Tax Benefits for Foreign Investors in the United States

The United States remains one of the world’s most attractive investment destinations, with foreign direct investment reaching $7.1 trillion in 2024 according to the Bureau of Economic Analysis. For foreign nationals considering U.S. investments, understanding the tax landscape is crucial to maximizing returns while maintaining full compliance. Non-resident aliens (NRAs) can benefit from significant tax advantages including capital gains exemptions on U.S. stocks, portfolio interest exemptions, and favorable tax treaty provisions. However, navigating these benefits requires careful planning and expert guidance. This comprehensive guide explores the key tax benefits available to foreign investors in 2025, essential compliance requirements, and strategic planning opportunities to optimize your U.S. investment portfolio. 

Understanding Your Tax Status: Are You a Non-Resident Alien (NRA)? 

Before exploring tax benefits, you must first determine your tax status. The IRS classifies individuals as either resident aliens or non-resident aliens (NRAs) for tax purposes. This classification is independent of your immigration status and determines how you’ll be taxed on U.S. and worldwide income. 

A non-resident alien is a foreign individual who does not meet either the Green Card Test or the Substantial Presence Test. NRAs are generally taxed only on U.S.-sourced income, while resident aliens are taxed on worldwide income similar to U.S. citizens. 

The Substantial Presence Test Explained 

The Substantial Presence Test is a day-count formula used by the IRS to determine tax residency. You meet this test if you are physically present in the United States for: 

• At least 31 days during the current year, AND 
• A total of 183 days during the 3-year period that includes the current year and the 2 preceding years 

The 183-day calculation uses this formula: – All days present in the current year – 1/3 of days present in the first preceding year – 1/6 of days present in the second preceding year 

Example: If you were present in the U.S. for 120 days in 2025, 120 days in 2024, and 120 days in 2023, your calculation would be: 120 + (120 ÷ 3) + (120 ÷ 6) = 120 + 40 + 20 = 180 days. You would NOT meet the test and remain an NRA. 

Certain days can be excluded from the calculation, including days you commute to work in the U.S. from Canada or Mexico, days you’re in the U.S. as a crew member of a foreign vessel, days you’re unable to leave due to a medical condition that arose while in the U.S., and days you’re an exempt individual (certain teachers, students, or government-related individuals). 

Green Card Test vs. Tax Residency 

The Green Card Test is straightforward: if you are a lawful permanent resident of the United States at any time during the calendar year, you are considered a resident alien for tax purposes. This means EB-5 investors and other green card holders are taxed on worldwide income, regardless of where they live. 

Critical distinction: You can be an NRA for tax purposes while holding other visa types (B-1, E-2, L-1, etc.), but once you receive a green card, your tax status automatically changes to resident alien. This transition has profound implications for your global tax obligations and requires careful planning before accepting permanent residency. 

Top Tax Benefits Available to Foreign Investors

Foreign investors who maintain NRA status can access several powerful tax advantages that significantly reduce their U.S. tax burden compared to resident aliens and U.S. citizens. 

Capital Gains Tax Exemption on U.S. Stocks 

One of the most significant benefits for NRAs is the complete exemption from U.S. capital gains tax on profits from selling U.S. stocks and securities. According to IRS Publication 519, NRAs who are not engaged in a U.S. trade or business do not pay capital gains tax on: 

• Sales of U.S. corporate stocks 
• Sales of U.S. government and corporate bonds 
• Mutual funds and ETFs traded on U.S. exchanges 
• Options and derivatives on U.S. securities 

This exemption applies regardless of how long you held the investment or the size of your gain. A foreign investor who purchases $1 million in U.S. stocks and sells them for $1.5 million pays zero U.S. capital gains tax on the $500,000 profit. 

Important exception: This exemption does NOT apply if you are present in the U.S. for 183 days or more during the tax year, in which case a 30% tax applies to capital gains. Additionally, if you’re engaged in a U.S. trade or business and the gains are effectively connected with that business, standard capital gains rates apply. 

