[Reviewed 2/6/2024]

Taxable income received during your status as an F or J student is classified as either "effectively connected income" or "not effectively connected income." The type of income determines the tax rate applied to those types of income.

NOTE: When reading this page and looking at the 1040-NR, page 1, and 1040-NR's Schedule NEC: Keep in your mind that the 1040-NR and its schedules are designed not just for F or J student/scholar nonresident aliens. The IRS has reporting lines necessary to include income from all nonresident aliens' taxable activities.

Effectively Connected Income

Effectively connected to what? To a U.S. Trade or Business.

As a student on an F or J visa, your "U.S. Trade" is "student." When using tax software designed for nonresident returns (1040-NR), after you enter F or J visa student, the software will describe your occupation as "student." If you are a J visa visiting scholar, it will list an occupation such as "researcher" or "teacher." Below I will refer to students, but the same applies to J visa visiting scholars.

Common types of income that are "effectively connected" to your reason for being in the U.S. are:

• Campus jobs

• CPT (always related to your field of study)

• OPT (always related to your field of study)

• Scholarships and Grants (the taxable portion if any)

Effectively Connected Income is reported on 1040-NR, page 1. https://www.irs.gov/pub/irs-pdf/f1040nr.pdf

Fun Fact to Know and Tell: Interest paid to you related to a bank account that you opened in connection with being here a student is effectively connected, but it is not taxed and does not need to be reported on your 1040-NR.

Not Effectively Connected Income

So what is "Not Effectively Connected" Income?

For the nonresident alien on F or J student visa Not Effectively Connected Income is income that is not directly connected to your reason for being here: to be a student.

Examples of not effectively connected income are

• Investing Income

  • Dividends (reported on 1099-DIV)

  • Capital Gains and Losses (reported on 1099-B)

  • Interest earned in connection with investing activity (reported on 1099-INT)

  • Other miscellaneous income earned in connection with investing activity (reported on 1099-MISC)

• Income from work not authorized under (and in violation of) the terms of your visa

• Prize money and awards.  See IRS Pub 515 "Prizes and Awards"

• Gambling income

Not Effectively Connected Income is reported on 1040-NR, Schedule NEC.  https://www.irs.gov/pub/irs-pdf/f1040nrn.pdf