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LearnFAQImmigrant & NRI Finance

Why does the U.S. tax my worldwide income once I become a resident alien?

Answer

The U.S. taxes residents and citizens on worldwide income because it uses a residence-and-citizenship-based system rather than a purely territorial one. Once you're a resident alien, every dollar you earn counts—your U.S. salary, foreign rental income, interest on an overseas account, capital gains from selling property back home, and dividends from foreign shares. This often surprises new immigrants who assumed only U.S. earnings were taxable. The relief valves are the Foreign Tax Credit, which offsets U.S. tax with taxes you paid abroad, and tax treaties that can reduce or reallocate certain items. Knowing your residency start date matters, because income earned before that date generally isn't swept in. Gather records of all foreign income sources before filing your first resident return so nothing is missed and you can claim the credits you're owed.

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