Do I need to file tax returns in US if my only income was from capital gains and I am a non-resident who was not in the USA for the tax year?

Question

So I came to the US on F1 Student visa on September 2012 and studied for 2 years. I then worked for 3 years in California on F1 OPT. My F1 visa (along with the OPT) got expired in July 2017 after which I returned to India for good. I had income for half of 2017 for which I filed taxes in 2018.

Now in the year 2018, I do not have any ordinary income in the US. I have been investing in stocks for the past few years. The only income I have in 2018 is the capital gains I received from selling the stocks. It is about $26k (long term $13k and short term $13k). So do I have to file tax returns in the US, considering that I was not in the US for the whole 2018 year, except that I visited US as the tourist twice in 2018. Or does it depend on something else?

Answer 1

Since you were in US only during 6 years (not 8 or more) you aren't at risk of the expatriation tax. Plus, although you don't tell us your total tax or total assets, extrapolating reasonable guesses from your stock gains you probably would be under the threshhold amounts anyway (about $160k/yr tax or $2m net worth).

Capital gains on stock and other securities, not effectively connected to a US trade or business, are considered sourced to your home (which is no longer US) and thus not subject to US tax. You shouldn't have had withholding on them by the US payer(s), but if by mistake they did (and you get form 1042-S) you need to file if you want a refund of that withholding.

Real property (i.e. land plus some improvements) is different. If you had a gain on sale of real property it is considered US-source and subject to US tax, at rates that may be affected by your country's treaty status which I didn't check.

Also to be clear, if you received dividends on stocks or mutual funds (before selling them) that income is US-taxable. For US residents qualified dividends are taxed at lower rates, and for that reason often distinguished as 'not ordinary income' (even though they are income).