U.S. and Foreign-Sourced Income


Nonresident aliens are only subject to U.S. taxation on income from U.S. sources. Foreign-sourced income received by nonresident aliens is not subject to U.S. taxation. This is unlike resident aliens who are taxed on worldwide income (income from both U.S. and foreign sources). 

Generally, U.S.-sourced income includes all income received from U.S. organizations or individuals and compensation received from both U.S. and foreign organizations or individuals for work performed in the U.S. 

Income is considered foreign-sourced if the location of the activity for which the payment is being issued is not in the U.S.

If the source is unclear at the time of payment, the payment is treated as U.S.-sourced income and taxed accordingly.


Type of Income

Factor Determining Source

Salaries, wages, other compensation

Where services performed

Business income: Personal services

Where services performed

Business income: Sale of inventory - purchased

Where sold

Business income: Sale of inventory - produced

Where produced (Allocation may be necessary)


Residence of payer


Whether a U.S. or foreign corporation (some exceptions)

Rents and Sale of real property

Location of property

Royalties: Patents, copyrights, etc.

Where property is used

Sale of personal property

Seller's tax home (some exceptions)


Where services were performed that earned the pension

Scholarships - Fellowships

Generally, the residence of the payer


Additional information on U.S.-sourced income can be found in Chapter 2 of IRS Publication 519.


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