Publication 519 |
2008 Tax Year |
After you have determined your alien status, the source of your income, and if and how that income is taxed in the United
States, your next step is
to figure your tax. The information in this chapter is not as comprehensive for resident aliens as it is for nonresident aliens.
Resident aliens
should get publications, forms, and instructions for U.S. citizens, because the information for filing returns for resident
aliens is generally the
same as for U.S. citizens.
If you are both a nonresident alien and a resident alien in the same tax year, see chapter 6 for a discussion of dual-status
aliens.
Topics - This chapter discusses:
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Identification numbers,
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Filing status,
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Deductions,
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Exemptions,
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Tax credits and payments, and
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Special rules for bona fide residents of American Samoa and Puerto Rico.
Useful Items - You may want to see:
Publication
-
463
Travel, Entertainment, Gift, and Car Expenses
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501
Exemptions, Standard Deduction, and Filing Information
-
521
Moving Expenses
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526
Charitable Contributions
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535
Business Expenses
-
597
Information on the United States-Canada Income Tax Treaty
Form (and Instructions)
-
W-7
Application for IRS Individual Taxpayer Identification Number
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1040
U.S. Individual Income Tax Return
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1040NR
U.S. Nonresident Alien Income Tax Return
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1040NR-EZ
U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents
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2106
Employee Business Expenses
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2106-EZ
Unreimbursed Employee Business Expenses
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3903
Moving Expenses
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4563
Exclusion of Income for Bona Fide Residents of American Samoa
See chapter 12 for information about getting these publications and forms.
You must figure your income and file a tax return on the basis of an annual accounting period called a tax year. If you have
not previously
established a fiscal tax year, your tax year is the calendar year. A calendar year is 12 consecutive months ending on December
31. If you have
previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December
or a 52-53 week year)
and are considered to be a U.S. resident for any calendar year, you will be treated as a U.S. resident for any part of your
fiscal year that falls
within that calendar year.
A taxpayer identification number must be furnished on returns, statements, and other tax-related documents. For an individual,
this is a social
security number (SSN). If you do not have and are not eligible to get an SSN, you must apply for an individual taxpayer identification
number (ITIN).
An employer identification number (EIN) is required if you are engaged in a trade or business as a sole proprietor and have
employees or a qualified
retirement plan.
You must furnish a taxpayer identification number if you are:
-
An alien who has income effectively connected with the conduct of a U.S. trade or business at any time during the year,
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An alien who has a U.S. office or place of business at any time during the year,
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A nonresident alien spouse treated as a resident, as discussed in chapter 1, or
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Any other alien who files a tax return, an amended return, or a refund claim (but not information returns).
Social security number (SSN).
Generally, you can get an SSN if you have been lawfully admitted to the United States for permanent residence or under
other immigration categories
that authorize U.S. employment.
To apply for this number, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration
(SSA) office or
call the SSA at 1-800-772-1213. You can also download Form SS-5 from the SSA's website at
www.socialsecurity.gov/online/ss-5.html.You must visit an
SSA office in person and submit your Form SS-5 along with original documentation showing your age, identity, immigration status,
and authority to work
in the United States. If you are an F-1 or M-1 student, you must also show your Form I-20. If you are a J-1 exchange visitor,
you will also need to
show your Form DS-2019. Generally, you will receive your card about 2 weeks after the SSA has all of the necessary information.
Individual taxpayer identification number (ITIN).
If you do not have and are not eligible to get an SSN, you must apply for an ITIN. For details on how to do so, see
Form W-7 and its instructions.
It usually takes about 4-6 weeks to get an ITIN. If you already have an ITIN, enter it wherever an SSN is required on your
tax return.
An ITIN is for tax use only. It does not entitle you to social security benefits or change your employment or immigration
status under U.S. law.
In addition to those aliens who are required to furnish a taxpayer identification number and are not eligible for
an SSN, a Form W-7 should be
filed for:
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Alien individuals who are claimed as dependents and are not eligible for an SSN, and
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Alien spouses who are claimed as exemptions and are not eligible for an SSN.
Employer identification number (EIN).
An individual may use an SSN (or ITIN) for individual taxes and an EIN for business taxes. To apply for an EIN, file
Form SS-4, Application for
Employer Identification Number, with the IRS.
The amount of your tax depends on your filing status. Your filing status is important in determining whether you can take
certain deductions and
credits. The rules for determining your filing status are different for resident aliens and nonresident aliens.
Resident aliens can use the same filing statuses available to U.S. citizens. See your form instructions or Publication 501
for more information on
filing status.
Married filing jointly.
