All articles 7 min read

Withholding From Other Income: U.S. Taxes for Noncitizens (2025 IRS Guide)

This guide covers “Withholding From Other Income” within u.s. taxes for noncitizens. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 519 (2025), U.S. Tax Guide for Aliens, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Withholding From Other Income

Other income subject to 30% (or lower treaty rate) withholding generally includes fixed or determinable income such as interest (other than portfolio interest), dividends, pensions and annuities, and gains from certain sales and exchanges, discussed in chapter 4. It also includes 85% of social security benefits paid to nonresident aliens.

Other income not subject to withholding of 30% (or lower treaty) rate.

The following income is not subject to withholding at the 30% (or lower treaty) rate if you file Form W-8ECI with the payer of the income.

  • Income (other than compensation) that is effectively connected with your U.S. trade or business.

  • Income from real property that you choose to treat as effectively connected with a U.S. trade or business. See Income From Real Property in chapter 4 for details about this choice.

Special rules for withholding on partnership income, scholarships, and fellowships are explained next.

Tax Withheld on Partnership Income

If you are a foreign partner in a U.S. or foreign partnership, the partnership will withhold tax on your share of ECTI from the partnership. Your partnership may be able to reduce withholding on your share of ECTI by considering certain partner-level deductions. Generally, you must submit Form 8804-C for this purpose. For more information, see the Instructions for Form 8804-C.

The withholding rate on your share of effectively connected income is generally the highest rate of tax specified under section 1 (37%). However, the partnership may withhold at the highest rate that applies to a particular type of income allocable to you if you gave the partnership the appropriate documentation. Long-term capital gain is an example of a particular type of income to which the highest tax rate applies. Claim the tax withheld as a credit on your 2025 Form 1040-NR.

The partnership will give you a statement on Form 8805 showing the tax withheld. A partnership that is publicly traded will withhold tax on your actual distributions of effectively connected income. In this case, the partnership will give you a statement on Form 1042-S.

Tax withheld on gain from the sale or exchange of certain partnership interests.

If you are a direct or indirect foreign partner in a U.S. or foreign partnership that is engaged (or is treated as engaged) in a trade or business within the United States and you directly or indirectly dispose of that interest for a gain, then for transfers occurring after 2017, the transferee will generally withhold and pay to the IRS on your behalf a tax equal to 10% of the amount realized on the sale. The rules for withholding and paying over this amount are similar to the rules for sales of U.S. real property interests. You will receive a Form 8288-A reflecting the amount withheld that you may then claim on line 25f of your Form 1040-NR as a credit against the tax you owe on the gain. You may be able to provide certain information to the transferee to reduce or eliminate withholding. For example, if a nonrecognition provision of the Internal Revenue Code applies to all of the gain realized on a transfer, the transferee does not need to withhold if you provide a notice describing the application of a nonrecognition provision. If you are a transferee that failed to withhold, under section 1446(f)(4), the partnership is required to withhold on distributions to you an amount equal to the tax you failed to withhold (plus interest, if applicable).

On November 30, 2020, the Department of the Treasury and the IRS issued final regulations under section 1446(f) in T.D. 9926 (85 FR 76910) for transfers of both non-PTP and PTP interests. The final regulations require any transferee to withhold a tax equal to 10% of the amount realized on any transfer of a partnership interest (other than certain PTP interests) under section 1446(f)(1), unless an exception to withholding applies. These regulations generally apply to transfers that occur on or after January 29, 2021. However, in accordance with Notice 2021-51, 2021-36 I.R.B. 361, the rules related to withholding under section 1446(f)(4) and to transfers of PTP interests apply to transfers occurring on or after January 1, 2023. Additionally, the final regulations revised certain provisions in Regulations section 1.1446-4 for withholding under section 1446(a) on PTP distributions. Also, in accordance with Notice 2021-51, these revisions apply to PTP distributions made on or after January 1, 2023. Notices 2018-8 and 2018-29 apply to transfers that occur before the effective date of the final regulations or, as previously described, taxpayers may apply the proposed regulations to transfers of non-PTP interests during this time.

For additional guidance on certain issues related to the section 1446(f) regulations, see Notice 2023-8.

Withholding on Scholarships and Fellowship Grants

There is no withholding on a qualified scholarship received by a candidate for a degree. See chapter 3.

If you are a nonresident alien student or grantee with an “F,” “J,” “M,” or “Q” visa and you receive a U.S. source grant or scholarship that is not fully exempt, the withholding agent (usually the payer of the scholarship) withholds tax at 14% (or lower treaty rate) of the taxable part of the grant or scholarship that is not a payment for services. However, if you are not a candidate for a degree and the grant does not meet certain requirements, tax will be withheld at the 30% (or lower treaty) rate.

Any part of a scholarship or fellowship grant that is a payment for services is subject to graduated withholding, as discussed earlier under Withholding on Wages.

Alternate Withholding Procedure

Your withholding agent may choose to use an alternate procedure by asking you to fill out Form W-4. See below for items that may reduce your withholding.

Expenses.

Include expenses that will be deductible on your return. These include the IRA deduction discussed under Deductions in chapter 5.

Nontaxable grant or scholarship.

You can exclude the part of your grant or scholarship that is not taxable under U.S. law or under a tax treaty.

Standard deduction.

If you are a student who qualifies under Article 21(2) of the United States-India Income Tax Treaty, you can take the standard deduction. The standard deduction amount for 2025 is $15,000.

Form W-4.

Complete the appropriate lines of Form W-4. Sign and date the form and give it to your withholding agent.

If you file a Form W-4 to reduce or eliminate the withholding on your scholarship or grant, you must file an annual U.S. income tax return to be allowed any deductions you claimed on that form. If you are in the United States during more than 1 tax year, you must attach a statement to your yearly Form W-4 indicating that you have filed a U.S. income tax return for the previous year. If you have not been in the United States long enough to be required to file a return, you must attach a statement to your Form W-4 saying you will file a U.S. income tax return when required.

After the withholding agent has accepted your Form W-4, tax will be withheld on your scholarship or grant at the graduated rates that apply to wages. The gross amount of the income is reduced by the applicable amount(s) on Form W-4, and the withholding tax is figured on the remainder.

You will receive a Form 1042-S from the withholding agent (usually the payer of your grant) showing the gross amount of your taxable scholarship or fellowship grant less any withholding allowance amount, the tax rate, and the amount of tax withheld. Use this form to prepare your annual U.S. income tax return.

For more information, go to IRS.gov/FormW4.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

Back to all articles