constitute personalised legal, tax, or financial advice. Tax rules vary by jurisdiction and may change. Hypothetical examples do not represent actual clients or outcomes. Investment decisions should be based on individual objectives and circumstances. Past performance does not predict future results. Skybound Wealth USA, LLC is an SEC-registered investment adviser; registration does not imply any particular level of skill or training. Please refer to Form ADV Part 2A, Part 2B, and Form CRS for complete disclosures.
In this 30-minute session, an adviser will help you:
Get clarity on how U.S. tax rules, treaties, and residency status may affect your global income and investments, and understand where double taxation risks can arise.
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A short conversation with a Skybound Wealth USA adviser can help you:
This session is educational and obligation-free. Book your complimentary discussion today.