Portfolio Interest Exemption 

NRAs benefit from a complete exemption on portfolio interest income earned from: 

• U.S. bank account interest 
• Interest from U.S. corporate bonds 
• Interest from U.S. government obligations (Treasury bonds, notes, bills) 
• Interest from state and municipal bonds 

The portfolio interest exemption eliminates the standard 30% withholding tax that would otherwise apply to interest income. To qualify, you must properly complete Form W-8BEN and provide it to your financial institution. 

Requirements for portfolio interest exemption: – The debt must be in registered form – The beneficial owner must not be a 10% or greater shareholder if the debt is corporate – The debt cannot be contingent interest 

Tax Treaty Benefits by Country 

The United States has tax treaties with 68 countries as of 2025, which can further reduce or eliminate withholding taxes on various types of income. These treaties often provide: 

• Reduced withholding rates on dividends (often 15% instead of 30%) 
• Reduced or eliminated withholding on interest and royalties 
• Protection against double taxation 
• Tie-breaker rules for dual residency situations 
• Exchange of information provisions 

Tax Treaty Comparison Table: 

Country	Dividend Rate	Interest Rate	Royalty Rate
United Kingdom	15%	0%	0%
Germany	15%	0%	0%
France	15%	0%	0%
Japan	10%	10%	0%
China	10%	10%	10%
Canada	15%	0%	10%
India	25%	15%	15%
South Korea	15%	12%	15%
Netherlands	15%	0%	0%
Switzerland	15%	0%	0%

To claim treaty benefits, you must complete Form W-8BEN and certify your country of residence. The form must be updated every three years or when circumstances change. 

How Foreign Investors Are Taxed: FDAP vs. ECI Income 

The IRS categorizes foreign investor income into two distinct types, each with different tax treatment and filing requirements. Understanding this distinction is critical for tax planning and compliance. 

Fixed, Determinable, Annual, or Periodical (FDAP) Income 

FDAP income includes passive income that is fixed in amount or determinable, annual or paid periodically, and from U.S. sources. Common FDAP income types include: 

• Dividends from U.S. corporations 
• Interest (when not exempt under portfolio interest rules) 
• Rents from U.S. property (when no services provided) 
• Royalties from U.S. sources 
• Annuities and pensions 
• Prizes and awards 
• Gambling winnings 

Tax treatment: FDAP income is subject to a flat 30% withholding tax (or reduced treaty rate) at the source. No deductions are allowed against FDAP income, and you typically don’t need to file a tax return unless you’re claiming a refund or treaty benefits. The payer automatically withholds the tax before distributing income to you. 

Example: If you receive a $10,000 dividend from a U.S. corporation and no treaty applies, the company withholds $3,000 (30%) and you receive $7,000. If you’re from the UK and properly claim treaty benefits, withholding is reduced to $1,500 (15%), and you receive $8,500. 

Effectively Connected Income (ECI) 

Effectively Connected Income is income from activities that constitute a U.S. trade or business. The IRS uses a two-part test to determine if income is ECI: 

1. Asset-use test: Is the income derived from assets used in conducting a U.S. trade or business? 
2. Business-activities test: Are the business activities conducted in the U.S. a material factor in realizing the income? 

Income types commonly classified as ECI include: – Income from operating a U.S. business – Rental income from real estate when you provide substantial services (cleaning, maintenance, tenant management) – Gains from selling U.S. real estate (under FIRPTA rules) – Income from a U.S. partnership in which you’re a partner 

Tax treatment: ECI is taxed at graduated rates (10% to 37% for 2025), the same rates that apply to U.S. citizens. However, you can claim deductions related to producing this income, potentially reducing your taxable amount significantly. You must file Form 1040-NR to report ECI. 

Key advantage: While ECI faces higher potential tax rates, the ability to claim deductions (business expenses, depreciation, mortgage interest on rental property, state and local taxes) often results in lower effective tax rates than the flat 30% FDAP rate. 

Example: You own a U.S. rental property generating $50,000 in annual rent. As FDAP income, you’d pay $15,000 (30%) in tax. By electing ECI treatment and claiming $20,000 in deductions (mortgage interest, property taxes, depreciation, repairs), your taxable income is $30,000, resulting in approximately $4,500 in federal tax at graduated rates—a savings of $10,500. 

Withholding Tax Rates for Foreign Investment Income 

Understanding withholding tax obligations is essential for foreign investors to accurately project after-tax returns and ensure compliance. 

Standard Withholding Rates by Income Type: 

Income Type	Standard Rate	Treaty Rate (Typical)	Exemptions Available
Dividends	30%	10-15%	None
Interest (non-portfolio)	30%	0-15%	Portfolio interest exemption
Royalties	30%	0-15%	Varies by treaty
Rental Income (FDAP)	30%	No reduction	Can elect ECI treatment
Capital Gains (stocks)	0%	N/A	Automatic for NRAs
Capital Gains (real estate)	15% (FIRPTA)	No reduction	Limited exceptions
Pensions/Annuities	30%	Varies	Some treaty exemptions
Social Security	30%	Often reduced	Treaty dependent

How withholding works: U.S. payers (corporations, banks, brokers) automatically withhold taxes before distributing income to foreign investors. This withholding is reported to the IRS on Form 1042-S, which you should receive by March 15 of the following year. 

Claiming refunds: If excess tax was withheld or you qualify for treaty benefits but didn’t claim them, you can file Form 1040-NR to request a refund. The deadline is generally June 15 of the year following the tax year (April 15 if you had U.S. wages). The IRS typically processes NRA refunds within 6-8 months. 

Backup withholding: If you fail to provide proper documentation (Form W-8BEN), payers may apply 24% backup withholding on payments that would otherwise be exempt or subject to treaty rates. 

FIRPTA: Tax Rules for Foreign Investors in U.S. Real Estate 

The Foreign Investment in Real Property Tax Act (FIRPTA) creates special tax rules for NRAs investing in U.S. real estate, treating gains as effectively connected income subject to U.S. taxation. 

FIRPTA Withholding Requirements 

When a foreign person sells U.S. real property, the buyer must withhold and remit to the IRS: 

• 15% of the sales price (increased from 10% in 2016) 
• Applies regardless of whether there’s a gain or loss 
• Reported on Form 8288 within 20 days of the sale 
• Applies to direct real estate and certain interests in U.S. real property holding corporations 

Example: If you sell a U.S. property for $800,000, the buyer must withhold $120,000 (15%) and send it to the IRS, even if your actual gain is much smaller or you have a loss. 

The withheld amount is a prepayment of your tax liability. You must file Form 1040-NR to report the actual gain and calculate your true tax liability. If the withholding exceeds your tax due, you’ll receive a refund. 

Calculating your actual tax: Your gain is the sales price minus your adjusted basis (purchase price plus improvements minus depreciation). Long-term capital gains (property held over one year) are taxed at preferential rates: 0%, 15%, or 20% depending on income level. Note that the 3.8% Net Investment Income Tax (NIIT) does not apply to non-resident aliens. 

Exceptions and Reduced Withholding Certificates 

Several exceptions to FIRPTA withholding exist: 

• Personal residence exception: No withholding if the buyer will use the property as a residence and the sales price is $300,000 or less 
• Small transaction exception: Reduced 10% withholding if sales price is between $300,001 and $1 million and buyer will use as residence 
• No gain certification: Seller can certify under penalties of perjury that no gain will be realized 

You can also apply for a withholding certificate (Form 8288-B) before closing if: – You will have no tax liability (due to losses or deductions) – Your actual tax liability will be less than the standard withholding – You’re eligible for an installment sale agreement – You’re exchanging the property in a like-kind exchange 

The IRS typically processes withholding certificate applications within 90 days, so plan ahead and submit your application well before closing. 