Generally, you can file as married filing jointly only if both you and your spouse were resident aliens for the entire
tax year, or if you make one
of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year.
Qualifying widow(er).
If your spouse died in 2005 or 2006, you did not remarry before the end of 2007, and you have a dependent child living
with you, you may qualify to
file as a qualifying widow(er) and use the joint return tax rates. This applies only if you could have filed a joint return
with your spouse for the
year your spouse died.
Head of household.
You can qualify as head of household if you are unmarried or considered unmarried on the last day of the year and
you pay more than half the cost
of keeping up a home for you and a qualifying person. You must be a resident alien for the entire tax year.
You are considered unmarried for this purpose if your spouse was a nonresident alien at any time during the year and
you do not make one of the
choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year.
Note.
Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien,
you may still be considered
married for purposes of the earned income credit. In that case, you will not be entitled to the credit. See Publication 596
for more information.
If you are a nonresident alien filing Form 1040NR, you may be able to use one of the filing statuses discussed below. If you
are filing Form
1040NR-EZ, you can only claim “Single nonresident alien” or “Married nonresident alien” as your filing status.
Married nonresident alien.
Married nonresident aliens who are not married to U.S. citizens or residents generally must use the Tax Table column
or the Tax Computation
Worksheet for married filing separate returns when determining the tax on income effectively connected with a U.S. trade or
business.
Exceptions.
Married nonresident aliens normally cannot use the Tax Table column or the Tax Computation Worksheet for single individuals.
However, you may be
able to file as single if you lived apart from your spouse during the last 6 months of the year and you are a married resident
of Canada, Mexico, the
Republic of Korea (South Korea), or are a married U.S. national. See the instructions for Form 1040NR or Form 1040NR-EZ to
see if you qualify. U.S.
national was defined earlier in this section under Qualifying widow(er).
A nonresident alien generally cannot file as married filing jointly. However, a nonresident alien who is married to
a U.S. citizen or resident can
choose to be treated as a resident and file a joint return on Form 1040, Form 1040A, or Form 1040EZ. For information on these
choices, see chapter 1.
If you do not make the choice to file jointly, file Form 1040NR or Form 1040NR-EZ and use the Tax Table column or the Tax
Computation Worksheet for
married individuals filing separately.
Qualifying widow(er).
You may be eligible to file as a qualifying widow(er) and use the joint return tax rates if all of the following conditions
apply.
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You were a resident of Canada, Mexico, or the Republic of Korea (South Korea), or a U.S. national (defined below).
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Your spouse died in 2005 or 2006 and you did not remarry before the end of 2007.
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You have a dependent child living with you.
See the instructions for Form 1040NR for the rules for filing as a qualifying widow(er) with a dependent child.
A U.S. national
is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States.
U.S. nationals include American Samoans and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S.
citizens.
Head of household.
You cannot file as head of household if you are a nonresident alien at any time during the tax year. However, if you
are married, your spouse can
qualify as a head of household if:
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Your spouse is a resident alien or U.S. citizen for the entire tax year,
-
You do not choose to be treated as a resident alien, and
-
Your spouse meets the other requirements for this filing status, as discussed earlier under Resident Aliens.
Note.
Even if your spouse is considered unmarried for head of household purposes because you are a nonresident alien, your
spouse may still be considered
married for purposes of the earned income credit. In that case, your spouse will not be entitled to the credit. See Publication
596 for more
information.
Estates and trusts.
A nonresident alien estate or trust using Form 1040NR must use Tax Rate Schedule W in the Form 1040NR instructions
when determining the tax on
income effectively connected with a U.S. trade or business.
Special rules for aliens from certain U.S. possessions.
A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year and who is
temporarily working in the
United States should read Bona Fide Residents of American Samoa or Puerto Rico, at the end of this chapter, for information about special
rules.
You must report each item of income that is taxable according to the rules in chapters 2, 3, and 4. For resident aliens, this
includes income from
sources both within and outside the United States. For nonresident aliens, this includes both income that is effectively connected
with a trade or
business in the United States (subject to graduated tax rates) and income from U.S. sources that is not effectively connected
(subject to a flat 30%
tax rate or lower tax treaty rate).
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.
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.
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.
Educator expenses.
If you were an eligible educator in 2007, you can deduct as an adjustment to income up to $250 in unreimbursed qualified
expenses you paid or
incurred during 2007 for books, supplies (other than nonathletic supplies for courses of instruction in health or physical
education), computer
equipment, and other equipment and materials used in the classroom. For more information, see your tax form instructions.
Individual retirement arrangement (IRA).
