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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
treaty country to exempt income earned as em- Employees of been reported as taxable income on a Form
ployees in the United States from U.S. tax if W-2, Form 1042-S, Form 1099, or other infor-
they satisfy the following. Foreign Governments mation return, you should report it on the appro-
• They are present in the United States for a priate line of Form 1040 or 1040-SR (for exam-
period not exceeding 183 days in a All treaties have provisions for the exemption of ple, line 1 in the case of wages or salaries).
12-month period. income earned by certain employees of foreign Enter the amount for which treaty benefits are
• The income is paid by a foreign employer. governments. However, a difference exists claimed on Schedule 1 (Form 1040), line 8z.
• The income is not borne by a U.S. perma- among treaties as to who qualifies for this bene- Enter “Exempt income,” the name of the treaty
nent establishment of the foreign em- fit. Under many treaties, aliens who are U.S. country, and the treaty article that provides the
ployer. residents do not qualify. Under most treaties, exemption. Combine the amounts reported on
aliens who are not nationals or subjects of the lines 8a through 8z on Schedule 1 (Form 1040)
Some income tax treaties contain different re- foreign country do not qualify. Employees of for- and enter on line 9. Then, combine the totals
quirements, such as a different period of maxi- eign governments should read the pertinent from Schedule 1 (Form 1040), lines 1 through 7
mum presence. For more information, see Pub. treaty carefully to determine whether they qual- and 9 and enter the total on line 10. Then, enter
901. ify for benefits. Chapter 10 of this publication the total from Schedule 1 (Form 1040), line 10,
also has information for employees of foreign on Form 1040 or 1040-SR, line 8.
Independent personal services. Some in- governments.
come tax treaties contain an “independent per-
sonal services” article, which allows residents Also follow the above procedure for income
of the treaty country to exempt income earned Students, Apprentices, that is subject to a reduced rate of tax, instead
as an independent contractor or as a self-em- and Trainees of an exemption, under the treaty. Attach a
ployed individual from U.S. tax if they are statement to Form 1040 or 1040-SR showing a
present in the United States for a period not ex- Under some income tax treaties, students, ap- computation of the tax at the reduced rate, the
ceeding a certain number of days and if they do prentices, and trainees are exempt from tax on name of the treaty country, and the treaty article
not have a fixed base regularly available to remittances received from abroad for study and that provides for the reduced tax rate. Enter this
them in the United States. maintenance. Also, under some treaties, schol- tax on Form 1040 or 1040-SR, line 16. Check
arship and fellowship grants, and a limited box 3 and enter "Tax from attached statement."
Note. Some treaties do not have an inde- amount of compensation received by students,
pendent service article. Under these treaties, in- apprentices, and trainees, may be exempt from Example. Jacques Dubois, who is a resi-
come for independent personal services may tax. dent of the United States under Article 4 of the
be covered by the business profits article. Un- United States-France income tax treaty, re-
der the business profits article, individuals can If you entered the United States as a non- ceives French social security benefits. Under
generally exempt their business profits from resident alien, but are now a resident alien, the Article 18(1) of the treaty, French social security
U.S. tax unless they have a permanent estab- treaty exemption may still apply. See Students, benefits are not taxable by the United States.
lishment in the United States to which the busi- Apprentices, Trainees, Teachers, Professors, Benefits conferred by Article 18(1) are excepted
ness profits are attributable. For more informa- and Researchers Who Became Resident Ali- from the saving clause under Article 29(3) of the
tion, including definitions of the terms "fixed ens, later, under Resident Aliens. treaty. Jacques is not required to file a Form
base" and "permanent establishment," see Pub. 8833 for French social security benefits or re-
port the benefits on Form 1040 or 1040-SR.
901. Capital Gains
Teachers, Professors, Most treaties provide for the exemption of gains Special Rule for Canadian and
from the sale or exchange of personal property. German Social Security Benefits
and Researchers Generally, gains from the sale or exchange of
Under many income tax treaties, nonresident real property located in the United States are Under income tax treaties with Canada and
alien teachers or professors who temporarily taxable. Germany, if a U.S. resident receives social se-
curity benefits from Canada or Germany, those
visit the United States for the primary purpose benefits are treated for U.S. income tax purpo-
of teaching at a university or other accredited Resident Aliens ses as if they were received under the social
educational institution are not subject to U.S. in- security legislation of the United States. If you
come tax on compensation received for teach- Resident aliens may qualify for tax treaty bene- receive social security benefits from Canada or
ing for the first 2 or 3 years after their arrival in fits in the situations discussed below. Germany, include them on line 1 of your Social
the United States. Many treaties also provide Security Benefits Worksheet in the Instructions
an exemption for engaging in research. General Rule for Resident Aliens for Form 1040, for purposes of determining the
Generally, the teacher or professor must be taxable amount to be reported on Form 1040 or
in the United States primarily to teach, lecture, Resident aliens generally do not qualify for tax 1040-SR, line 6b. You are not required to file a
instruct, or engage in research. A substantial treaty benefits because most tax treaties con- Form 8833 for those benefits.
part of that person's time must be devoted to tain a "saving clause" that preserves or "saves"
those duties. The normal duties of a teacher or the right of the United States to tax its citizens Students, Apprentices, Trainees,
professor include not only formal classroom and residents as if the tax treaty had not come Teachers, Professors, and
work involving regularly scheduled lectures, into effect. However, many tax treaties have ex- Researchers Who Became
demonstrations, or other student-participation ceptions to the saving clause, which may allow Resident Aliens
activities, but also the less formal method of a resident alien to continue to claim treaty bene-
presenting ideas in seminars or other informal fits. Generally, you must be a nonresident alien stu-
groups and in joint efforts in the laboratory. dent, apprentice, trainee, teacher, professor, or
Some exceptions to the saving clause apply researcher in order to claim a tax treaty exemp-
If you entered the United States as a non- to all resident aliens (for example, under the tion for remittances from abroad for study and
resident alien, but are now a resident alien, the United States-People's Republic of China maintenance in the United States, for scholar-
treaty exemption may still apply. See Students, treaty); others apply only to resident aliens who ship, fellowship, and research grants, and for
Apprentices, Trainees, Teachers, Professors, are not lawful permanent residents of the United wages or other personal service compensation.
and Researchers Who Became Resident Ali- States (green card holders). Once you become a resident alien, you can
ens, later, under Resident Aliens. generally no longer claim a tax treaty exemption
In most cases, you will also not need to re- for this income.
port the income on your Form 1040 or 1040-SR
because the income will be exempt from U.S.
tax under the treaty. However, if the income has
Page 46 Chapter 9 Tax Treaty Benefits
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