Updated for 2025 — U.S. Capital Gains Taxation Rules for Nonresident Aliens (NRAs)
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Introduction: Why Nonresident Capital Gains Rules Matter
U.S. tax law treats nonresident aliens (NRAs) differently than residents when it comes to capital gains taxation. Normally, capital gains are exempt from U.S. tax for NRAs unless certain conditions are met. The key trigger is the 183-day rule, which imposes a flat 30% tax rate on U.S.-sourced capital gains for those who stay too long in the U.S. within a tax year. Understanding this rule can prevent costly mistakes in withholding, compliance, and filing obligations.
General Rule: Nonresidents and Capital Gains
Under IRS guidance, nonresidents are generally not taxed on capital gains from U.S. securities and property sales, unless:
- The gain is effectively connected with a U.S. trade or business (ECI).
- The individual is present in the U.S. for 183 days or more in the tax year.
- The gain involves U.S. real property (subject to FIRPTA withholding rules).
The 183-Day/30% Rule Explained
If you are a nonresident alien and spend 183 days or more in the United States during the calendar year, the IRS applies a special flat tax:
- 30% flat tax rate on U.S.-sourced capital gains.
- No deductions or preferential long-term capital gains rates apply.
- This applies even if you do not meet the Substantial Presence Test for residency.
Example: A foreign investor visits the U.S. for 200 days in 2025 and sells stock in a U.S. company with a $50,000 gain. Even though stock gains are usually exempt for NRAs, the 183-day rule triggers a $15,000 tax liability (30%).
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Sourcing the Gain: U.S. vs. Foreign Capital Gains
The IRS distinguishes between U.S.-sourced and foreign-sourced gains:
- U.S.-sourced gains: Sales of U.S. real estate, tangible property in the U.S., or certain securities when tied to presence.
- Foreign-sourced gains: Sales of foreign securities or property remain exempt even under the 183-day rule.
Filing Obligations for NRAs
If subject to the 183-day/30% rule, nonresident aliens must file Form 1040-NR and report capital gains. Withholding may not always cover the liability, requiring additional payment or refund claims.
- Form 1040-NR: Required annual filing for nonresidents with U.S. income.
- Schedule NEC: Reports passive and non-effectively connected income like capital gains.
- FIRPTA rules: Apply separately to U.S. real property sales, with withholding at 15% of gross proceeds.
IRS Guidance & Treaties
Some tax treaties between the U.S. and foreign countries may reduce or eliminate the 30% tax. For example, certain treaties exempt residents of treaty countries from the 183-day capital gains tax. Always review the applicable IRS NRA guidance and treaty provisions before filing.
Tax Planning Tips for Nonresidents
- Limit U.S. presence to less than 183 days in a tax year to avoid triggering the flat 30% rule.
- Use foreign holding structures to minimize U.S. tax exposure.
- Check if your country has a U.S. tax treaty for capital gains relief.
- Track travel days accurately—IRS counts partial days as full days for this rule.
Conclusion
For individual taxpayers in the USA dealing with foreign investors, the 183-day/30% capital gains rule is critical. While nonresident aliens typically avoid U.S. tax on capital gains, spending too many days in the country can trigger a flat, non-deductible 30% tax. Careful planning, treaty review, and compliance with IRS rules ensure you avoid unexpected tax bills and penalties.
