Trading on Robinhood as a Nonresident? Don’t Ignore These U.S. Tax Rules
January 17, 2025 – ⏱ 6 minute read
📱 Your phone, a few taps… and now taxes 🧾
Investing has never been easier. You can buy and sell shares on the bus, between classes, or during your lunch break.
But if you’re a nonresident in the U.S. and you made a profit from apps like Robinhood or E*TRADE, there’s one thing you can’t swipe away: U.S. tax rules.
This guide walks you through what counts as taxable investment income, which forms you’ll receive, how the 30% nonresident rates work, when tax treaties may help, and how to report everything correctly.
📚 Table of Contents
1️⃣ Can nonresidents earn profit from investments while in the U.S.?
2️⃣ Do I have to pay tax on my investment income?
3️⃣ What documents will I receive for trading profits?
4️⃣ Case studies (with treaty twists)
5️⃣ Who can help me file as a nonresident?
💼 Can Nonresidents Earn Profit from Investments in the U.S.?
Yes! ✅ Investment income is considered passive income — not “effectively connected” with a U.S. business.
There’s no limit on how much F-1 or J-1 visa holders can earn passively.
⚠️ But beware: active trading or running a “trading business” could violate your visa conditions. Occasional investing for personal gain? Totally fine. 📊
💰 Do I Have to Pay Tax on My Investment Income?
Yes — but how much depends on your situation.
💵 Capital Gains:
If you’re in the U.S. for over 183 days, you’ll usually pay 30% tax on your U.S.-source capital gains.
If less than 183 days, those gains are not taxed federally.
🏦 Dividends:
Dividends from U.S. companies are typically taxed at 30%, unless a tax treaty reduces that rate.
📜 Tax Treaties:
Your country may have a treaty that lowers or removes U.S. tax on dividends or capital gains — but you must claim it using Form W-8BEN.
📅 Timing tip:
Your income is taxed in the year it’s paid or credited, not when you receive it.
📄 What Documents Will You Receive for Trading Profits
🧾 Form W-8BEN
Every nonresident investor should complete a W-8BEN to:
✅ Confirm they’re not a U.S. resident
✅ Claim any tax treaty benefits
Without it, your broker might withhold the full 30%. 😬
📊 1042-S vs. 1099 Forms
📜 Form 1042-S – for nonresidents. It reports income subject to withholding, such as:
-
💵 Code 1: U.S. interest (30% unless treaty = 0%)
-
💸 Code 6: U.S. dividends (30% unless treaty reduces)
-
📈 Code 9: Capital gains (30% if >183 days; 0% if ≤183 days)
📑 Forms 1099-B / 1099-DIV / 1099-INT – for U.S. residents.
If you get one of these by mistake, update your W-8BEN and file correctly as a nonresident.
🧮 Form 1040NR – Your Annual Tax Return
Every nonresident must file a 1040NR to report their income (dividends, gains) and apply treaty benefits.
📚 Case Studies – Real Examples
👩🎓 Case 1: Student with Gains and Dividends (Germany 🇩🇪)
Maria is an F-1 student from Germany.
She bought 1,000 Apple shares at $43.11, sold at $68.79, earning $25,680, and received $94 in dividends.
✅ Capital Gains: Germany’s treaty may reduce the tax to 0% if she files W-8BEN correctly.
💡 She can’t claim the benefit if she owns >10% voting shares.
✅ Dividends: Treaty reduces from 30% → 15%.
📄 She’ll receive Form 1042-S with codes 6 and 9.
🧪 Case 2: Researcher with Short-Term Gain (China 🇨🇳)
Yao, a J-1 researcher from China, bought 100 GameStop shares at $87.23, sold at $306, gaining $21,877.
🇨🇳 China’s treaty doesn’t cover capital gains from shares, so Yao owes 30% CGT if he stayed in the U.S. >183 days.
📄 With a valid W-8BEN, he’ll receive 1042-S with Code 9.
🤝 Who Can Help with U.S. Nonresident Tax?
That’s where J1 Summer Tax Back comes in! 🌍
We help nonresidents and international students:
🧩 Enter 1042-S, 1099, and W-8BEN forms correctly
📉 Claim treaty benefits and reduce over-withholding
💼 File federal (1040NR) and state returns easily
💬 Stay 100% compliant with the IRS — stress-free!
If you traded on Robinhood, E*TRADE, or Webull, we’ll walk you through each step so your return is perfect. 💪