Effectively Connected Income (ECI) - International Tax Implications for US Taxation

Effectively Connected Income (ECI)

Effectively Connected Income (ECI): When a foreign resident (non-US Person) has effectively connected income (ECI) then they will generally have to file a tax return. The tax return is referred to as a 1040-NR (NR means nonresident). ECI is taxed based on various factors, and deductions can be claimed.

For example, an NRA landlord of a US Property who elects to treat the income as ECI instead of the default FDAP (Fixed, Determinable, Annual and Periodic), can claim deductions associated with the income.

Let’s review the basics of ECI: