Nonresident Aliens and Income Tax Withholdings
Additional information, including an online workshop, can be found at International Student Tax Return Information.
International visitors are subject to an entirely different set of tax rules and regulations that exist under Section 1441 of the Internal Revenue Code. In general, all income received by a “nonresident alien” is taxable and the tax must be withheld at the time of payment unless the payment is:
- Exempt from tax under the provisions of a tax treaty between the U.S. and the person's country of residence
- Exempt from tax under a Code provision, or
- Is "foreign source" income.
In addition, international visitors must follow strict immigration regulations about what payments they may receive while they are in the United States. It is not always possible for a foreign visitor to legally receive a payment you might wish to make.
View the Visa Type - Tax Status Matrix[PDF] to see the various Visa types, the associated immigration status, permissible income, and tax withholding requirements.
Source: Indiana University
Income Tax Withholding on the Student Account
For certain F-1, J-1, M-1, Q-1, or Q-2 Visa students, depending on any existing tax treaties between the U.S. and the student’s home country, a 14 percent withholding tax may be charged to the student account. This withholding charge is based on any taxable payments received by the student from scholarships, fellowships, and awards that are in excess of any qualified tuition expenses charged to a student’s account.
If a payment is considered to be a prize or award, a 30% rate of tax withholding will apply. An income tax treaty exemption is not generally applicable for prizes or awards.
Qualified tuition expenses include:
- Tuition (Instructional, General, Technology, and SIS Network fees)
- Mandatory class, course, and material fees
- Mandatory health insurance
- Book allowance (annual estimate)
Taxable items include, but are not limited to the following:
- Room and Board (for example, scholarships that pay these expenses)
- Fellowship Stipend (which does not require a service to be performed)
- Living Allowance
- Cash Award
- Travel Payment/Reimbursement
- Compensation (including a fellowship stipend that does require a service to be performed)
Source: Arctic International LLC, 2008
Students who are assessed the income tax withholding charge may be able to reclaim their withholdings if filing an Income Tax Return in the United States. . The Office of the Bursar does not provide tax filing advice to students. More information about Nonresident Alien taxation may be found on the IRS website. Students may also consult with a tax professional. Additional information, including an online workshop, can be found at International Student Tax Return Information.