Gross Income Under United States

Gross income of a resident alien includes income from all sources and wherever earned throughout the world. Thus, a resident alien’s gross income can include: salaries; other compensation; interest and dividend income (wherever paid); net income from carrying on any trade or business (that is, gross income less expenses incurred to earn that income); capital gains or losses (subject to limitations); income (less expenses) from partnerships and rental properties; annuities; pensions; and other miscellaneous income, including reimbursed business expenses in excess of expenses reported to the employer. Gross income, however, does not include income received while the individual was a nonresident alien.  Certain items are excluded by statute from gross income. These items include: interest received on certain state and local obligations; gifts and inheritances; compensation for injuries or sickness; amounts received under accident and health plans; contributions by employers to accident and health plans; and qualified scholarships. Compensation for Personal Services

In General

A resident alien is taxed on his or her worldwide compensation regardless of where or for whom the services are performed.

Compensation includes:

• Salaries, bonuses, and commissions;
• Fringe benefits;
• Deferred compensation;
• Employer stock and other property;
• Stock-option income;
• Pensions and other retirement income;
• The benefit of loans with below-market interest;
• Foreign service allowances;
• Cost-of-living allowances;
• Housing costs paid for by an employer;
• The value of the use of employer-provided housing;
• Reimbursements for U.S. or foreign taxes;
• School tuition for an employee’s spouse and children;
• Home-leave allowances;
• Use of a company car for personal purposes;
• The value of domestic help provided by an employer;
• Reimbursement of moving expenses; and
• The value of employer-provided return on tax preparation services.

Compensation includes cash remuneration and the fair market value of property or services received. All compensation is taxable unless excluded by law.

Adjustments to Gross Income

Certain expenses are deductible even if the flat standard deduction (discussed below) is claimed. These deductions are subtractions from gross income to compute adjusted gross income. The following are some of the deductions available:

Employee business expenses to the extent reimbursed by an employer;

• Trade or business expenses other than employee business expenses;
• Individual retirement account (IRA) contributions up to the lesser of USD 5,000 in 2008 and 2009 (USD 10,000 for a spousal and traditional IRA) or compensation included in income. For taxpayers over 50, the amounts for 2008 and 2009 are USD 6,000 and USD12,000 respectively;
• Health savings account deduction;
• Unreimbursed qualified moving expenses;
• 1 1/2 of self-employment tax paid, for certain self-employed individuals;
• Keogh and certain other retirement plan contributions, within limitations, for self-employed individuals;
• Forfeited interest penalty on early withdrawal of savings from deposits;
• Alimony paid;
• Qualified student loan interest.

The concept of adjusted gross income (AGI) is important because several limitations on deductions and credits are calculated by reference to adjusted gross income.