As an international student in the U.S. on an F-1 visa, your foreign income (income earned outside the U.S.) is generally not taxed by the U.S. under most circumstances. However, there are certain conditions and exceptions you should be aware of. Let's break it down:

1. General Rule:

• As an international student on an F-1 visa, the U.S. taxes you on your U.S.-sourced income (i.e., income you earn while physically present in the U.S. or from U.S. sources like wages from an on-campus job, OPT, or CPT income).

• Foreign income earned outside the U.S. is generally not subject to U.S. taxes as long as you are a nonresident alien for tax purposes.

2. Nonresident Alien vs. Resident Alien for Tax Purposes

• If you are considered a nonresident alien for tax purposes (which is typically the case for F-1 students during their first few years in the U.S.), you are only taxed on U.S.-sourced income.

  • Your foreign income is not subject to U.S. taxes.

• However, if you qualify as a resident alien for tax purposes (which can happen if you've been in the U.S. for a substantial amount of time and meet the Substantial Presence Test), you may be taxed on both U.S.-sourced and foreign income.

  • In this case, you would need to report your foreign income on your U.S. tax return (Form 1040), and you would generally be subject to the same tax rates as U.S. citizens.

3. Substantial Presence Test (SPT)

• If you meet the Substantial Presence Test, you will be classified as a resident alien for tax purposes.

• The Substantial Presence Test is based on the number of days you’ve been in the U.S. over the past three years:

  • You must be in the U.S. for at least 31 days in the current year.

  • You must have been in the U.S. for 183 days or more over the past three years, with a weighted calculation:

    • All the days you were present in the current year count.

    • 1/3 of the days you were present in the previous year count.

    • 1/6 of the days you were present in the second previous year count.

• If you meet this test, you are considered a resident alien for tax purposes and are required to pay tax on worldwide income, including your foreign income.

4. Income Earned Abroad While Physically Present in the U.S.

• If you earn income from foreign sources while you are physically present in the U.S. (such as income from remote work for a foreign company), that income may be considered U.S.-sourced and could be taxable.

• The source of the income is typically determined by where the services are performed, not where the company is based. So, if you're working remotely in the U.S. for a foreign company, that income may be considered U.S.-sourced and therefore taxable.

5. Tax Treaties

• Many countries have tax treaties with the U.S. that may provide some exemptions or reduced tax rates on certain types of income, including foreign income.

• Tax treaties may also influence your residency status, taxability of foreign income, or tax rates on income.

• However, tax treaties generally do not apply to foreign income earned while you are a nonresident alien. They mostly apply to income that is U.S.-sourced and might provide exemptions or lower withholding rates.

6. Reporting Foreign Income

• Nonresident aliens typically do not need to report foreign income, unless that income is connected to a U.S. trade or business (e.g., if you are a self-employed student working for foreign clients while in the U.S. on your F-1 visa).

• Resident aliens (if you qualify under the Substantial Presence Test) would report their worldwide income, including foreign income, on their Form 1040.

• If you're a nonresident alien and have foreign income (e.g., from a bank account, investment income, or work in your home country), you generally don’t need to report that income on your U.S. tax return.

7. Exceptions:

• Even as a nonresident alien, you might need to report certain types of foreign income if you are involved in activities that are connected with a U.S. trade or business. For example:

  • Self-employment or freelance work conducted from outside the U.S. but connected to U.S. business activities might require reporting and taxation.

  • If you have bank accounts, investments, or property in your home country that generate interest, dividends, or rental income, that income would generally not be taxed by the U.S. as long as you're a nonresident alien.

8. Important Forms

• Form 1040-NR: If you’re a nonresident alien, you will file Form 1040-NR for your U.S. tax return. If you have only U.S.-sourced income, you report that income on this form, but you generally do not report foreign income.

• Form 8938 (FATCA): If you're a resident alien (or if you file as a U.S. citizen) and you have certain foreign financial assets above a certain threshold, you may need to file Form 8938, which reports foreign assets, not income. This is part of the Foreign Account Tax Compliance Act (FATCA).

9. Summary:

• Nonresident aliens (F-1 visa holders): Typically not taxed on foreign income. U.S. taxes only apply to U.S.-sourced income.

• Resident aliens (after meeting the Substantial Presence Test): Taxed on worldwide income, including foreign income.

• Tax treaties may provide certain exemptions or benefits, but most do not apply to foreign income unless you are a resident alien.

• Self-employment or foreign income connected to a U.S. business may require reporting.

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Example:

Let’s say you are an F-1 student from India, and you work part-time in the U.S. under OPT and earn $15,000 in the U.S. during the year. You also have $5,000 in income from a part-time job in India, which you earned while physically present in India.

1. U.S. Income: Your $15,000 from your U.S.-based job is taxable in the U.S. You will report this income on your Form 1040-NR.

2. Foreign Income: Your $5,000 from India is not taxable in the U.S., as long as you are considered a nonresident alien for tax purposes. You don’t need to report it on your U.S. tax return.

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Conclusion:

• Nonresident aliens (F-1 students) are not taxed on foreign income, as long as it is earned outside the U.S..

• Resident aliens (based on the Substantial Presence Test) are taxed on worldwide income, including foreign income.

• You should file your Form 1040-NR if you're a nonresident alien and report only U.S.-sourced income.

• If you qualify as a resident alien, you would need to report your foreign income on your Form 1040.

If you're unsure about your residency status or have specific questions about your foreign income, feel free to ask!