As I began earning income through my freelance work with U.S. clients, I started to wonder how my status as a nonresident alien (NRA) would impact my taxes. Would I be taxed only on my U.S.-sourced income, or would additional rules apply to me? It felt crucial to get this right.
Answer by: Abdullah Al Naim
2 months ago
Nonresident aliens (NRAs) generally pay U.S. income tax only on income earned from U.S. sources. This is taxed under two systems:
Effectively Connected Income (ECI): This includes income from running a business or working in the U.S. (like wages or self-employment income). It’s taxed at graduated rates, similar to how U.S. citizens are taxed.
Fixed or Determinable Annual or Periodic (FDAP) Income: This is passive income, like interest, dividends, rents, or royalties. It’s taxed at a flat 30% rate on the total amount unless a tax treaty lowers the rate
