Will an Savings Account in US Bank Be Taxed in the U.S.?

In the United States, one common question among individuals who are not citizens but wish to open a savings account is whether they will be subject to taxation. The answer to this question depends on several factors, including the individual's tax status, the type of account, and the specific regulations of the bank in question. While there is no direct tax imposed solely for opening a savings card at an American bank, there are indirect implications that non-U.S. residents should be aware of.

To begin with, U.S. banks do not charge taxes specifically for issuing savings cards to foreign nationals. However, if the account holder earns interest on their savings, they may be subject to withholding tax under the Foreign Account Tax Compliance Act FATCA. FATCA was enacted by the U.S. government in 2010 to combat tax evasion by U.S. citizens holding accounts abroad. Under FATCA, foreign financial institutions are required to report information about accounts held by U.S. taxpayers to the Internal Revenue Service IRS. If a non-resident opens a savings account in the U.S., they may still be subject to a 30% withholding tax on any interest earned, unless they qualify for an exemption or a reduced rate under a tax treaty between their home country and the U.S.

This withholding tax is not unique to savings accounts. It applies to any investment income earned by non-U.S. persons in the U.S., such as dividends or interest from bonds. The IRS does provide some relief through various tax treaties, which often reduce the withholding tax rate or eliminate it entirely for residents of certain countries. For example, residents of Canada or Mexico might benefit from lower rates due to bilateral agreements with the U.S.

Another consideration is the reporting requirement for foreign account holders. Non-U.S. citizens who have a financial interest in or signature authority over a U.S. financial account must report this on Form 8938 if the aggregate value exceeds $10,000 at any time during the year. This form is separate from the FBAR Foreign Bank Account Report requirement, which mandates that U.S. citizens report foreign financial accounts exceeding $10,000. While the FBAR is not directly related to U.S. banks, it underscores the complexity of international tax compliance.

Recent news has highlighted cases where foreign account holders were unaware of these obligations and faced penalties for failing to report their accounts. For instance, a story published by CNBC in 2024 discussed how a European businessman was fined for neglecting to disclose his U.S. savings account. The article emphasized the importance of understanding both domestic and international tax laws before opening an account abroad. Similarly, a report by Reuters mentioned that some banks have tightened their procedures to ensure compliance with FATCA, which could affect the ease of opening an account for non-residents.

Despite these complexities, many non-U.S. residents continue to open savings accounts in the U.S. due to factors like higher interest rates compared to their home countries or the desire for asset diversification. Some banks, such as Citibank and Bank of America, offer specialized services catering to international clients. These banks often have dedicated teams that can guide clients through the process and help them understand their tax obligations.

It is important for non-U.S. residents to consult with a tax professional or legal advisor before opening a savings account in the U.S. A qualified expert can help assess the potential tax implications based on the individual's circumstances and nationality. Additionally, understanding the terms and conditions of the account, including fees and charges, is crucial to avoid unexpected costs.

In conclusion, while opening a savings card at an American bank does not incur a direct tax, non-U.S. residents should be mindful of potential withholding taxes on interest earnings and reporting requirements. By staying informed and seeking professional advice, individuals can navigate the complexities of international banking and taxation effectively.