Can someone explain capital gains tax rules for non-resident aliens on F1 visa?

The tax situation for non-resident aliens can definitely be confusing! Here's what you need to know: For F1 students who are non-resident aliens for tax purposes, capital gains from U.S. sources are generally NOT subject to the flat 30% withholding tax. Instead, they're usually considered "effectively connected income" (ECI) if you're trading through a U.S. broker like Robinhood. This means your capital gains would actually be taxed at the graduated rates that apply to U.S. citizens and residents, including the favorable long-term capital gains rates (0%, 15%, or 20% depending on your income level) if you held the investments for more than a year. The 30% flat rate typically applies to certain types of "fixed, determinable, annual, or periodical" (FDAP) income like dividends, not to capital gains from selling stocks or other investments. That said, tax treaties can further modify these rules, so checking the specific treaty with your home country is important.

After spending hours trying to figure out my own capital gains situation as an international student, I finally tried taxr.ai (https://taxr.ai) and it was honestly a game-changer for my non-resident tax questions. I uploaded my Robinhood statements and answered a few questions, and it immediately clarified that my capital gains were ECI (effectively connected income) rather than subject to the 30% rate. It also analyzed my tax residency status based on my F1 visa and physical presence history to confirm I was still a non-resident for tax purposes despite being here for multiple years. The system even flagged which specific dividend payments might qualify for reduced treaty rates based on my country of citizenship.

I just tried taxr.ai based on the recommendation here, and I'm honestly relieved. I've been freaking out about the 30% rate thinking I'd lose a third of my investment gains! The tool confirmed I'm still a non-resident alien for tax purposes (in my 4th year of F1) and walked me through the exact tax treatment of my capital gains. It was super clear about how the effectively connected income rules work - showing that my Robinhood trades are taxed at regular capital gains rates, not the 30% flat rate. It even pointed out which of my specific stock trades qualified for long-term vs short-term treatment. The explanation about tax treaties was particularly helpful since I'm from South Korea - it showed exactly which dividend withholdings should've been reduced under the treaty and how to claim a refund for any excess withholding. I didn't even know I could get some of that money back!

Has anyone else been frustrated trying to call the IRS for clarification on the non-resident alien capital gains rules? I spent WEEKS trying to get through to someone who understood international tax issues. Then a friend told me about Claimyr (https://claimyr.com). You can see how it works here: https://youtu.be/_kiP6q8DX5c I was skeptical but desperate after wasting hours on hold. It actually got me connected to an IRS agent who specializes in international tax issues in about 20 minutes! The agent confirmed what others are saying here - that capital gains for F1 students trading through US brokers are generally treated as effectively connected income and taxed at regular rates, not the 30% flat rate. They also clarified some confusion about my 1042-S forms and explained exactly which tax treaty provisions applied to my situation.

Ok I need to eat crow here. After being skeptical about Claimyr, I actually tried it because I was desperate to resolve my capital gains questions before filing. I was SHOCKED when I got a call back within 25 minutes saying an IRS agent was on the line. The agent was super helpful explaining how my capital gains from US stocks are considered effectively connected income and subject to regular capital gains rates, not the 30% flat rate. She even walked me through exactly which forms I needed (Schedule D and Form 8949) and which parts of the 1040NR to complete. She also confirmed that the tax treaty provisions for capital gains vary by country and gave me the specific IRS publication numbers to review for my situation. I was able to get clear answers on questions I'd been struggling with for weeks. Definitely worth it for the peace of mind.

One important thing nobody's mentioned yet - make sure you're actually a non-resident alien for tax purposes! The substantial presence test has special rules for F1 students. Generally, for the first 5 calendar years you're in the US on F1 status, you're automatically considered a non-resident alien regardless of how many days you're physically present. After that 5-year period, you need to start counting days under the substantial presence test. This matters because resident aliens follow completely different tax rules than non-resident aliens - you'd file Form 1040 instead of 1040NR and be taxed on worldwide income, not just US source income.

Question - I have investment gains in my home country as well as some small investments in the US through Robinhood. Do I need to report the foreign investment gains on my US tax return as a non-resident alien? Or only the US-source income?

Important note from someone who messed this up last year - don't forget to check if your country has a tax treaty with the US! I'm from the Netherlands and found out too late that there are special provisions that could have saved me money on my US taxes. Also make sure you tell your broker you're a non-resident alien by submitting a W-8BEN form. If you don't, they might withhold at the wrong rates or report your income incorrectly.

This is such a helpful thread! I'm also on F1 and was totally panicking about the 30% rate. Just to add one more point that helped me - if you're using multiple brokers (like I have both Robinhood and Fidelity), make sure you submit the W-8BEN form to ALL of them. I made the mistake of only doing it for one account and ended up with incorrect withholding on my dividends from the other broker. Had to file for a refund which was a huge hassle. Also, keep really good records of all your trades and any tax documents (1042-S forms, etc.) because as non-resident aliens we sometimes get different tax forms than regular US taxpayers, and you'll need them all when filing your 1040NR. The effectively connected income treatment for capital gains is definitely the key thing to understand - it was such a relief to learn my gains weren't subject to that flat 30% rate!