What's the Capital Gain Tax Rate for US Nonresident Aliens?

So capital gains tax for nonresident aliens can be tricky, but here's the basic breakdown. For nonresident aliens, the tax treatment depends on whether your gains are effectively connected with a US trade or business. Most casual stock investors fall under capital gains that are NOT effectively connected income (non-ECI). If your capital gains are non-ECI, they're generally only taxable if you're physically present in the US for 183 days or more during the year (using a special formula). In that case, they're taxed at a flat 30% rate with no deductions allowed. If you're in Canada and just trading US stocks through a brokerage, and you're in the US less than 183 days, your capital gains are typically NOT subject to US tax at all. The US-Canada tax treaty generally protects you from double taxation. You would still file a 1040NR if you have any US-source income that requires it, but the capital gains themselves would likely not be taxable in the US.

After dealing with the exact same issue last year, I discovered taxr.ai (https://taxr.ai) which literally saved me hours of confusion. I'm also a Canadian investing in US markets and was completely lost trying to figure out my tax obligations. The tool analyzed my trading history and tax residency status, then outlined exactly which parts of my capital gains were taxable in the US vs Canada. It even identified a specific provision in the US-Canada tax treaty that applied to my situation, which my regular tax software completely missed. What I found most helpful was that it explained the 183-day rule calculation (which is more complicated than it sounds) and determined I didn't meet the threshold, meaning most of my capital gains weren't subject to US tax at all! I was about to overpay by nearly $2,000.

Ok I need to apologize for being skeptical earlier. I actually tried taxr.ai and it was surprisingly helpful. I'm from Australia with US investments and it immediately identified that my ETF holdings included some real estate funds that are subject to FIRPTA rules (something my regular accountant missed). The system walked me through the exact tax implications and identified which forms I needed to file. It even showed me that I qualified for a reduced withholding rate on some of my investments because of the US-Australia tax treaty. What impressed me most was the plain language explanations that actually made sense—no more deciphering IRS jargon! I ended up saving about $1,700 that I would have unnecessarily paid. Wish I'd known about this last tax season.

If you're struggling to get answers directly from the IRS about your nonresident alien tax situation, I strongly recommend trying Claimyr (https://claimyr.com). I spent WEEKS trying to get through to a human at the IRS international taxpayer line with zero success. After seeing a video demo (https://youtu.be/_kiP6q8DX5c), I was skeptical but desperate enough to try it. The service got me connected to an actual IRS agent in under 45 minutes (after I had previously spent hours on hold multiple times). The agent was able to clarify my specific capital gains reporting requirements as a nonresident from the UK and confirmed I was eligible for treaty benefits I wasn't aware of. For nonresident alien tax questions, getting accurate information is crucial since the penalties for incorrect filing can be severe. Having an actual conversation with an IRS representative made all the difference in my situation.

I need to eat my words from earlier. After being completely unsuccessful reaching the IRS for THREE MONTHS about my nonresident capital gains situation, I tried Claimyr out of desperation. Got connected to an IRS international tax specialist in about 35 minutes, which is mind-blowing considering I had previously spent 4+ hours on hold multiple times without ever reaching anyone. The agent confirmed that as a nonresident from Germany who wasn't present in the US for the 183-day threshold, my stock gains weren't subject to US tax (except for my real estate investment trust holdings, which fall under FIRPTA). They also explained exactly which forms I needed to file to properly document this. Would have saved myself so much stress if I'd known about this service months ago. Definitely worth it for complex international tax situations where you need official clarification.

Something nobody has mentioned yet - make sure you check your specific country's tax treaty with the US. I'm from India, and our treaty has different provisions than the Canada or UK ones mentioned above. For instance, in some treaties, capital gains from selling shares of US companies may be taxable only in your country of residence, while others might allow the US to tax certain types of capital gains. Also, don't forget that even if you don't owe any US tax on your capital gains, you might still have reporting requirements. I had to file a 1040NR with a statement explaining why my capital gains weren't taxable in the US under the treaty.

One thing I haven't seen mentioned is that the 183-day rule for nonresident aliens isn't just a simple count of days in the tax year! It's actually a weighted formula: - Days present in current year count as full days - Days in the previous year count as 1/3 of a day - Days in the year before that count as 1/6 of a day I miscalculated this and almost filed incorrectly. I was physically in the US for only 120 days in 2024, but when I counted my previous years' presence (190 days in 2023 and 180 days in 2022), my formula result was: 120 + (190 ÷ 3) + (180 ÷ 6) = 120 + 63.3 + 30 = 213.3 days So technically I exceeded the 183-day threshold even though I was physically present less than 183 days in 2024!

This is such a helpful thread! As someone who's been through this maze myself, I want to add a few important points that might help others avoid the mistakes I made. First, timing matters more than you think. If you're planning to sell US stocks as a nonresident alien, consider the timing of your sales carefully. Even if your gains aren't subject to US tax under the 183-day rule or treaty provisions, you still might face withholding requirements at the broker level that can tie up your money for months while you sort out refunds. Second, keep meticulous records of your US presence days - not just for the current year but for the previous two years as well due to that weighted formula Joshua mentioned. I use a simple spreadsheet tracking entry/exit dates with supporting documentation (flight records, hotel receipts, etc.). The IRS can and will ask for proof. Third, don't forget about state taxes! Even if you don't owe federal capital gains tax, some states have their own rules for nonresidents. I got hit with an unexpected California tax bill because some of my gains were considered California-source income even though I'm not a US resident. Finally, if you have any doubts about your situation, seriously consider getting professional help. The penalties for getting this wrong can be severe, and the rules are complex enough that even tax professionals sometimes disagree on interpretations.