REIT Investments vs. Direct Real Estate 

Foreign investors can gain U.S. real estate exposure through Real Estate Investment Trusts (REITs) with different tax treatment compared to direct ownership: 

Direct real estate ownership: – Full FIRPTA withholding on sale (15%) – Can claim depreciation and expenses – Rental income taxed as ECI (graduated rates with deductions) – Full control over property management – Higher transaction costs and illiquidity 

REIT shares: – Dividends subject to 30% withholding (or treaty rate) – Sale of REIT shares generally exempt from FIRPTA if REIT is publicly traded and you own less than 10% – No depreciation benefits – More liquidity and diversification – Lower minimum investment 

For passive investors seeking real estate exposure without management responsibilities, publicly traded REITs offer tax efficiency on the exit while direct ownership provides better current tax benefits through deductions. 

The U.S. Estate Tax Trap: What Foreign Investors Must Know 

One of the most overlooked risks for foreign investors is the U.S. estate tax, which can claim up to 40% of certain U.S. assets upon death. 

U.S. Situs Assets Defined 

U.S. situs assets are properties subject to U.S. estate tax when owned by NRAs at death. Understanding what qualifies is critical for estate planning. 

Taxable U.S. situs assets: – U.S. real estate (residential, commercial, land) – Tangible personal property located in the U.S. (art, jewelry, cars, furniture) – Stock in U.S. corporations (even if certificates held outside the U.S.) – Interests in U.S. partnerships and LLCs 

Non-taxable assets: – Bank deposits in U.S. banks – Portfolio debt obligations (bonds, notes) – Stock in non-U.S. corporations – Life insurance proceeds – Assets held in certain foreign trusts 

The trap: While NRAs enjoy a $60,000 estate tax exemption (compared to $13.99 million for U.S. citizens in 2025), this small exemption is quickly exceeded by even modest U.S. investments. An NRA owning $500,000 in U.S. stocks faces potential estate tax of approximately $176,000 upon death—a 35% effective rate on the entire portfolio. 

Calculation example: – U.S. situs assets: $500,000 – Less exemption: $60,000 – Taxable estate: $440,000 – Estate tax (40% rate): $176,000 

Estate Tax Planning Strategies for NRAs 

Foreign investors can implement several strategies to minimize or eliminate U.S. estate tax exposure: 

1. Invest through foreign corporations:Stock in non-U.S. corporations is not a U.S. situs asset. A foreign investor can form a corporation in their home country or a favorablejurisdiction (such as the British Virgin Islands, Cayman Islands, or Panama), which then invests in U.S. assets. Upon death, the corporation shares (not the underlying U.S. assets) are part of the estate and not subject to U.S. estate tax. 

Considerations: This strategy adds complexity and costs (formation, annual maintenance, tax compliance in the corporation’s jurisdiction). Additionally, the corporation may face U.S. corporate income tax on its earnings, though this can be mitigated through proper structuring. 

2. Use debt obligations instead of equity:U.S. bonds and debt securities are exempt from estate tax for NRAs. Consider shifting from stocks to fixed-income investments for estate tax efficiency, especially for older investors or those with significant U.S. holdings.
3. Purchase life insurance:Life insurance proceeds are not subject to U.S. estate tax for NRAs. A policy can provide liquidity to pay any estate taxes dueon other assets or replace the value lost to estate taxes. The policy should be owned by a foreign trust or entity to avoid inclusion in your estate. 
4. Utilizetax treaties: Some U.S. estate tax treaties provide higher exemptions or credits. For example, the U.S.-U.K. treaty allows NRAs to claim a prorated portion of the full U.S. exemption based on the percentage of worldwide assets that are U.S. situs. If 20% of your worldwide estate is U.S. situs assets, you can claim 20% of the $13.99 million exemption ($2.8 million) rather than just $60,000. 
5. Gift assets during lifetime:The U.S. gift taxgenerally doesn’t apply to NRAs for gifts of intangible property (including stock). Strategic gifting can remove assets from your estate before death. However, be aware of gift tax implications in your home country. 
6. Use foreign trusts:Properly structured foreign trusts can hold U.S. investments while keeping them outside your taxable estate. The trust must beirrevocable and you cannot retain significant control or beneficial interest. 

