Certain Types of Nontaxable Interest Income
Nonresident aliens are not taxed on certain kinds of interest income as follows, per Internal Revenue Code subsections 871(h) and (i), provided that such interest income arises from one of the following sources:
- A U.S. bank
- A U.S. savings and loan association
- A U.S. credit union
- A U.S. insurance company
- Portfolio Interest (Described in Chapter 3 "Exclusions From Gross Income" – "Interest Income" – "Portfolio interest" of Publication 519, U.S. Tax Guide for Aliens)
If the nonresident alien individual uses Form 1040NR to report his income, then such nontaxable interest income shall not be reported anywhere on Form 1040NR except in response to question L on page 5 of Form 1040NR.
If the nonresident alien individual uses Form 1040NR-EZ to report his income, then such nontaxable interest income shall not be reported anywhere on Form 1040NR-EZ. The erroneous reporting of such interest income on Form 1099 by one of the institutions listed above shall not cause such interest income to be included in the gross income of the nonresident alien recipient if such recipient has filed the proper income tax return.
A nonresident alien individual should not deliver Form W-9, Request for Taxpayer Identification Number and Certification, to a U.S. bank, U.S. savings and loan association, U.S. credit union, or U.S. insurance company. Instead, he should deliver Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to such institutions in order to put them on notice that he is a nonresident alien and that the interest income accruing to his account at such institutions is not reportable to the IRS, except in the case of U.S. bank accounts held by residents of Canada. Refer to Treasury Regulation 1.6049-8(a).
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.