If you made contributions to a traditional IRA for 2007, you may be able to take an IRA deduction. But you must have
taxable compensation
effectively connected with a U.S. trade or business to do so. A statement should be sent to you by June 2, 2008, that shows
all contributions to your
traditional IRA for 2007. If you were covered by a retirement plan (qualified pension, profit-sharing (including 401(k)),
annuity, SEP, SIMPLE, etc.)
at work or through self-employment, your IRA deduction may be reduced or eliminated. But you can still make contributions
to an IRA even if you cannot
deduct them. If you made nondeductible contributions to a traditional IRA for 2007, you must report them on Form 8606, Nondeductible
IRAs.
For more information, see Publication 590, Individual Retirement Arrangements (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.
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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.
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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 26 of Form 1040NR.
For more information on the moving expense deduction, see Publication 521.
Reimbursements.
If your employer reimbursed you for allowable moving expenses under an accountable plan, 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 29 of Form 1040NR the amount of the early withdrawal penalty
that the banking
institution charged.
Student loan interest expense.
If you paid interest on a student loan in 2007, you may be able to deduct up to $2,500 of the interest you paid. Generally,
you can claim the
deduction if all of the following requirements are met.
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Your filing status is any filing status except married filing separately.
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Your modified adjusted gross income is less than $70,000.
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No one else is claiming an exemption for you on their 2007 tax return.
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You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your
spouse, someone
who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan
was taken out except
that:
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The person filed a joint return,
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The person had gross income that was equal to or more than the exemption amount for that year ($3,400 for 2007), or
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You could be claimed as a dependent on someone else's return.
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The loan is not from a related person or a qualified employer plan.
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The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out.
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The person for whom the expenses were paid or incurred was an eligible student.
Use the worksheet in the Form 1040NR or Form 1040NR-EZ instructions to figure the deduction. For more information, see Publication
970, Tax
Benefits for Education.
Resident aliens can claim personal exemptions and exemptions for dependents in the same way as U.S. citizens. However, nonresident
aliens generally
can claim only a personal exemption for themselves on their U.S. tax return.
You can claim personal exemptions and exemptions for dependents according to the dependency rules for U.S. citizens. You can
claim an exemption for
your spouse on a separate return if your spouse had no gross income for U.S. tax purposes and was not the dependent of another
taxpayer. You can claim
this exemption even if your spouse has not been a resident alien for a full tax year or is an alien who has not come to the
United States.
You can claim an exemption for each person who qualifies as a dependent according to the rules for U.S.
citizens. The dependent must be a citizen or national (defined earlier) of the United States or be a resident of the United
States, Canada, or Mexico
for some part of the calendar year in which your tax year begins. Get Publication 501 for more information.
Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. See Identification Number,
earlier.
Phase-out of exemptions.
If the adjusted gross income shown on your tax return is more than the amount shown below for your filing status,
your deduction for exemptions may
be reduced or eliminated. Use the worksheet in your income tax return instructions to figure the amount, if any, you can deduct.
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$117,300, if married filing separately.
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$156,400, if single.
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$195,500, if head of household.
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$234,600, if married filing jointly or a qualifying widow(er) with dependent child.
Generally, if you are a nonresident alien engaged in a trade or business in the United States, you can claim only one personal
exemption ($3,400
for 2007). You may be able to claim an exemption for a spouse and a dependent if you are described in any of the following
discussions.
Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. See Identification Number
, earlier.
Residents of Mexico or Canada or U.S. nationals.
If you are a resident of Mexico or Canada or a national of the United States (defined earlier), you can also claim
a personal exemption for your
spouse if your spouse had no gross income for U.S. tax purposes and cannot be claimed as the dependent on another U.S. taxpayer's
return. In addition,
you can claim exemptions for your dependents who meet certain tests. Residents of Mexico, Canada, or nationals of the United
States must use the same
rules as U.S. citizens to determine who is a dependent and for which dependents exemptions can be claimed. See Publication
501 for these rules. For
purposes of these rules, dependents who are U.S. nationals meet the citizenship test discussed in Publication 501.
Residents of the Republic of Korea (South Korea).
Nonresident aliens who are residents of the Republic of Korea (South Korea) may be able to claim exemptions for a
spouse and children. The income
tax treaty with the Republic of Korea (South Korea) imposes two additional requirements on Korean residents:
-
The spouse and all children claimed must live with the alien in the United States at some time during the tax year, and
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The additional deduction for the exemptions must be prorated based on the ratio of the alien's U.S. source gross income effectively
connected with a U.S. trade or business for the tax year to the alien's entire income from all sources during the tax year.
Example.
Mr. Park, a nonresident alien who is a resident of Korea, lives temporarily in the United States with his wife and two children.
