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TaxRobin
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Experience:  International tax
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I currently have a US brokerage account as I invest in US

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Dear Sir or Madam, I currently have a US brokerage account as I invest in US equities and derivatives (options). I have come to understand that the IRS will likely tax my capital gains. As my capital gains will be bellow the annual exempt amount of 11.7K I am at risk of being taxed in the US and then not being able to get that taxation reimbursed in the UK. In essence the tax treaty in the US will be void due to the small amount of capital gains I will generate.However I have no understanding of how my capital gains will be taxed in the US. Can anyone explain to me how capital gains are taxed in the US. Is there an annual exempt amount like there is in the UK and do I need to fill out a tax reuturn in the UK or US to calculate how much tax I owe on capital gains that I genereate?Any help will be of great help and I appreciate it greatly.Many thanksTom

Hello and thank you for allowing me to assist you.

A flat tax of 30 percent was imposed on U.S. source capital gains in the hands of nonresident alien individuals physically present in the United States for 183 days or more during the taxable year. This 183-day rule bears no relation to the 183-day rule under the substantial presence test of IRC section 7701(b)(3).

For example, a foreign diplomat, consular officer, or other nonresident alien employee of a foreign government, or nonresident alien employee of an international organization, who is visiting the United States in A or G nonimmigrant status for a period longer than 183 days in a calendar year would be subject to the 30 percent tax on his/her U.S. source capital gains - even if he/she continues to be a nonresident alien per the “exempt individual” rules under the substantial presence test

Customer: replied 8 days ago.
Thanks for the information. Would the 30% tax on capital gains differ if an individual had dual citizenship in the US and UK, or if a hedge fund was established in the US instead of the UK? If so how would capital gains be taxed?

A us citizen is taxed on their worldwide income not as a non resident.

Customer: replied 8 days ago.
as a US citizen what tax bands may apply? Would this be less than 30% Further is the 30% tax band a flat rate no matter how much income is generated?

The 30% is a flat rate for NON US PERSONS that have a presence in the US.

Customer: replied 8 days ago.
Yeah sorry about that I was meant to ask what tax bands would potentially apply to a US citizen compared to a non US person.

There are seven federal tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The bracket depends on taxable income and filing status. There are just 3 for capital gain

In 2018 the capital gains tax rates are either 0%, 15% or 20% for most assets held for more than a year.

Customer: replied 8 days ago.
As an individual with dual citizenship: UK/US would such rates that usually apply to a US citizen also apply to an individual with dual citizenship?

yes

Customer: replied 8 days ago.
if I was to either have dual citizenship between the US and the UK, or if I was to have foreign citizenship in the US and retain my UK citizenship I would be subject to the 0%, 15% or 20% capital gains tax rate instead of the 30% tax rate which applies to foreign investors?

yes

TaxRobin and other Tax Specialists are ready to help you
Customer: replied 8 days ago.
ok thanks for all your help!

You are most welcome.