What is the 30% withholding rate on U.S. income for non-resident aliens, and when does a treaty reduce it?

If you are a non-resident alien (NRA), the IRS imposes a flat 30% withholding tax on most types of passive U.S.-source income you receive, including dividends, rent, royalties, and certain interest payments. This rate applies automatically unless a tax treaty between the U.S. and your country of residence provides a lower rate or a full exemption.

Income types subject to the 30% rate:

Key exceptions where the 30% rate does NOT apply:

• Bank deposit interest from U.S. banks is generally exempt
• Capital gains on U.S. stock (non-real-estate) are not taxable for NRAs unless you are present 183+ days in the U.S. during the year
• Effectively connected income (wages, U.S. business profits) is taxed at graduated rates on Form 1040-NR, not the flat 30%

How to claim a treaty-reduced rate:

• Provide your payer with a completed Form W-8BEN certifying your foreign status and treaty eligibility
• The payer withholds at the treaty rate instead of the default 30%
• If too much was withheld, file Form 1040-NR to claim a refund of the excess

The withholding is collected at the source, meaning the U.S. payer deducts the tax before sending you the payment. If you did not file a W-8BEN and 30% was withheld on income that qualifies for a treaty rate, you can recover the difference by filing Form 1040-NR with the applicable treaty article cited.

For a broader comparison of how NRA and resident alien tax obligations differ, see our Taxation of Nonresident Aliens guide.