U.S. Tax Treaty Benefit Calculator
See how an income tax treaty can reduce the 30% U.S. withholding tax on your U.S. source income.
Calculate Your Tax Savings
$
Your Estimated U.S. Tax
Total Tax Savings With Treaty:
$4,500.00
How It's Reported on Form 1042-S
Box 3a (Exemption Code): 04
Box 3b (Tax Rate): 15.00
Box 13b (Country Code): CA
Other Key Tax Benefits
Beyond treaties, the U.S. tax code itself exempts certain income from tax, meaning 0% withholding is applied. Key examples include:
- Portfolio Interest (Exemption Code 05): Interest on many U.S. bonds and bank deposits is completely exempt.
- Effectively Connected Income (Code 01): Income from a U.S. business is taxed at graduated rates after deductions, not a flat 30% on gross income.
- Income Not from U.S. Sources (Code 03): If income is determined not to be from a U.S. source, it is not subject to U.S. withholding tax.
If tax was withheld from your payment, Form 1042-S is your proof of payment. The amount in **Box 7a (Federal tax withheld)** represents a direct tax payment made on your behalf. When you file a U.S. tax return (like Form 1040-NR), you can claim this amount as a credit. If the tax withheld is more than your final tax liability, you are entitled to a refund. Always attach Copy C of your Form 1042-S to your tax return to validate your claim.