Table of Contents
After you have determined your alien status, the source of your income, and if and how that income is taxed in the United States, your next step is to figure your tax. The information in this chapter is not as comprehensive for resident aliens as it is for nonresident aliens. Resident aliens should get publications, forms, and instructions for U.S. citizens, because the information for filing returns for resident aliens is generally the same as for U.S. citizens.
If you are both a nonresident alien and a resident alien in the same tax year, see chapter 6 for a discussion of dual-status aliens.
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Identification numbers,
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Filing status,
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Deductions,
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Exemptions,
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Tax credits and payments, and
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Special rules for bona fide residents of American Samoa and Puerto Rico.
Publication
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463 Travel, Entertainment, Gift, and Car Expenses
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501 Exemptions, Standard Deduction, and Filing Information
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521 Moving Expenses
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526 Charitable Contributions
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535 Business Expenses
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597 Information on the United States–Canada Income Tax Treaty
Form (and Instructions)
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W-7 Application for IRS Individual Taxpayer Identification Number
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1040 U.S. Individual Income Tax Return
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1040NR U.S. Nonresident Alien Income Tax Return
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1040NR-EZ U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents
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2106 Employee Business Expenses
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2106-EZ Unreimbursed Employee Business Expenses
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3903 Moving Expenses
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4563 Exclusion of Income for Bona Fide Residents of American Samoa
See chapter 12 for information about getting these publications and forms.
You must figure your income and file a tax return on the basis of an annual accounting period called a tax year. If you have not previously established a fiscal tax year, your tax year is the calendar year. A calendar year is 12 consecutive months ending on December 31. If you have previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December or a 52–53 week year) and are considered to be a U.S. resident for any calendar year, you will be treated as a U.S. resident for any part of your fiscal year that falls within that calendar year.
A taxpayer identification number must be furnished on returns, statements, and other tax-related documents. For an individual, this is a social security number (SSN). If you do not have and are not eligible to get an SSN, you must apply for an individual taxpayer identification number (ITIN). An employer identification number (EIN) is required if you are engaged in a trade or business as a sole proprietor and have employees or a qualified retirement plan.
You must furnish a taxpayer identification number if you are:
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An alien who has income effectively connected with the conduct of a U.S. trade or business at any time during the year,
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An alien who has a U.S. office or place of business at any time during the year,
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A nonresident alien spouse treated as a resident, as discussed in chapter 1, or
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Any other alien who files a tax return, an amended return, or a refund claim (but not information returns).
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Alien individuals who are claimed as dependents and are not eligible for an SSN, and
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Alien spouses who are claimed as exemptions and are not eligible for an SSN.
The amount of your tax depends on your filing status. Your filing status is important in determining whether you can take certain deductions and credits. The rules for determining your filing status are different for resident aliens and nonresident aliens.
Resident aliens can use the same filing statuses available to U.S. citizens. See your form instructions or Publication 501 for more information on filing status.
If you are a nonresident alien filing Form 1040NR, you may be able to use one of the filing statuses discussed below. If you are filing Form 1040NR-EZ, you can only claim “Single nonresident alien” or “Married nonresident alien” as your filing status.
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You were a resident of Canada, Mexico, or the Republic of Korea (South Korea), or a U.S. national (defined below).
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Your spouse died in 2006 or 2007 and you did not remarry before the end of 2008.
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You have a dependent child living with you.
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Your spouse is a resident alien or U.S. citizen for the entire tax year,
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You do not choose to be treated as a resident alien, and
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Your spouse meets the other requirements for this filing status, as discussed earlier under Resident Aliens.
You must report each item of income that is taxable according to the rules in chapters 2, 3, and 4. For resident aliens, this includes income from sources both within and outside the United States. For nonresident aliens, this includes both income that is effectively connected with a trade or business in the United States (subject to graduated tax rates) and income from U.S. sources that is not effectively connected (subject to a flat 30% tax rate or lower tax treaty rate).
