Foreign Investors

Do Nonresidents Pay U.S. Tax on U.S. Stocks, Dividends and Capital Gains?

Nonresident aliens are generally not taxed on capital gains from U.S. stocks, but U.S. dividends are subject to 30 percent withholding unless a treaty lowers the rate. Estate tax exposure is a separate issue.

Last reviewed: 2026-09-29

Quick answer

If you are a nonresident alien investing in U.S. stocks through a brokerage account and have no U.S. business, you generally pay U.S. tax only through withholding on dividends — 30 percent, or a lower treaty rate such as 15 percent for many treaty countries. Gains from selling the shares are generally not subject to U.S. tax unless you were physically present in the United States for 183 days or more during the year, the gain is connected with a U.S. business, or the company is a U.S. real property holding corporation.

Who this applies to

These rules apply to individuals who are not U.S. citizens, green card holders, or substantial-presence residents. U.S. citizens and residents living abroad are taxed on worldwide income and follow different rules.

How each type of income is treated

Dividends from U.S. corporations: FDAP income, 30 percent withholding unless reduced by treaty
Interest on U.S. bank deposits: generally exempt
Portfolio interest on qualifying U.S. bonds: generally exempt
Capital gains on stock: generally exempt for nonresidents present under 183 days
Gains on U.S. real property interests, including shares of U.S. real property holding corporations: taxable under FIRPTA
Distributions from U.S. mutual funds and ETFs: ordinary dividends are withheld; capital gain distributions and certain interest-related dividends may be exempt

Example

Marta lives in Mexico and holds U.S. shares worth $400,000. She receives $8,000 of dividends and sells shares for a $30,000 gain. With a valid W-8BEN claiming the U.S.–Mexico treaty, dividend withholding is generally 10 percent for portfolio dividends. Her $30,000 gain is not subject to U.S. tax because she spent only a few weeks in the United States. Mexico may tax both.

Forms and filing

Brokers withhold tax and report it on Form 1042-S. If the correct amount was withheld, the nonresident generally has no U.S. return to file. A Form 1040-NR is needed to claim a refund of over-withholding, or when there is effectively connected income or taxable gains.

Estate tax: the often-missed exposure

Shares of U.S. corporations are U.S.-situs property for estate tax purposes, even if held through a foreign broker. A nonresident's estate generally has an exemption of only $60,000, unless a treaty provides more. Ownership structures and treaties should be reviewed before accumulating significant U.S. equities.

Mistakes to avoid

Submitting a Form W-9 or letting an expired W-8BEN lapse, which can cause backup withholding
Assuming no withholding means no tax at home
Overlooking the 183-day rule for long stays
Ignoring estate tax on large U.S. holdings

Key takeaways

U.S.-source dividends paid to nonresidents are generally subject to 30 percent withholding, often reduced by treaty.
Capital gains on U.S. stocks are generally not taxed for nonresidents present fewer than 183 days in the year.
Bank deposit interest and portfolio interest are generally exempt.
A valid Form W-8BEN lets the broker apply the correct rate.
U.S. stocks held directly can be subject to U.S. estate tax at death.

Frequently asked questions

Do I need to file a U.S. return for my dividends?

Generally no, if the broker withheld the correct amount. You file Form 1040-NR if you want a refund of excess withholding.

How long is a W-8BEN valid?

Generally until the last day of the third calendar year after signing, unless your circumstances change.

Are U.S. ETF distributions treated like dividends?

Ordinary dividends from U.S. funds are subject to withholding. Capital gain dividends and qualified interest-related dividends may be exempt, as reported by the fund.

What if I spend more than 183 days in the U.S.?

You may become a U.S. tax resident under the substantial presence test. If you remain a nonresident (for example, as an exempt individual), U.S.-source net capital gains can become taxable at 30 percent.

Is holding U.S. stock through a foreign company better?

It can change estate tax exposure, but it adds complexity and may create home-country issues. It requires case-specific advice.

Sources and official references

Educational information only

This article provides general educational information and should not be considered tax, legal, accounting, or investment advice. Tax consequences depend on each taxpayer's specific circumstances.

Written by Roger I. Chirino

Chirino USA tax professionals

Our educational resources are supported by experienced U.S. tax and accounting professionals.

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