U.S.-Source Income

U.S.-Source Income

Katelynn Minott, CPA & CEO profile picture
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U.S.-source income is income treated as coming from the United States under IRS source rules. It can include wages for work performed in the United States, rental income from U.S. property, dividends from U.S. corporations, income from a U.S. trade or business, and gains or royalties connected to U.S. property or activity.

Why it matters for U.S. expats

U.S.-source income matters because it can affect whether income qualifies for the Foreign Earned Income Exclusion, how the Foreign Tax Credit is calculated, whether U.S. withholding applies, and whether a nonresident alien spouse or foreign business partner has U.S. filing obligations.

Common questions

1. What is U.S.-source income?

U.S.-source income is income the IRS treats as coming from the United States. The source depends on the income type and the IRS rules that apply to it.

2. What are examples of U.S.-source income?

Examples can include wages for work performed in the United States, U.S. rental income, dividends from U.S. corporations, certain U.S. business income, and royalties from U.S. property.

3. Are wages from a U.S. employer always U.S.-source income?

No. For personal services, source is usually based on where the work is performed. Wages from a U.S. employer can be foreign-source income if the work is physically performed outside the United States.

4. Is remote work for a U.S. company U.S.-source income?

Not automatically. If the work is performed while the taxpayer is physically outside the United States, the income may be foreign-source for U.S. tax purposes, even if the employer or client is in the United States.

5. Is U.S. rental income U.S.-source income?

Yes. Rental income from real estate located in the United States is U.S.-source income.

6. Are U.S. dividends U.S.-source income?

Usually, yes. Dividends from U.S. corporations are generally treated as U.S.-source income.

7. Does U.S.-source income qualify for the Foreign Earned Income Exclusion?

Usually no. The Foreign Earned Income Exclusion applies to qualifying foreign earned income, not U.S.-source income.

8. Can U.S.-source income create state tax issues?

Yes. Income connected to a specific U.S. state, such as rental income or work performed there, may create state filing obligations even when the taxpayer lives abroad.

9. Why does U.S.-source income matter for nonresident aliens?

Nonresident aliens are generally taxed by the United States on U.S.-source income and income effectively connected with a U.S. trade or business.

When to get help

Professional guidance is important when:

  • You worked in the United States during the tax year while living abroad.
  • You work remotely for a U.S. employer or U.S. clients from another country.
  • You receive U.S. rental income, U.S. dividends, royalties, or business income.
  • You are claiming the Foreign Earned Income Exclusion and need to separate U.S.-source and foreign-source wages.
  • You paid foreign tax on income that may be U.S.-source for IRS purposes.
  • You have a nonresident alien spouse or foreign business partner with U.S.-source income.
  • You are unsure whether a tax treaty affects withholding or filing obligations.

Bright!Tax can help classify U.S.-source and foreign-source income, coordinate credits and exclusions, and prepare the right U.S. forms for your expat tax return. Get started with Bright!Tax.

Official sources

Reviewed by

Katelynn Minott, CPA & CEO

Last reviewed

July 2026

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