How to Add Investment Income When Filing Your U.S. Tax Return (for J1 Students and Nonresidents)

How to Add Investment Income When Filing Your U.S. Tax Return (for J1 Students and Nonresidents)

January 16, 2025 – 4 minute read

💼 Your First Investment Lesson in the U.S.

You’ve worked hard, saved up, and maybe even decided to invest a little while living in the U.S. — perhaps through Robinhood, eToro, or even in cryptocurrency.

Then tax season arrives, and you start wondering:
💭 Do I really need to pay tax on that profit?
💭 And if yes… how do I report it?

If this sounds familiar, don’t worry — you’re not alone. Many J1 students and nonresidents discover too late that investment income is taxable in the U.S.

Here’s everything you need to know to report your investment income correctly and stay compliant with the IRS (without losing your mind).

💡 What Is Investment Income in the U.S.?

Investment income is considered passive income, meaning it’s not linked to an active trade or business in the U.S.

It includes:

• Dividends (earnings from company shares)

• Interest (from U.S. banks or bonds)

• Capital gains (profits when you sell stock or crypto for more than you paid)

💰 Example:
If you traded cryptocurrency on a U.S.-based exchange and made a profit while living in the U.S., you must include that income in your U.S. tax return (Form 1040NR).

🧾 Is There Investment Income Tax in the U.S.?

Yes — and it often surprises nonresidents.

• Capital gains and dividends are typically taxed at a flat rate of 30%.

• However, if your home country has a tax treaty with the U.S., you may be able to reduce or even eliminate that tax.

That’s why understanding your treaty benefits (and filing correctly) is crucial — it could save you a significant amount.

📑 What Forms Will You Need?

If you invested through platforms like Robinhood, eToro, or similar brokers, you’ll receive a Form 1099 summarizing your investment activity.

Here’s how it breaks down:

You’ll use these forms to complete your Form 1040NR (the U.S. nonresident tax return).

💻 How to Add Investment Income When Filing Your Tax Return

Once you receive your 1099 forms, it’s time to enter them into your tax software — and if you’re using J1 Summer Tax Back, the process is simple and guided.

Here’s what to do:

1. Collect your 1099 forms from your broker or bank.

2. Enter the details from each form into your 1040NR section for investment income.

3. For Form 1099-B, you’ll need to fill in:

   • 1a – Description of Property: Type or name of the stock.

   • 1b – Date Acquired: When you bought it.

   • 1c – Date Sold: When you sold it.

   • 1d – Proceeds: Amount received from the sale.

   • 1e – Cost or Other Basis: The amount you originally paid.

   • 1g – Wash Sale Loss Disallowed: If applicable, calculate manually and enter the adjusted gain.

4. Box 4 and 16 – Federal/State Taxes Withheld: Usually “0” (no taxes withheld).

5. Box 14 – State Name: The state where you lived when trading.

6. Box 15 – State ID Number: Enter “0” if not applicable.

7. Payer’s Details: Enter your broker’s name (e.g., Robinhood). If you don’t have their tax ID, enter “0”.

💡 Tip:
When asked if your investment income is “effectively connected with a U.S. trade or business”, select “No” — because trading stocks or crypto through a U.S. broker doesn’t count as an active business activity.

📉 Why Reporting Your Investment Income Matters

Failing to report your investment income — even a small amount — can lead to IRS penalties or delays when claiming refunds.

By reporting everything accurately, you stay fully compliant and can also claim any treaty benefits you’re entitled to.

🧘 Filing Without Stress

We know how confusing U.S. taxes can feel — especially when you’re juggling studies, travel, and new experiences abroad.

That’s why J1 Summer Tax Back helps international students and nonresidents:
✅ Report investment income correctly
✅ Apply tax treaty benefits
✅ Stay compliant with the IRS
✅ Avoid unnecessary stress

So if you made even a small investment in the U.S., take a few minutes to include it in your return — it’s quick, smart, and keeps your record clean.

Your wallet (and your future self) will thank you. 💸