During the tax
year he receives U.S. compensation of $9,000. He also receives $3,000 of income from sources outside the United States that
is not effectively
connected with his U.S. trade or business. Thus, his total income for the year is $12,000. Mr. Park meets all requirements
for claiming exemptions for
his spouse and two children. The additional deduction for 2007 is $7,650 figured as follows:
Students and business apprentices from India.
Students and business apprentices who are eligible for the benefits of Article 21(2) of the United States-India Income
Tax Treaty may be able
to claim exemptions for their spouse and dependents.
You can claim an exemption for your spouse if he or she had no gross income during the year and cannot be claimed
as a dependent on another U.S.
taxpayer's return.
You can claim exemptions for each of your dependents not admitted to the United States on “ F-2,” “ J-2,” or “ M-2” visas if they meet
the same rules that apply to U.S. citizens. See Publication 501 for these rules.
List your spouse and dependents on line 7c of Form 1040NR. Enter the total on the appropriate line to the right of
line 7c.
Phase-out of exemptions.
If the adjusted gross income shown on line 36 of Form 1040NR or line 10 of Form 1040NR-EZ is more than the amount
shown below for your filing
status, your deduction for exemptions may be reduced or eliminated. Use the worksheet in the Form 1040NR or 1040NR-EZ instructions
to figure the
amount, if any, you can deduct.
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$117,300, if married filing separately.
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$156,400, if single.
-
$234,600, if a qualifying widow(er) with dependent child.
Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim. However, nonresident aliens
can claim itemized
deductions only if they have income effectively connected with their U.S. trade or business.
Resident and nonresident aliens may not be able to claim all of their itemized deductions. If your adjusted gross income is
more than $156,400
($78,200 if married filing separately), use the worksheet in your income tax return instructions to figure the amount you
can deduct.
You can claim the same itemized deductions as U.S. citizens, using Schedule A of Form 1040. These deductions include certain
medical and dental
expenses, state and local income taxes, real estate taxes, interest you paid on a home mortgage, charitable contributions,
casualty and theft losses,
and miscellaneous deductions.
If you do not itemize your deductions, you can claim the standard deduction for your particular filing status. For further
information, see Form
1040 and instructions.
You can deduct certain itemized deductions if you receive income effectively connected with your U.S. trade or business. These
deductions include
state and local income taxes, charitable contributions to U.S. organizations, casualty and theft losses, and miscellaneous
deductions. Use Schedule A
of Form 1040NR to claim itemized deductions.
If you are filing Form 1040NR-EZ, you can only claim a deduction for state or local income taxes. If you are claiming any
other itemized deduction,
you must file Form 1040NR.
Standard deduction.
Nonresident aliens
cannot claim the standard deduction. However, see Students and business apprentices from India,
next.
Students and business apprentices from India.
A special rule applies to students and business apprentices who are eligible for the benefits of Article 21(2) of
the United States-India
Income Tax Treaty. You can claim the standard deduction provided you do not claim itemized deductions.
Use Table 7, 8, or 9 in Publication 501 to figure your standard deduction. If you are married and your spouse files
a return and itemizes
deductions, you cannot take the standard deduction.
If you are filing Form 1040NR, enter the standard deduction on line 37 of Form 1040NR. In the space to the left of
line 37, print, “ Standard
Deduction Allowed Under U.S.-India Income Tax Treaty.” If you are filing Form 1040NR-EZ, enter the amount on line 11.
State and local income taxes.
If during the tax year, you receive income that is connected with a trade or business in the United States, you can
deduct state and local income
taxes you paid on that income.
Charitable contributions.
You can deduct your charitable contributions or gifts to qualified organizations subject to certain limits. Qualified
organizations include
organizations that are religious, charitable, educational, scientific, or literary in nature, or that work to prevent cruelty
to children or animals.
Certain organizations that promote national or international amateur sports competition are also qualified organizations.
Foreign organizations.
Contributions made directly to a foreign organization are not deductible. However, you can deduct contributions to
a U.S. organization that
transfers funds to a charitable foreign organization if the U.S. organization controls the use of the funds or if the foreign
organization is only an
administrative arm of the U.S. organization.
For more information about organizations that qualify to receive charitable contributions, see Publication 526, Charitable
Contributions.
Contributions from which you benefit.
If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the
amount of your contribution that
is more than the value of the benefit you receive.
If you pay more than the fair market value to a qualified organization for merchandise, goods, or services, the amount
you pay that is more than
the value of the item can be a charitable contribution. For the excess amount to qualify, you must pay it with the intent
to make a charitable
contribution.
Cash Contributions.