Resident and nonresident aliens can claim similar deductions on their U.S. tax returns. However, nonresident aliens generally can claim only deductions related to income that is effectively connected with their U.S. trade or business.
You can claim the same deductions allowed to U.S. citizens if you are a resident alien for the entire tax year. While the discussion that follows contains some of the same general rules and guidelines that apply to you, it is specifically directed toward nonresident aliens. You should get Form 1040 and instructions for more information on how to claim your allowable deductions.
You can claim deductions to figure your effectively connected taxable income. You generally cannot claim deductions related to income that is not connected with your U.S. business activities. Except for personal exemptions, and certain itemized deductions, discussed later, you can claim deductions only to the extent they are connected with your effectively connected income.
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You are a full-time employee for at least 39 weeks during the 12 months right after you move, or if you are self-employed, you work full time for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months right after you move.
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Your new job location is at least 50 miles farther (by the shortest commonly traveled route) from your former home than your former job location was. If you had no former job location, the new job location must be at least 50 miles from your former home.
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Your filing status is any filing status except married filing separately.
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Your modified adjusted gross income is less than $70,000.
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No one else is claiming an exemption for you on their 2008 tax return.
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You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, someone who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan was taken out except that:
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The person filed a joint return,
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The person had gross income that was equal to or more than the exemption amount for that year ($3,500 for 2008), or
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You could be claimed as a dependent on someone else's return.
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The loan is not from a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan.
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The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out.
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The person for whom the expenses were paid or incurred was an eligible student.
Resident aliens can claim personal exemptions and exemptions for dependents in the same way as U.S. citizens. However, nonresident aliens generally can claim only a personal exemption for themselves on their U.S. tax return.
You can claim personal exemptions and exemptions for dependents according to the dependency rules for U.S. citizens. You can claim an exemption for your spouse on a separate return if your spouse had no gross income for U.S. tax purposes and was not the dependent of another taxpayer. You can claim this exemption even if your spouse has not been a resident alien for a full tax year or is an alien who has not come to the United States.
You can claim an exemption for each person who qualifies as a dependent according to the rules for U.S. citizens. The dependent must be a citizen or national (defined earlier) of the United States or be a resident of the United States, Canada, or Mexico for some part of the calendar year in which your tax year begins. Get Publication 501 for more information.
Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. See Identification Number, earlier.-
$119,975, if married filing separately.
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$159,950, if single.
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$199,950, if head of household.
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$239,950, if married filing jointly or a qualifying widow(er) with dependent child.
Generally, if you are a nonresident alien engaged in a trade or business in the United States, you can claim only one personal exemption ($3,500 for 2008). You may be able to claim an exemption for a spouse and a dependent if you are described in any of the following discussions.
Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. See Identification Number, earlier.-
The spouse and all children claimed must live with the alien in the United States at some time during the tax year, and
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The additional deduction for the exemptions must be prorated based on the ratio of the alien's U.S. source gross income effectively connected with a U.S. trade or business for the tax year to the alien's entire income from all sources during the tax year.
Example.
Mr. Park, a nonresident alien who is a resident of Korea, lives temporarily in the United States with his wife and two children. During the tax year he receives U.S. compensation of $9,000. He also receives $3,000 of income from sources outside the United States that is not effectively connected with his U.S. trade or business. Thus, his total income for the year is $12,000. Mr. Park meets all requirements for claiming exemptions for his spouse and two children. The additional deduction for 2008 is $7,875 figured as follows:
$9,000 $12,000 |
× | $10,500* | = | $7,875 | |
*3 × | $3,500 |
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$119,975, if married filing separately.
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$159,950, if single.
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$239,950, if a qualifying widow(er) with dependent child.
Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim. However, nonresident aliens can claim itemized deductions only if they have income effectively connected with their U.S. trade or business.
Resident and nonresident aliens may not be able to claim all of their itemized deductions. If your adjusted gross income is more than $159,950 ($79,975 if married filing separately), use the worksheet in your income tax return instructions to figure the amount you can deduct.
