How To Use Tax Treaties for International Income
Read Next:
Explore More:
The IRS Publication 901 (U.S. Tax Treaties) shares summaries of all tax treaties in effect between the U.S. and other countries. These are agreements between countries made to avoid the issue of double taxation, helping to cut through red tape and reduce the burden. The key is knowing how to apply the right treaty to the right kind of income.
From expats living and working abroad to U.S. residents receiving rental or other income from a foreign country, there are ways to avoid paying more taxes than necessary. Here's how:
All tax treaties will cover where different types of income are taxed. While for some countries, income is taxable only in the country of residence, it's important to remember that the U.S. taxes its citizens on worldwide income, regardless of residency. So, if a treaty says income is 'taxable only in the country of residence,' the IRS will still tax it.
Check Out:
Treaties only apply when residency is established. However, residency rules aren't the same across borders, and a person can end up being a resident of both countries under local laws, yet only one under treaty rules.
Most treaties have tiebreaker tests for this situation, looking at factors like where the person's permanent home is, where their 'center of vital interests' (personal and economic relations) is, where they habitually live and their nationality.
Relief from double taxation usually comes in two forms: a foreign tax credit or the foreign earned income exclusion. The foreign tax credit lets U.S. taxpayers subtract foreign taxes paid on the same income from their U.S. tax bill. Meanwhile, the foreign earned income exclusion allows those who live and work abroad to exclude a portion of foreign wages from U.S. taxation.
Getting the benefits isn't automatic, so it's important to claim in the way the relevant tax treaty requires. That means filing the right treaty forms with the tax return. The IRS uses Form 8833 for treaty-based positions, and other countries have their own versions.
As with anything related to filing taxes, keeping accurate records is key. Proof will be needed of things like residency, income and expenditure. Without proper documentation, relief might be denied even if the claim is correct.
International income gets reported on a U.S. return, but a properly claimed credit or treaty benefit can keep it from being taxed twice. Understanding what's taxable, how to claim relief and where residency lies can make a big financial difference.
More From GoBankingRates6 Reasons Your Tax Refund Will Be Higher in 2025
7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth
25 Places To Buy a Home If You Want It To Gain Value
This article originally appeared on GOBankingRates.com: How To Use Tax Treaties for International Income
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
14 minutes ago
- Yahoo
PBC Announces Fiserv as PBC 2025 Title Sponsor and launches New PBC-CP Designation
WASHINGTON, Aug. 21, 2025 /PRNewswire/ -- The 6th Annual PBC Conference, the premier event for cannabis banking and compliance professionals, returns to Washington, D.C., on September 3–4, 2025. Nationally recognized for bringing together leaders across government and industry, PBC provides a platform to tackle the most pressing challenges in cannabis banking. Past participants have included state cannabis regulators, banking regulators, IRS commissioners, U.S. Senators, Members of Congress, and other high-level policymakers and financial leaders that bank the industry. This year, PBC is proud to welcome Fiserv as the official Title Sponsor of PBC Conference 2025. A global leader in payments and financial technology, Fiserv serves thousands of financial institutions and millions of businesses across the world. With a strong reputation for innovation, Fiserv brings valuable perspective and technology-driven insight to the future of cannabis banking. "PBC Conference remains the premier gathering where influential voices come together to drive progress and shape the future of the cannabis banking industry," said Joshua Radbod, CEO of PBC Conference. "We're proud to welcome Fiserv as our Title Sponsor and excited to unveil programming that reflects the momentum of this evolving sector." PBC has also launched the final level of its PBC Certification Program: the PBC Certified Professional (PBC-CP) designation. Recognized as the highest achievement in cannabis banking and compliance, the PBC-CP reflects deep expertise and leadership in the field. To qualify, learners must first complete Level I and Level II of the PBC Certification Program, participate in person at PBC Conferences, and publish a peer-reviewed industry use case. These requirements ensure candidates build a strong foundation before earning this elite designation. PBC plans to expand its certification offerings beyond individual achievement with the future launch of the PBC Certified Organization designation, created to recognize institutions that demonstrate the same high standards of compliance, innovation, and industry leadership. To meet the Fiserv team and recognized PBC professionals, register for PBC Conference 2025 at: About: PBC was founded in 2018 and operates an international portfolio of banking & compliance events, industry resources, and training dedicated to tackling banking & compliance challenges in emerging industries. The PBC team also hosts the annual CBC Summit, which addresses banking & compliance challenges for the crypto industry, both in the U.S. and Europe. For more details, visit: Contact: info@ View original content: SOURCE PBC Conference Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 hours ago
- Yahoo
This Beach Town Was Just Named the 'Most Livable' Place to Retire in the U.S.—and It's Famous for Its White-sand Beaches and Charming Downtown