You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a
bank record (such as a canceled
check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount)
or a written communication
from the charity. The written communication must include the name of the charity, date of the contribution, and the amount
of the contribution.
You may deduct a cash contribution of $250 or more only if you have a written statement from the charitable organization
showing:
-
The amount of any money contributed,
-
Whether the organization gave you any goods or services in return for your contribution, and
-
A description and estimate of the value of any goods or services described in (2).
If you received only intangible religious benefits, the organization must state this, but it does not have to describe or
value the benefit.
Noncash contributions.
For contributions not made in cash, the records you must keep depend on the amount of your deduction. See Publication
526 for details. For example,
if you make a noncash contribution and the amount of your deduction is more than $500, you must complete and attach to your
tax return Form 8283,
Noncash Charitable Contributions. If you deduct more than $500 for a contribution of a motor vehicle, boat, or airplane, you
must also attach a
statement from the charitable organization to your return. If your total deduction is over $5,000, you also may have to get
appraisals of the values
of the property. If the donated property is valued at more than $5,000, you must obtain a qualified appraisal. You generally
must attach to your tax
return an appraisal of any property if your deduction for the property is more than $500,000. See Form 8283 and its instructions
for details.
Contributions of appreciated property.
If you contribute property to a qualified organization, the amount of your charitable contribution is generally the
fair market value of the
property at the time of the contribution. However, if you contribute property with a fair market value that is more than your
basis in it, you may
have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. Your
basis in the property is
generally what you paid for it. If you need more information about basis, get Publication 551, Basis of Assets.
Different rules apply to figuring your deduction, depending on whether the property is:
For information about these rules, see Publication 526.
Limit.
The amount you can deduct in a tax year is limited in the same way it is for a citizen or resident of the United States.
For a discussion of limits
on charitable contributions and other information, get Publication 526.
Casualty and theft losses.
You can deduct your loss from fire, storm, shipwreck, or other casualty, or theft of property even though your property
is not connected with a
U.S. trade or business. The property can be personal use property or income-producing property not connected with a U.S. trade
or business. The
property must be located in the United States at the time of the casualty or theft. You can deduct theft losses only in the
year in which you discover
the loss.
The amount of the loss is the fair market value of the property immediately before the casualty or theft less its
fair market value immediately
after the casualty or theft (but not more than its cost or adjusted basis) less any insurance or other reimbursement. The
fair market value of
property immediately after a theft is considered zero, because you no longer have the property.
If your property is covered by insurance, you should file a timely insurance claim for reimbursement. If you do not,
you cannot deduct this loss as
a casualty or theft loss.
Figure your deductible casualty and theft losses on Form 4684, Casualties and Thefts.
Losses from personal use property.
You cannot deduct the first $100 of each casualty or theft loss to property held for personal use. You can deduct
only the total of these losses
for the year (reduced by the $100 limit) that is more than 10% of your adjusted gross income (line 36, Form 1040NR) for the
year.
Losses from income-producing property.
These losses are not subject to the limitations that apply to personal use property. Use Section B of Form 4684 to
figure your deduction for these
losses.
Job expenses and other miscellaneous deductions.
You can deduct job expenses, such as allowable unreimbursed travel expenses (discussed next), and other miscellaneous
deductions. Generally, the
allowable deductions must be related to effectively connected income. Deductible expenses include:
-
Union dues,
-
Safety equipment and small tools needed for your job,
-
Dues to professional organizations,
-
Subscriptions to professional journals,
-
Tax return preparation fees, and
-
Casualty and theft losses of property used in performing services as an employee (employee property).
Most miscellaneous itemized deductions are deductible only if they are more than 2% of your adjusted gross income
(line 36, Form 1040NR). For more
information on miscellaneous deductions, see the instructions for Form 1040NR.
Travel expenses.
You may be able to deduct your ordinary and necessary travel expenses while you are temporarily performing personal
services in the United States.
Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last)
for one year or less. You
must be able to show you were present in the United States on an activity that required your temporary absence from your regular
place of work.
For example, if you have established a “ tax home” through regular employment in a foreign country, and intend to return to similar employment
in the same country at the end of your temporary stay in the United States, you can deduct reasonable travel expenses you
paid. You cannot deduct
travel expenses for other members of your family or party.
Deductible travel expenses.
If you qualify, you can deduct your expenses for:
-
Transportation—airfare, local transportation, including train, bus, etc.,
-
Lodging—rent paid, utilities (do not include telephone), hotel or motel room expenses, and
-
Meal expenses—actual expenses allowed if you keep records of the amounts, or, if you do not wish to keep detailed records,
you are
generally allowed a standard meal allowance amount depending on the date and area of your travel. You can deduct only 50%
of unreimbursed meal
expenses. The standard meal allowance rates for high-cost areas are in Publication 1542, Per Diem Rates (For Travel Within
the Continental United
States), which is available only on the Internet at
www.irs.gov/pub/irs-pdf/p1542.pdf. The
rates for other areas are in Publication 463.