EB-5 Visa Program: Investment Immigration Tax Benefits 

The EB-5 Immigrant Investor Program offers foreign nationals a path to U.S. permanent residency through qualifying investments, but it fundamentally changes your tax status. 

Minimum Investment Requirements (2025) 

As of 2025, EB-5 program requirements include: 

• $1,050,000 standard minimum investment, OR 
• $800,000 for investments in Targeted Employment Areas (TEAs) – rural areas or high unemployment regions 
• Investment must create or preserve at least 10 full-time jobs for U.S. workers 
• Investment must be “at risk” – no guaranteed returns 
• Over 12,000 EB-5 visas were issued in 2024 according to USCIS data 

The investment can be made directly into a new commercial enterprise or through a USCIS-approved Regional Center, which pools investments from multiple EB-5 investors into larger projects. 

Tax Status Changes After EB-5 Approval 

Before green card approval (NRA status): – Taxed only on U.S.-sourced income – Capital gains exemption on U.S. stocks – Portfolio interest exemption – Estate tax exemption of $60,000 – No reporting of foreign bank accounts or assets 

After green card approval (resident alien status): – Taxed on worldwide income from all sources – Capital gains tax applies to all gains (U.S. and foreign) – No portfolio interest exemption – Estate tax exemption of $13.99 million (2025) – Must report foreign bank accounts (FBAR) if total exceeds $10,000 – Must report specified foreign financial assets (Form 8938) if thresholds met – May face tax on unrealized gains in foreign corporations (Subpart F income, GILTI) 

Critical planning window: The period between EB-5 petition approval and green card issuance provides a strategic opportunity. Consider selling appreciated assets while still an NRA to lock in capital gains exemption, restructuring foreign business interests to minimize future U.S. tax, and establishing foreign trusts for asset protection. 

Essential Tax Forms for Foreign Investors 

Navigating U.S. tax compliance requires understanding which forms apply to your situation and when they’re due. 

Form W-8BEN: Certificate of Foreign Status 

Purpose: Establishes your foreign status and treaty eligibility to claim reduced withholding rates. 

Who needs it: All NRAs receiving U.S.-sourced income subject to withholding (dividends, interest, royalties). 

When to file: Provide to each payer (bank, broker, company) before receiving income. Valid for three years or until circumstances change. 

Key information required: 

• Name and country of residence 
• Foreign tax identification number (if applicable) 
• Treaty country and treaty benefits claimed 
• Certification under penalties of perjury 

Form 1040-NR: U.S. Nonresident Alien Income Tax Return 

Purpose: Reports income effectively connected with a U.S. trade or business, claims refunds of excess withholding, and reports capital gains. 

Who needs it: NRAs with ECI, those claiming treaty benefits or refunds, or those with U.S. real estate income. 

Filing deadline: June 15 (or April 15 if you had wages subject to withholding). 

Key schedules: 

• Schedule NEC: Tax on income not effectively connected with U.S. business 
• Schedule OI: Other information (visa type, days in U.S., etc.) 

Form 8288: U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests 

Purpose: Reports FIRPTA withholding on real estate sales. 

Who files it: The buyer or buyer’s agent must file within 20 days of the sale. 

Withholding amount: Generally 15% of sales price. 

Form 8288-B: Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests 

Purpose: Requests reduced or eliminated FIRPTA withholding. 

Who needs it: Sellers who expect their actual tax liability to be less than standard withholding. 

When to file: At least 90 days before closing (though the IRS may expedite in certain circumstances). 

Form 8938: Statement of Specified Foreign Financial Assets 

Purpose: Reports foreign financial assets if you’re a resident alien. 