You can claim the same itemized deductions as U.S. citizens, using Schedule A of Form 1040. These deductions include certain medical and dental expenses, state and local income taxes, real estate taxes, interest you paid on a home mortgage, charitable contributions, casualty and theft losses, and miscellaneous deductions.
If you do not itemize your deductions, you can claim the standard deduction for your particular filing status. For further information, see Form 1040 and instructions.
You can deduct certain itemized deductions if you receive income effectively connected with your U.S. trade or business. These deductions include state and local income taxes, charitable contributions to U.S. organizations, casualty and theft losses, and miscellaneous deductions. Use Schedule A of Form 1040NR to claim itemized deductions.
If you are filing Form 1040NR-EZ, you can only claim a deduction for state or local income taxes. If you are claiming any other itemized deduction, you must file Form 1040NR.
Caution. If you are married filing a separate return and your spouse itemizes deductions, do not complete this worksheet. You cannot take the standard deduction even if you were born before January 2, 1944, are blind, pay real estate taxes, or have a net disaster loss. | |||||||
1. | Enter the amount shown below for your filing status. | ||||||
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1. | ||||||
2. | Can you be claimed as a dependent on someone else's U.S. income tax return? No. Skip line 3; enter the amount from line 1 on line 4. Yes. Go to line 3. |
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3. | Is your earned income* more than $600? | ||||||
Yes. Add $300 to your earned income. Enter the total | 3. | ||||||
No. Enter $900 | |||||||
4. | Enter the smaller of line 1 or line 3 | 4. | |||||
5. | If born before January 2, 1944, OR blind, enter $1,050 ($1,350 if single). If born before January 2, 1944, AND blind, enter $2,100 ($2,700 if single). Otherwise, enter -0- | 5. | |||||
6. | Enter any net disaster loss from Form 4684, line 18a. ** | 6. | |||||
7. | Enter the state and local real estate taxes you paid. Do not include foreign real estate taxes. See Instructions for line 7 of Worksheet 5-1. | 7. | |||||
8. | Maximum real estate tax deduction | 8. | 500.00 | ||||
9. | Enter the smaller of line 7 or line 8. | 9. | |||||
10. | Add lines 4, 5, 6, and 9. Enter the total here and on Form 1040NR, line 37 (or Form 1040NR-EZ, line 11**). Print “Standard Deduction Allowed Under U.S.–India Income Tax Treaty” in the space to the left of these lines. This is your standard deduction for 2008. | 10. | |||||
*Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. It
also includes any amount received as a scholarship that you must include in your income. Generally, your earned income is
the total of the amount(s) you reported on Form 1040NR, lines 8,12,13, and 19 (or Form 1040NR-EZ, lines 3 and 5, minus any
amount on line 8). **If the amount on line 6 of this worksheet is more than zero, you cannot file Form 1040NR-EZ; you must file Form 1040NR. |
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Foreign real estate taxes.
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Taxes deductible in arriving at adjusted gross income (such as taxes on business real estate).
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Itemized charges for services to specific property or persons (for example, a $20 monthly charge per house for trash collection, a $5 charge for every 1,000 gallons of water consumed, or a flat charge for mowing a lawn that had grown higher than permitted under a local ordinance).
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Charges for improvements that tend to increase the value of your property (for example, an assessment to build a new sidewalk). The cost of a property improvement is added to the basis of the property. However, you can include a charge if it is used only to maintain an existing public facility in service (for example, a charge to repair an existing sidewalk, and any interest included in that charge).
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The amount of any money contributed,
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Whether the organization gave you any goods or services in return for your contribution, and
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A description and estimate of the value of any goods or services described in (2).
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Ordinary income property, or
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Capital gain property.
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Union dues,
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Safety equipment and small tools needed for your job,
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Dues to professional organizations,
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Subscriptions to professional journals,
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Tax return preparation fees, and
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Casualty and theft losses of property used in performing services as an employee (employee property).