Use Form 2106 or 2106-EZ to figure your allowable expenses that you claim on line 9 of Schedule A (Form 1040NR).
Expenses allocable to U.S. tax-exempt income.
You cannot deduct an expense, or part of an expense, that is allocable to U.S. tax-exempt income, including income
exempt by tax treaty.
Example.
Irina Oak, a citizen of Poland, resided in the United States for part of the year to acquire business experience from a U.S.
company. During her
stay in the United States, she received a salary of $8,000 from her Polish employer. She received no other U.S. source income.
She spent $3,000 on
travel expenses, of which $1,000 were for meals. None of these expenses were reimbursed. Under the tax treaty with Poland,
$5,000 of her salary is
exempt from U.S. income tax. In filling out Form 2106-EZ, she must reduce her deductible meal expenses by half ($500). She
must reduce the remaining
$2,500 of travel expenses by 62.5% ($1,563) because 62.5% ($5,000 ÷ $8,000) of her salary is exempt from tax. She enters the
remaining total of
$937 on line 9 of Schedule A (Form 1040NR). She completes the remaining lines according to the instructions for Schedule A.
More information.
For more information about deductible expenses, reimbursements, and recordkeeping, get Publication 463.
This discussion covers tax credits and payments for resident aliens, followed by a discussion of the credits and payments
for nonresident aliens.
Resident aliens generally claim tax credits and report tax payments, including withholding, using the same rules that apply
to U.S. citizens.
The following items are some of the credits you may be able to claim.
Foreign tax credit.
You can claim a credit, subject to certain limits, for income tax you paid or accrued to a foreign country on foreign
source income. You cannot
claim a credit for taxes paid or accrued on excluded foreign earned income. To claim a credit for income taxes paid or accrued
to a foreign country,
you generally will file Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), with your Form 1040.
For more information, get Publication 514, Foreign Tax Credit for Individuals.
Child and dependent care credit.
You may be able to take this credit if you pay someone to care for your qualifying child who is under age 13, or your
disabled dependent or
disabled spouse, so that you can work or look for work. Generally, you must be able to claim an exemption for your dependent.
For more information, get Publication 503, Child and Dependent Care Expenses, and Form 2441, Child and Dependent Care
Expenses.
Credit for the elderly or the disabled.
You may qualify for this credit if you are 65 or older or if you retired on permanent and total disability. For more
information on this credit,
get Publication 524, Credit for the Elderly or the Disabled, and Schedule R (Form 1040).
Education credits.
You may qualify for these credits if you paid qualified education expenses for yourself, your spouse, or your dependent.
There are two education
credits: the Hope credit and the lifetime learning credit. You cannot claim these credits if you are married filing separately.
Use Form 8863,
Education Credits (Hope and Lifetime Learning Credits), to figure the credit. For more information, see Publication 970.
Retirement savings contributions credit.
You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored
retirement plan or
to an individual retirement arrangement (IRA) in 2007. You cannot claim this credit if:
-
You were born after January 1, 1990,
-
You were a full-time student,
-
Your exemption is claimed by someone else on his or her 2007 tax return, or
-
Your adjusted gross income is more than:
-
$52,000, if your filing status is married filing jointly,
-
$39,000, if your filing status is head of household, or
-
$26,000, if your filing status is single, married filing separately, or qualifying widow(er).
Use Form 8880, Credit for Qualified Retirement Savings Contributions, to figure the credit. For more information, see Publication
590.
Child tax credit.
You may be able to take this credit if you have a qualifying child.
A qualifying child for purposes of the child tax credit is a child who:
-
Was under age 17 at the end of 2007.
-
Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for
example, your
grandchild, niece, or nephew).
-
Is a U.S. citizen, a U.S. national, or a resident alien.
-
Did not provide over half of his or her own support for 2007.
-
Lived with you more than half of 2007. Temporary absences, such as for school, vacation, or medical care, count as time lived
in the
home.
An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal
adoption.
See your form instructions for additional details.
Adoption credit.
You may qualify to take a tax credit of up to $11,390 for qualifying expenses paid to adopt an eligible child. This
amount may be allowed for the
adoption of a child with special needs regardless of whether you have qualifying expenses. To claim the adoption credit, file
Form 8839, Qualified
Adoption Expenses, with your Form 1040.
Earned income credit.
