Resident aliens working for foreign consulates located within the United States may wonder how much, if any, of their income is subject to U.S. taxation. The first place to look depends on the person’s country of origin. There may be an income tax treaty in place between the person’s country of origin and the United States which exempts income earned while working for the foreign government, even while residing in the United States, from U.S. taxation. For example, under the U.S.-France treaties, a resident alien may be entitled to a credit for the tax paid to the foreign government on income earned. In certain circumstances, persons who are dual citizens of the United States and a foreign country may qualify under the applicable U.S.-Foreign country tax treaty to exempt the income they earn while working for the foreign government.
Assuming no favorable tax treaty exists, a resident alien may still find their income exempt from U.S. taxation:
- If the person is either a non-U.S. citizen or he or she is a U.S. citizen but also a citizen of the Philippines, and the work he or she performs for a foreign government in the United States is similar to that which is performed by U.S. government employees in that foreign country and that foreign country grants an equivalent exemption to U.S. government employees, that person’s foreign government salary is exempt from U.S. taxation. To qualify for this exemption, you must either get a certification from the U.S. Department of State certifying the above or you must establish those facts to the IRS.
- If you work for an international organization in the United States and you are not a U.S. citizen (or are both a citizen of the United States and the Philippines), your salary from that international organization is exempt from U.S. taxation. Your international organization employer must be one that has been designated as tax exempt by the President of the United States through an Executive Order and you must know the number of the Executive Order covering your international organization in order to claim this exemption. Upon review, this tax exemption may be denied as a matter of policy by the Secretary of State when your foreign country does not allow similar exemptions to U.S. citizens.
This exemption only applies to current employees and not to former employees. Therefore, pensions received by former employees living in the United States do not qualify for the exemption under U.S. tax law.
It is important to note, generally resident aliens who file a USCIS Form I-508 Request for Waiver of Certain Rights, Privileges, Exemptions and Immunities in order to keep their immigrant status (green card), no longer qualify for these exemptions from U.S. tax law effective as of the date of filing of USCIS Form I-508. However, you may file USCIS Form I-508 and still maintain your exemption if:
- You are otherwise exempt from U.S. tax under an income tax treaty, consular agreement, or international agreement; or
- You work for an international organization and that organization’s creation agreement provides that alien employees are exempt from U.S. income tax. Two international organizations that have such an agreement are the International Monetary Fund and the International Bank for Reconstruction and Development.
