Can a Nonresident Alien Claim the Standard Deduction?

The standard deduction is a specific dollar amount that taxpayers can subtract from their adjusted gross income to reduce their overall tax liability. This amount is fixed annually and varies based on filing status, age, and whether the taxpayer or their spouse is blind. For U.S. tax purposes, a nonresident alien is an individual who is not a U.S. citizen and does not meet the criteria of the green card test or the substantial presence test. Understanding this status is the first step in navigating the U.S. tax system.

The General Rule for Nonresident Aliens

Individuals classified as nonresident aliens for tax purposes are generally not permitted to claim the standard deduction on their U.S. tax returns. This is a primary distinction between the tax treatment of U.S. residents and nonresidents. Nonresident aliens are taxed only on income from U.S. sources or that is “effectively connected” with a U.S. trade or business. Because their taxable income in the United States is limited, the tax framework does not extend the standard deduction to them. This means that nearly all nonresident aliens must calculate their deductions individually through a process known as itemizing.

Exceptions to the General Rule

An exception to the general prohibition exists for certain students and business apprentices from India. This allowance is granted under the United States-India Income Tax Treaty. To be eligible, these individuals must be in the U.S. for educational or training purposes and must not claim any itemized deductions. While tax treaties with other countries, such as Canada and Mexico, may affect how income is taxed, they do not grant a similar right to the standard deduction.

Itemized Deductions as an Alternative

Since most nonresident aliens cannot take the standard deduction, the alternative is to itemize. These deductions must be directly connected to income that is “Effectively Connected” with a U.S. trade or business. Income that is not effectively connected cannot be reduced by these deductions.

A common itemized deduction is for state and local income taxes. If you had these taxes withheld from your wages, you can deduct them. The deduction for all state and local taxes is capped at a combined total of $10,000 per household annually, and your federal deduction cannot exceed this amount.

Nonresident aliens can also deduct contributions made to qualified U.S. charitable organizations. Contributions to foreign charities are not deductible, and you will need to maintain records of your donations, such as bank statements or written acknowledgments from the charity for donations of $250 or more.

Another category of itemized deductions is for casualty and theft losses. These losses must be from property located in the United States and attributable to a federally declared disaster. The amount of the loss must be reduced by $100, and the total of all such losses for the year is only deductible to the extent it exceeds 10% of your adjusted gross income.

Claiming Deductions on Form 1040-NR

For nonresident aliens who itemize, deductions are reported on Schedule A (Form 1040-NR). You must complete this schedule and attach it to your main tax return, Form 1040-NR. The process involves listing your eligible deductions on the corresponding lines of Schedule A. After summing the individual amounts to determine your total itemized deductions, this total is transferred to the designated line on Form 1040-NR. This amount is then subtracted from your effectively connected income.