You may qualify for an earned income credit of up to $2,853 if your child lived with you in the United States and
your earned income and adjusted
gross income were each less than $33,241 ($35,241 if married filing jointly). If two or more children lived with you in the
United States and your
earned income and adjusted gross income were each less than $37,783 ($39,783 if married filing jointly), your credit could
be as much as $4,716. If
you do not have a qualifying child and your earned income and adjusted gross income were each less than $12,590 ($14,590 if
married filing jointly),
your credit could be as much as $428. You cannot claim the earned income credit if your filing status is married filing separately.
You and your spouse (if filing a joint return) and any qualifying child must have valid SSNs to claim this credit. You cannot
claim the credit
using an ITIN. If a social security card has a legend that says Not Valid for Employment and the number was issued so that
you (or your
spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. An example
of a federally funded
benefit is Medicaid. If a card has this legend and the individual's immigration status has changed so that the individual
is now a U.S. citizen or
lawful permanent resident, ask the SSA to issue a new social security card without the legend.
Advance earned income credit.
You may be able to get advance payments of part of the credit for one child in 2008 instead of waiting until you file
your 2008 tax return. Fill
out the 2008 Form W-5, Earned Income Credit Advance Payment Certificate. If you expect to qualify for the credit in 2008,
give the bottom part of the
form to your employer. Your employer will include part of the credit regularly in your pay during 2008.
If you received advance payments of the earned income credit in 2007, you must file a 2007 tax return to report the
payments. Your Form W-2 will
show the amount you received.
Other information.
There are other eligibility rules that are not discussed here. For more information, get Publication 596, Earned Income
Credit.
You can claim some of the same credits that resident aliens can claim. You can also report certain taxes you paid, are considered
to have paid, or
that were withheld from your income.
Credits are allowed only if you receive effectively connected income. You may be able to claim some of the following credits.
Foreign tax credit.
If you receive foreign source income that is effectively connected with a trade or business in the United States,
you can claim a credit for any
income taxes paid or accrued to any foreign country or U.S. possession on that income.
If you do not have foreign source income effectively connected with a U.S. trade or business, you cannot claim credits
against your U.S. tax for
taxes paid or accrued to a foreign country or U.S. possession.
You cannot take any credit for taxes imposed by a foreign country or U.S. possession on your U.S. source income if
those taxes were imposed only
because you are a citizen or resident of the foreign country or possession.
If you claim a foreign tax credit, you generally will have to attach to your return a Form 1116. See Publication 514
for more information.
Child and dependent care credit.
You may qualify for this credit if you pay someone to care for your qualifying child who is under age 13, or your
disabled dependent or disabled
spouse, so that you can work or look for work. Generally, you must be able to claim an exemption for your dependent.
Married nonresident aliens can claim the credit only if they choose to file a joint return with a U.S. citizen or
resident spouse as discussed in
chapter 1, or if they qualify as certain married individuals living apart (see Joint Return Test in Publication 503).
The amount of your child and dependent care expense that qualifies for the credit in any tax year cannot be more than
your earned income from the
United States for that tax year. Earned income generally means wages, salaries, and professional fees for personal services
performed.
For more information, get Publication 503.
Education credits.
If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. However,
if you are married and choose
to file a joint return with a U.S. citizen or resident spouse as discussed in chapter 1, you may be eligible for these credits.
Retirement savings contributions credit.
You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored
retirement plan or
to an individual retirement arrangement (IRA) in 2007. You cannot claim this credit if:
-
You were born after January 1, 1990,
-
You were a full-time student,
-
Your exemption is claimed by someone else on his or her 2007 tax return, or
-
Your adjusted gross income is more than $26,000.
Use Form 8880 to figure the credit. For more information, see Publication 590.
Child tax credit.
You may be able to take this credit if you have a qualifying child.
A qualifying child for purposes of the child tax credit is a child who:
-
Was under age 17 at the end of 2007.
-
Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for
example, your
grandchild, niece, or nephew).
-
Is a U.S. citizen, a U.S. national, or a resident alien.
-
Did not provide over half of his or her own support for 2007.
-
Lived with you more than half of 2007. Temporary absences, such as for school, vacation, or medical care, count as time lived
in the
home.
An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal
adoption.
See your form instructions for additional details.
Adoption credit.
You may qualify to take a tax credit of up to $11,390 for qualifying expenses paid to adopt an eligible child. This
amount may be allowed for the
adoption of a child with special needs regardless of whether you have qualifying expenses. To claim the adoption credit, file
Form 8839 with your Form
1040NR.