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Transportation—airfare, local transportation, including train, bus, etc.,
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Lodging—rent paid, utilities (do not include telephone), hotel or motel room expenses, and
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Meal expenses—actual expenses allowed if you keep records of the amounts, or, if you do not wish to keep detailed records, you are generally allowed a standard meal allowance amount depending on the date and area of your travel. You generally can deduct only 50% of unreimbursed meal expenses. The standard meal allowance rates for high-cost areas are in Publication 1542, Per Diem Rates (For Travel Within the Continental United States), which is available only on the Internet at www.irs.gov/pub/irs-pdf/p1542.pdf. The rates for other areas are in Publication 463.
Example.
Irina Oak, a citizen of Poland, resided in the United States for part of the year to acquire business experience from a U.S. company. During her stay in the United States, she received a salary of $8,000 from her Polish employer. She received no other U.S. source income. She spent $3,000 on travel expenses, of which $1,000 were for meals. None of these expenses were reimbursed. Under the tax treaty with Poland, $5,000 of her salary is exempt from U.S. income tax. In filling out Form 2106-EZ, she must reduce her deductible meal expenses by half ($500). She must reduce the remaining $2,500 of travel expenses by 62.5% ($1,563) because 62.5% ($5,000 ÷ $8,000) of her salary is exempt from tax. She enters the remaining total of $937 on line 9 of Schedule A (Form 1040NR). She completes the remaining lines according to the instructions for Schedule A.
This discussion covers tax credits and payments for resident aliens, followed by a discussion of the credits and payments for nonresident aliens.
Resident aliens generally claim tax credits and report tax payments, including withholding, using the same rules that apply to U.S. citizens.
The following items are some of the credits you may be able to claim.
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You were born after January 1, 1991,
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You were a full-time student,
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Your exemption is claimed by someone else on his or her 2008 tax return, or
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Your adjusted gross income is more than:
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$53,000, if your filing status is married filing jointly,
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$39,750, if your filing status is head of household, or
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$26,500, if your filing status is single, married filing separately, or qualifying widow(er).
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Was under age 17 at the end of 2008.
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Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew).
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Is a U.S. citizen, a U.S. national, or a resident alien.
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Did not provide over half of his or her own support for 2008.
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Lived with you more than half of 2008. Temporary absences, such as for school, vacation, or medical care, count as time lived in the home.
You can claim some of the same credits that resident aliens can claim. You can also report certain taxes you paid, are considered to have paid, or that were withheld from your income.
Credits are allowed only if you receive effectively connected income. You may be able to claim some of the following credits.
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You were born after January 1, 1991,
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You were a full-time student,
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Your exemption is claimed by someone else on his or her 2008 tax return, or
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Your adjusted gross income is more than $26,500.
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Was under age 17 at the end of 2008.
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Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew).
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Is a U.S. citizen, a U.S. national, or a resident alien.
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Did not provide over half of his or her own support for 2008.
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Lived with you more than half of 2008. Temporary absences, such as for school, vacation, or medical care, count as time lived in the home.
You can claim the tax withheld during the year as a payment against your U.S. tax. You claim it in the “Payments” section on page 2 of Form 1040NR or on line 18 of Form 1040NR-EZ. The tax withheld reduces any tax you owe with Form 1040NR or Form 1040NR-EZ.
Form number | Location of tax withheld |
RRB-1042S | Box 12 |
SSA-1042S | Box 9 |
W-2 | Box 2 |
W-2c | Box 2 |
1042-S | Box 9 |
8805 | Line 10 |
8288-A | Box 2 |
If you are a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you generally are taxed the same as resident aliens. You should file Form 1040 and report all income from sources both in and outside the United States. However, you can exclude the income discussed in the following paragraphs.
For tax purposes other than reporting income, however, you will be treated as a nonresident alien. For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. There are also limits on what deductions and credits are allowed. See Nonresident Aliens under Deductions, Itemized Deductions, and Tax Credits and Payments in chapter 5.
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