Publication 519 |
2000 Tax Year |
Deductions
Resident and nonresident aliens can claim similar deductions on
their U.S. tax returns. However, nonresident aliens generally can
claim only deductions related to income that is effectively connected
with their U.S. trade or business.
Resident Aliens
You can claim the same deductions allowed to U.S. citizens if you
are a resident alien for the entire tax year. While the discussion
that follows contains some of the same general rules and guidelines
that apply to you, it is specifically directed toward nonresident
aliens. You should get Form 1040 and instructions for more information
on how to claim your allowable deductions.
Nonresident Aliens
You can claim deductions to figure your effectively connected
taxable income. You generally cannot claim deductions related to
income that is not connected with your U.S. business activities.
Except for personal exemptions, and certain itemized deductions,
discussed later, you can claim deductions only to the extent they are
connected with your effectively connected income.
Ordinary and necessary business expenses.
You can deduct all ordinary and necessary expenses in the operation
of your U.S. trade or business to the extent they relate to income
effectively connected with that trade or business. The deduction for
travel expenses while in the United States is discussed under
Itemized Deductions, later. For information about other
business expenses, see Publication 535.
Losses.
You can deduct losses resulting from transactions that you entered
into for profit and that you were not reimbursed for by insurance,
etc., to the extent that they relate to income that is effectively
connected with a trade or business in the United States.
Individual retirement arrangement (IRA).
You may qualify to establish a traditional IRA whether or not you
are covered by a qualified retirement plan at work. You can contribute
the smaller of $2,000 or your taxable compensation effectively
connected with your U.S. trade or business to an IRA each year. If you
or your spouse are covered by a plan at work, or you are self-employed
and had a SEP, SIMPLE, or qualified retirement plan, you can only
deduct these contributions subject to certain limits.
For more information, see Publication 590,
Individual
Retirement Arrangements (IRAs) (Including Roth IRAs and Education
IRAs).
Moving expenses.
If you are a nonresident alien temporarily in the United States
earning taxable income for performing personal services, you can
deduct moving expenses to the United States if you meet both of the
following tests.
- You are a full-time employee for at least 39 weeks during
the 12 months right after you move, or if you are self-employed, you
work full time for at least 39 weeks during the first 12 months and 78
weeks during the first 24 months right after you move.
- Your new job location is at least 50 miles farther (by the
shortest commonly traveled route) from your former home than your
former job location was. If you had no former job location, the new
job location must be at least 50 miles from your former home.
You cannot deduct the moving expense you have when returning to
your home abroad or moving to a foreign job site.
Figure your deductible moving expenses to the United States on Form
3903, and deduct them on line 27 of Form 1040NR.
For more information on the moving expense deduction, see
Publication 521.
Reimbursements.
If you were reimbursed by your employer for allowable moving
expenses, your employer should have excluded these reimbursements from
your income. You can only deduct allowable moving expenses that were
not reimbursed by your employer or that were reimbursed but the
reimbursement was included in your income. For more information, see
Publication 521.
Moving expense or travel expense.
If you deduct moving expenses to the United States, you cannot also
deduct travel expenses (discussed, later, under Itemized
Deductions) while temporarily away from your tax home in a
foreign country. Moving expenses are based on a change in your
principal place of business while travel expenses are based on your
temporary absence from your principal place of business.
Self-employed SEP, SIMPLE, and qualified retirement plans.
If you are self-employed, you may be able to deduct contributions
to a SEP, SIMPLE, or qualified retirement plan that provides
retirement benefits for yourself and your common-law employees, if
any. To make deductible contributions for yourself, you must have net
earnings from self-employment that are effectively connected with your
U.S. trade or business.
Get Publication 560,
Retirement Plans for Small Business (SEP,
SIMPLE, and Qualified Plans), for further information.
Penalty on early withdrawal of savings.
You must include in income all effectively connected interest
income you receive or that is credited to your account during the
year. Do not reduce it by any penalty you must pay on an early
withdrawal from a time savings account. However, if the interest
income is effectively connected with your U.S. trade or business
during the year, you can deduct on line 30 of Form 1040NR the amount
of the early withdrawal penalty that the banking institution charged.
Student loan interest.
You may be able to deduct interest you pay on a qualified student
loan. You can deduct student loan interest if all of the
following apply.
- You paid interest in 2000 on a qualified student
loan.
- At least part of the interest paid in 2000 was paid during
the first 60 months that payments were required to be made.
- Your filing status is any status except married filing
separately.
- Your modified adjusted gross income is less than
$55,000.
- You are not claimed as a dependent on someone's 2000 tax
return.
For more information, see Publication 970,
Tax Benefits
for Higher Education.
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