Who needs it: Resident aliens (including green card holders) with foreign assets exceeding thresholds ($50,000-$600,000 depending on filing status and location). 

Not required for: NRAs (unless they elect to be treated as resident aliens). 

FinCEN Form 114 (FBAR): Report of Foreign Bank and Financial Accounts 

Purpose: Reports foreign bank accounts and financial accounts. 

Who needs it: U.S. persons (including resident aliens) with foreign accounts totaling over $10,000 at any time during the year. 

Filing deadline: April 15 (automatic extension to October 15). 

Not required for: NRAs. 

Required IRS Forms Summary Table: 

Form	Purpose	Who Files	Deadline
W-8BEN	Claim foreign status & treaty benefits	All NRAs receiving U.S. income	Before receiving income
1040-NR	Report ECI & claim refunds	NRAs with ECI or refund claims	June 15 (April 15 with wages)
8288	Report FIRPTA withholding	Buyer of U.S. real estate from NRA	20 days after sale
8288-B	Request reduced FIRPTA withholding	NRA sellers	90+ days before closing
8938	Report foreign assets	Resident aliens (not NRAs)	April 15
FBAR	Report foreign bank accounts	Resident aliens (not NRAs)	April 15

 

Tax Planning Strategies to Maximize Benefits 

Strategic planning can significantly enhance after-tax returns for foreign investors. 

Using Foreign Corporations for U.S. Investments 

Investing through a foreign corporation offers several advantages: 

Estate tax benefits: Shares in the foreign corporation are not U.S. situs assets, avoiding the $60,000 NRA estate tax exemption limit. 

Flexibility: The corporation can hold multiple types of U.S. investments and be structured to minimize both U.S. and home country taxes. 

Considerations: 

• U.S. corporate income tax may apply to the corporation’s earnings 
• Additional compliance costs and complexity 
• Potential home country tax implications 
• May trigger controlled foreign corporation (CFC) rules if you become a U.S. resident 

Timing Capital Gains Realization 

For NRAs, timing is everything: 

Before becoming a U.S. resident: Sell appreciated U.S. securities to lock in the capital gains exemption. You can immediately repurchase them with a stepped-up basis. 

Monitor the 183-day rule: If you’ll be in the U.S. for 183+ days in a year, realize gains before reaching that threshold to avoid 30% capital gains tax. 

Coordinate with visa timing: If applying for a green card, consider selling appreciated assets before approval. 

State Tax Considerations 

While federal tax treatment is critical, don’t overlook state taxes: 

States with no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no state income tax. Consider these for U.S. real estate investments or business operations. 

State withholding on real estate: Most states require withholding on sales by non-residents, typically 2-7% of sales price. File a state tax return to claim refunds if actual liability is lower. 

Nexus considerations: Operating a business or owning rental property may create state tax filing obligations even if you never visit the state. 

Common Mistakes Foreign Investors Make (And How to Avoid Them) 

Learning from others’ errors can save significant money and compliance headaches. 

Mistake 1: Failing to File Form W-8BEN 

The error: Not providing Form W-8BEN to U.S. payers results in 24% backup withholding instead of treaty rates or exemptions. 

The fix: Submit Form W-8BEN to all brokers, banks, and companies before receiving income. Update every three years. 

Mistake 2: Not Electing ECI Treatment for Rental Income 

The error: Accepting 30% withholding on rental income without considering the ECI election. 

The fix: File Form 1040-NR and elect to treat rental income as ECI. Claim deductions for mortgage interest, property taxes, depreciation, and expenses to significantly reduce tax liability. 

Mistake 3: Ignoring Estate Tax Planning 

The error: Accumulating U.S. stocks and real estate without considering the $60,000 estate tax exemption, leaving heirs with massive tax bills. 

The fix: Implement estate planning strategies early: foreign corporations, life insurance, strategic gifting, or shifting to bonds. 

Mistake 4: Missing FIRPTA Withholding Certificate Deadlines 

The error: Waiting until just before closing to apply for reduced FIRPTA withholding, causing delays or forcing acceptance of full 15% withholding. 