Married nonresident aliens can claim the credit only if they choose to file a joint return with a U.S. citizen or
resident spouse as discussed in
chapter 1, or if they qualify as certain married individuals living apart (see Married Persons Filing Separate Returns in the Form 8839
instructions).
Credit for prior year minimum tax.
If you paid alternative minimum tax in a prior year, get Form 8801, Credit for Prior Year Minimum Tax—Individuals,
Estates, and Trusts, to
see if you qualify for this credit.
Earned income credit.
If you are a nonresident alien for any part of the tax year, you generally cannot get the earned income credit. However,
if you are married and
choose to file a joint return with a U.S. citizen or resident spouse as discussed in chapter 1, you may be eligible for the
credit.
You, your spouse, and any qualifying child must have valid SSNs to claim this credit. You cannot claim the credit using an
ITIN. If a social
security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your
qualifying
child) could receive a federally funded benefit, you cannot claim the earned income credit. An example of a federally funded
benefit is Medicaid. If a
card has this legend and the individual's immigration status has changed so that the individual is now a U.S. citizen or lawful
permanent resident,
ask the SSA to issue a new social security card without the legend.
See Publication 596 for more information on the credit.
You can claim the tax withheld during the year as a payment against your U.S. tax. You claim it in the “Payments” section on page 2 of Form
1040NR or on line 18 of Form 1040NR-EZ. The tax withheld reduces any tax you owe with Form 1040NR or Form 1040NR-EZ.
Withholding from wages.
Any federal income tax withheld from your wages during the tax year while you were a nonresident alien is allowed
as a payment against your U.S.
income tax liability for the same year. You can claim the income tax withheld whether or not you were engaged in a trade or
business in the United
States during the year, and whether or not the wages (or any other income) were connected with a trade or business in the
United States.
Excess social security tax withheld.
If you have two or more employers, you may be able to claim a credit against your U.S. income tax liability for social
security tax withheld in
excess of the maximum required. See Social Security and Medicare Taxes in chapter 8 for more information.
Tax paid on undistributed long-term capital gains.
If you are a shareholder in a mutual fund (or other regulated investment company) or real estate investment trust,
you can claim a credit for your
share of any taxes paid by the company on its undistributed long-term capital gains. You will receive information on Form
2439, Notice to Shareholder
of Undistributed Long-Term Capital Gains, which you must attach to your return.
Tax withheld at the source.
You can claim as a payment any tax withheld at the source on investment and other fixed or determinable annual or
periodic income paid to you.
Fixed or determinable income includes interest, dividend, rental, and royalty income that you do not claim to be effectively
connected income. Wage or
salary payments can be fixed or determinable income to you, but usually are subject to withholding as discussed above. Taxes
on fixed or determinable
income are withheld at a 30% rate or at a lower treaty rate.
Tax withheld on partnership income.
If you are a foreign partner in a partnership, the partnership will withhold tax on your share of effectively connected
taxable income from the
partnership. The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446
Withholding Tax, showing
the tax withheld. A partnership that is publicly traded may withhold on your actual distributions of effectively connected
income. In this case, the
partnership will give you a statement on Form 1042-S. Claim the tax withheld as a payment on line 67a or 67b of Form 1040NR,
as appropriate.
Claiming tax withheld on your return.
When you fill out your tax return, take extra care to enter the correct amount of any tax withheld shown on your information
documents. The
following table lists some of the more common information documents and shows where to find the amount of tax withheld.
Bona Fide Residents of American Samoa or Puerto Rico
If you are a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you generally
are taxed the
same as resident aliens. You should file Form 1040 and report all income from sources both in and outside the United States.
Residents of Puerto Rico.
If you are a bona fide resident of Puerto Rico for the entire year, you can exclude from gross income all income from
sources in Puerto Rico (other
than amounts for services performed as an employee of the United States or any of its agencies).
If you report income on a calendar year basis and you do not have wages subject to withholding, file your return and
pay your tax by June 15. You
must also make your first payment of estimated tax by June 15. You cannot file a joint income tax return or make joint payments
of estimated tax.
However, if you are married to a U.S. citizen or resident, see Nonresident Spouse Treated as a Resident in chapter 1.
If you earn wages subject to withholding, your U.S. income tax return is due on April 15. Your first payment of estimated
tax is also due by April
15. For information on withholding and estimated tax, see chapter 8.
You cannot claim exemptions for dependents who are residents of Puerto Rico unless the dependents are citizens of
the United States.
Residents of American Samoa.
If you are a bona fide resident of American Samoa for the entire year, you can exclude from gross income all income
from sources in American Samoa
(other than amounts for services performed as an employee of the U.S. government or any of its agencies). For more information
about this exclusion,
get Form 4563 and Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.
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