W-8BEN form: how investors legally pay 0% US tax on stock gains and interest

What brokers withhold from investors outside the US on dividends, interest, stock gains and fund payouts, what applies to US property and estates and how overwithheld tax comes back, in 2026.

Interactive Brokers says on its tax pages that all non-US persons and entities complete Form W-8 when they open an account, to certify the country of tax residence and to establish whether a reduced rate of withholding applies. Lightyear's help center says that for personal accounts it generates and submits Form W-8BEN automatically during onboarding, to reduce the withholding tax rate where applicable. The US guide for withholding agents describes one more use of the form: "For example, a foreign person may provide a Form W-8BEN to a broker to establish that the gross proceeds from the sale of securities are not subject to Form 1099 reporting or backup withholding."

Which investment income counts as US income

For shares and other personal property, the US guide for nonresidents reads: "Gain or loss from the sale or exchange of personal property generally has its source in the United States if you have a tax home in the United States. If you do not have a tax home in the United States, the gain or loss is generally considered to be from sources outside the United States."

Lightyear's help center says that some stocks trade on US exchanges but belong to companies headquartered outside the United States, so their dividends come from a non-US payment source. For these stocks and for ADRs, Lightyear does not withhold US tax, and tax may be withheld at source in the company's home country.

Dividends: 30% or a treaty rate

The US guide for nonresidents reads: "Dividends are generally taxed at a 30% (or lower treaty) rate." The US guide for withholding agents describes a broker with clients on different rates: "It has five customers: two are foreign persons who have provided documentation entitling them to a 15% rate of withholding on dividends; two are foreign persons subject to a 30% rate of withholding on dividends; and one is a U.S. individual who provides it with a Form W-9." On $12,000 in US dividends, the tax is $1,800 at 15% and $3,600 at 30%.

For contracts that track US shares, the same guide reads: "However, payments of dividend equivalents (described later under Dividend equivalent) are generally subject to withholding."

For funds that hold US bonds, the US guide for nonresidents reads: "There is no 30% tax on interest-related dividends from sources within the United States that you receive from a mutual fund or other regulated investment company (RIC)." It adds: "The mutual fund will designate in writing which dividends are interest-related dividends."

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Interest: 0% on deposits and portfolio interest

The US guide for withholding agents reads: "Interest and original issue discount that qualifies as portfolio interest is exempt from chapter 3 withholding." On $4,000 of such interest a year, the US tax is $0. For bank accounts, the US guide for nonresidents reads: "Interest income that is not connected with a U.S. trade or business is excluded from income if it is from: Deposits (including certificates of deposit) with persons in the banking business;"

Firstrade's help center says that after Form W-8BEN expires, it withholds 30% from dividends and credit interest and 24% from sales proceeds. The US guide for withholding agents reads: "For example, if the payee of interest is presumed to be a foreign person, you may not apply the portfolio interest exception or a reduced rate of withholding under a tax treaty since both exceptions require documentation."

Stock gains: 0% under the 183-day rule

The US guide for nonresidents reads: "If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year." For a $40,000 gain on US shares, the US tax is $0.

The same guide covers longer stays: "If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate."

The guide also covers investors who trade often: "If your only U.S. business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U.S. resident broker or other agent, you are not engaged in a trade or business in the United States."

US real estate: FIRPTA withholding

The US page on FIRPTA withholding reads: "The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding." It sets the rate: "The rate of withholding generally is 15% (10% for dispositions before Feb. 17, 2016)." and names the person who holds back the money: "In most cases, the buyer (transferee) is the withholding agent." For an apartment sold for $500,000, that is $75,000.

The US guide for nonresidents covers the gain itself: "Gains and losses from the sale or exchange of U.S. real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States."

For rent, the same guide gives an example: "You own a single-family house in the United States that you rent out. Your rental income for the year is $10,000." The tax in the example is 30% or a lower treaty rate, withheld by the tenants, and the guide adds: "You do not have to file a U.S. tax return (Form 1040-NR) because your U.S. tax liability is satisfied by the withholding of tax." The guide also gives the owner a choice: "If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States."