The fix: Apply for Form 8288-B at least 90 days before your expected closing date. Work with a CPA experienced in FIRPTA transactions. 

Mistake 5: Becoming a U.S. Tax Resident Accidentally 

The error: Spending too many days in the U.S. without tracking, inadvertently meeting the Substantial Presence Test. 

The fix: Maintain a detailed log of U.S. days. If approaching 183 days (calculated), limit future visits or file Form 8840 (Closer Connection Exception). 

Mistake 6: Not Keeping Proper Documentation 

The error: Failing to retain purchase records, improvement receipts, and expense documentation for U.S. investments. 

The fix: Maintain organized records for at least 7 years. Document all capital improvements to real estate to reduce future capital gains. 

Mistake 7: Overlooking State Tax Obligations 

The error: Filing federal returns but ignoring state tax filing requirements, leading to penalties and interest. 

The fix: Research state tax obligations for each state where you own property or conduct business. File state returns even if no tax is due to start the statute of limitations. 

Navigate U.S. Tax Laws with Expert Guidance from Manay CPA 

Foreign investment in the United States offers tremendous opportunities, but the tax landscape is complex and ever-changing. Whether you’re considering your first U.S. investment or managing an existing portfolio, professional guidance ensures you maximize benefits while maintaining full compliance. 

Navigate U.S. tax laws with confidence. Schedule a free consultation with Manay CPA’s international tax specialists to maximize your investment benefits and ensure full compliance. Contact us today. 

FAQ 

Do foreign investors pay capital gains tax on U.S. stocks? 

No, non-resident aliens generally do not pay U.S. capital gains tax on profits from selling U.S. stocks, as long as they are not engaged in a U.S. trade or business and are not present in the U.S. for 183 days or more during the tax year. 

What is the withholding tax rate for foreign investors? 

The standard withholding tax rate is 30% on FDAP income (dividends, non-portfolio interest, royalties). However, this can be reduced to 0-15% through tax treaties. Portfolio interest and capital gains on stocks are often exempt from withholding. 

How does the EB-5 visa affect my tax status? 

Once you receive a green card through EB-5, you become a U.S. tax resident and are taxed on worldwide income, not just U.S.-sourced income. You’ll also face FBAR and Form 8938 reporting requirements for foreign accounts and assets. 

What is FIRPTA and when does it apply? 

FIRPTA (Foreign Investment in Real Property Tax Act) requires 15% withholding on the sale of U.S. real estate by foreign investors and treats gains as effectively connected income subject to U.S. taxation at graduated rates. 

Can I claim deductions as a foreign investor? 

Yes, if you have effectively connected income (ECI), you can claim deductions related to that income on Form 1040-NR, including business expenses, depreciation, and mortgage interest on rental properties. 

SOURCES 

• Bureau of Economic Analysis – Foreign Direct Investment Statistics (https://www.bea.gov/) 
• IRS Publication 519 – U.S. Tax Guide for Aliens (https://www.irs.gov/publications/p519) 
• IRS – Substantial Presence Test (https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test) 
• IRS – Portfolio Interest Exemption (https://www.irs.gov/individuals/international-taxpayers/portfolio-interest) 
• IRS – U.S. Income Tax Treaties (https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z) 
• IRS – FDAP Income (https://www.irs.gov/individuals/international-taxpayers/fixed-determinable-annual-periodical-fdap-income) 
• IRS – Effectively Connected Income (https://www.irs.gov/individuals/international-taxpayers/effectively-connected-income-eci) 
• IRS – FIRPTA Withholding (https://www.irs.gov/individuals/international-taxpayers/firpta-withholding) 
• IRS – Estate Tax (https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax) 
• USCIS – EB-5 Immigrant Investor Program (https://www.uscis.gov/working-in-the-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5) 
• REIT.com – Real Estate Investment Trusts (https://www.reit.com/)