A new report ranks America's most livable retirement towns—Florida leads the list with seven spots in the top 10. Key Takeaway recently published a report on the 50 most livable retirement towns in the U.S. Overall, Florida dominated the survey, with over half of all 50 towns located there, followed by Arizona with eight towns on the list. Keep reading to see what city claimed the top spot. As a record number of Americans reach retirement age, more seniors are looking for communities that can provide them with comfort and safety during their golden years. recently published a report on the 50 most livable retirement towns in the U.S. Florida towns take the top three spots, with Dunedin winning. It has a livability score of 84 out of 100 and a median household income of $68,068. Additionally, Dunedin, which is located on the Gulf of Mexico about 25 miles west of Tampa, has a sizable retirement community with 35 percent of residents aged 65 and older. The town is known for its beautiful white sand beaches and charming downtown. The beautiful Caladesi Island State Park and Honeymoon Island are just a short drive from downtown Dunedin, offering unspoiled coastal landscapes. Following Dunedin at No. 2 is Ormond Beach, Florida, where a third of the population is of retirement age and the median household income is $67,482. Sebastian, Florida, ranked third with a median household income of $68,863 and 35.9 percent of the population aged 65 and older. Both Ormond Beach and Sebastian achieved a livability score of 83. The Sunshine State dominated the survey, with over half of all 50 towns located there. The top 10 has seven Florida communities, including Gulfport at No. 6, Estero at No. 8, Naples at No. 9, and Venice at No. 10. Arizona also made a strong showing in the study, with eight towns on the list, including the highest-ranking Oro Valley, which was fifth. People looking to retire in the West should also consider Laguna Woods, California, where 83 percent of the population is of retirement age and the median household income is $60,235. Notable inclusions in the Northeast include the No. 4 spot, Parole, Maryland, just outside of the state's capital, Annapolis, and Pompton Plains, New Jersey, at No. 7. However, both these towns have a median household income of above $110,000. To determine the rankings, GOBankingRates referenced the U.S. Census 2023 5-Year American Community Survey to identify towns with populations of at least 10,000 people, of which at least 33 percent are of retirement age. You can see the full list on Read the original article on Travel & Leisure Solve the daily Crossword
Yahoo
13 hours ago
- Yahoo
Map: How much of the $643M Powerball jackpot would you lose to taxes?
(NEXSTAR) — The Powerball has done it again. Without a winner in Monday night's drawing, the jackpot has grown, reaching an estimated $643 million with a cash value of $290.6 million. There's even a chance it will grow again before Wednesday's drawing. Regardless of whether the Powerball jackpot remains at $643 million or grows, you would take home far less if you overcome the odds and win on Wednesday. You can thank taxes. Whether you take the annuitized payout or the cash prize, you'll see 24% in federal tax withheld immediately. With additional taxes, you'll see roughly 37% of your prize money withheld, should you win. Cash vs. annuity: Which payout should you pick if you win Mega Millions, Powerball jackpots? There are only a handful of states that do not have a local lottery tax withholding. It's within these states that the winner of the current jackpot would lose the least of their winnings to taxes. Your total annuitized payout ($643 million, pre-tax, spread out over 30 annual payments) would total nearly $406.4 million, according to an analysis by USA Mega. If you selected the cash option (which financial experts recommend), you would take home roughly $183.1 million. While both are far less than the advertised annuitized and cash prizes, winners in some states have it worse. Across states that do have lottery taxes, Arizona has the lowest rate, according to USA Mega. There, a Powerball winner stands to take home an estimated cash payout of $175.9 million. If they selected the annuitized option, they could receive roughly $390.3 million over 30 years. A winner in New York would take home far less after state tax withholdings. USA Mega found the payouts there would be about $336.3 million in annuitized payments or $151.4 million with the cash option — barely more than half of the advertised estimated prize amounts. Want to ensure a Powerball jackpot win? How many tickets you'd need to buy Ready to find out how much you will (or will not, depending on how you look at it) take home, should you win the Powerball jackpot on Wednesday? The interactive map below shows the estimated annuitized or cash payouts, post-tax, in each state. You'll notice a few states are gray on the map — these do not participate in Powerball or Mega Millions. It's important to remember that these are estimates. The jackpot could go up or down before the next drawing. Plus, a jackpot can be split between multiple winners. While the odds of winning the Powerball are 1 in 292.2 million, more than 15 have been split by two or more tickets that matched the winning numbers. If you're lucky enough to win the jackpot, even if you aren't the sole winner, experts recommend moving quickly to assemble a team that includes an attorney, a tax advisor and a financial advisor. They also encourage protecting your ticket and keeping your victory a secret for as long as possible. At its estimated value, the current Powerball jackpot ranks as the largest of the year, surpassing a $515 million prize won by a ticket sold in California in March. It's also now the largest jackpot since a $1.326 billion payout was secured by a ticket in Oregon in April 2024. The next drawing is scheduled for 10:59 p.m. ET on Wednesday. Powerball tickets are $2 each and are sold in 45 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
