I’m a non-resident running a small online consulting business registered in the U.S. I’m making decent income from U.S. clients, and I’ve heard the term “effectively connected income” or ECI thrown around a lot. I’m trying to figure out, am I taxed the same way as residents? Or is there a different rule for foreign business owners like me?
Answer by: abdullah-al-naim
1 month ago
If you\’re a non-resident alien (NRA) earning income that\’s effectively connected to a U.S. trade or business: like consulting fees, self-employment income, or wages from work performed in the U.S., that income is treated just like it would be for a U.S. resident.
The IRS taxes this kind of income at graduated federal income tax rates, not the flat 30% typically applied to other types of foreign-sourced income. You’ll usually need to file Form 1040-NR, and depending on your state, there may be state tax obligations too.
The key point? As long as your income is effectively connected to U.S. business activities, you\’re taxed similarly to locals, just with extra forms and a bit more paperwork on your end.
For more details : https://businessglobalizer.com/blog/us-tax-brackets-a-comprehensive-guide-for-taxpayers/
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