Estate tax on US shares

The US answers on estate tax for people who were neither residents nor citizens of the United States list "Certain intangible property, such as U.S. marketable securities" among the assets situated in the United States. They set a threshold: "The executor of an NRNC decedent’s estate can generally transfer the decedent’s U.S.-situated assets without being required to file a federal estate tax return or pay a federal estate tax if those assets, valued at the time of death, together with the amount of the decedent’s adjusted taxable gifts, do not exceed $60,000." An estate with $300,000 in US shares is above that limit.

Where investors lose money

For banks and brokers outside the United States, the instructions for Form W-8BEN read: "A foreign financial institution (FFI) may rely on a properly completed Form W-8BEN to establish your chapter 4 status as a foreign person. The Form W-8BEN should be provided to the FFI when requested. Failure to do so could result in 30% withholding on income paid or credited to you as a recalcitrant account holder from sources within the United States."

For joint accounts, the same instructions read: "If you own the income or account jointly with one or more other persons, the income or account will be treated by the withholding agent as owned by a foreign person that is a beneficial owner of a payment only if Forms W-8BEN or W-8BEN-E are provided by all of the owners." They add: "If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, however, the payment must be treated as made to a U.S. person and the account treated as a U.S. account."

Interactive Brokers' lesson on Form W-8BEN says that the country of tax residence determines treaty eligibility and that the permanent address on the form must match the treaty country. For a treaty rate, the instructions for Form W-8BEN read: "If you are claiming treaty benefits as a resident of a foreign country with which the United States has an income tax treaty for payments subject to withholding under chapter 3 or under section 1446(a) or (f), identify the country where you claim to be a resident for income tax treaty purposes."

The same lesson asks clients who move to update the form, because the new country of residence may have lower withholding rates. The instructions for Form W-8BEN read: "If a change in circumstances makes any information on the Form W-8BEN you have submitted incorrect, you must notify the withholding agent, payer, or FFI with which you hold an account within 30 days of the change in circumstances and you must file a new Form W-8BEN or other appropriate form."

Interactive Brokers' page for non-US clients says that US tax on distributions from publicly traded partnerships is withheld at 37%, since this is earned income in the United States. On sales of such units, the US guide for withholding agents reads: "For purposes of section 1446(f), a broker is generally required to withhold at a 10% rate on an amount realized from the transfer of a PTP interest that it effects for the transferor of the interest." It defines the base: "An amount realized from the sale of a PTP interest is the amount of gross proceeds paid or credited from the sale." For units sold for $20,000, the broker withholds $2,000.

Getting back what was withheld

For brokers abroad that act as qualified intermediaries, the US guide for withholding agents reads: "A QI may seek a refund of tax withheld under chapters 3 and 4 on behalf of its account holders when the QI has not issued a Form 1042-S to the account holders that received the payment that was subject to overwithholding."

Firstrade's help center says that a refund of backup withholding is claimed on Form 1040-NR, with the consolidated Form 1099 as proof of withholding. The same page says that refunds of nonresident withholding may require Form 1042-S. The instructions for Form 1040-NR cover a return filed for this purpose alone: "You’re filing Form 1040-NR solely to claim a refund of U.S. tax withheld at the source under chapter 3 or tax withheld under chapter 4 (FATCA)." Murblz experts have described the deadlines and the time a refund takes in the guide to US tax on YouTube, KDP and app store income, and payouts to creators in the guide to Instagram tax.

What decides the rate

Interactive Brokers says that the type of Form W-8 depends on whether the account is an individual account or an entity account. The instructions for Form W-8BEN-E read: "You must give Form W-8BEN-E to the withholding agent or payer if you are a foreign entity receiving a withholdable payment from a withholding agent, receiving a payment subject to chapter 3 withholding, or if you are an entity maintaining an account with an FFI requesting this form." Murblz experts check the tax residence of investors with the tax residency calculator and have described a change of residence in the guide on how to become tax resident abroad.

0% is possible, but not for everyone

Firstrade's tax center says that tax treaties between the United States and other countries can reduce or eliminate withholding taxes, and that investors claim these benefits with Form W-8BEN. The US guide for nonresidents reads: "Income of any kind that is exempt from U.S. tax under a treaty to which the United States is a party is excluded from your gross income."

For investors who become US residents, the same guide reads: "If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services; income from rental property or royalties; and other types of income on your U.S. tax return."

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