Do Foreigners Pay US Tax on Treasury Bonds and CDs? (2026)

Here’s something that surprises almost every foreign investor: the US taxes your dividends at 30%, but taxes the interest from US Treasury bonds at zero.

Same country. Same account. Wildly different tax. A dividend and a bond payment can hit the same brokerage on the same day, and one gets a third shaved off while the other arrives whole.

The short version: for nonresident investors, most US interest — Treasury bonds, bank CDs, high-yield savings, many corporate bonds — is exempt from US tax. It’s the dividend that gets the 30% hit. If you’ve been avoiding US fixed income because you assumed it’d be taxed like your stocks, you’ve been leaving a genuinely good deal on the table.

Let’s break down what’s tax-free, what isn’t, and why the difference exists.

The 30% / 0% split

Quick answer: For nonresident aliens, US dividends are withheld at 30% (lower with a treaty). But most US interest income is exempt from US tax entirely — 0%. This includes interest from US bank deposits and CDs, and interest from Treasury and most corporate bonds under the “portfolio interest exemption.” The type of income matters more than the amount.

Two buckets. Wildly different treatment.

Dividends — the payments you get for owning a share of a company — are “FDAP income” in tax language, and the US withholds 30% at the source. A treaty and a W-8BEN can knock that down to 15% or 10%, but it never hits zero for a normal stock dividend.

Interest — the payments you get for lending money, which is what a bond or a deposit really is — mostly escapes US tax altogether for nonresidents. Not reduced. Gone.

Why does the US do this? On purpose. The US wants foreign money buying its bonds and sitting in its banks — it’s how the government and the banking system fund themselves. So Congress deliberately carved interest out of the tax net for foreigners. Dividends didn’t get the same treatment.

For you, the practical takeaway is almost the reverse of what US citizens hear. A US citizen often prefers stocks in a taxable account because qualified dividends and long-term gains get favorable rates. As a nonresident, the tax code quietly nudges you toward interest.

What’s actually tax-free

Quick answer: Bank deposit interest and CD interest are fully exempt — not even reported. Treasury bonds, notes, and bills are exempt as portfolio interest. Most US corporate bonds qualify too. What is NOT exempt: dividends (30%), REIT dividends (30%), and dividend-paying stock funds. The line runs between lending money and owning equity.

Look at the CD line for a second, because it’s the one that changes behavior. A US high-yield savings account or a bank CD pays a nonresident interest that the US doesn’t tax and doesn’t even report. The IRS’s own guidance calls this kind of bank interest “nontaxable and nonreportable” for most nonresidents. For a foreign saver who wants a safe US-dollar return, that’s about as clean as it gets.

Treasuries sit right next to it. When you hold a US Treasury bond as a nonresident, the interest qualifies as portfolio interest and comes to you untaxed by the US. You’re lending money to the US government and the US government isn’t taxing you on what it pays you back. Corporate bonds usually get the same treatment, as long as the bond is in registered form — which, in practice, almost all modern US bonds are.

Why interest gets a free pass and dividends don’t

The split isn’t random, and understanding it helps you predict how any new product will be taxed.

The line runs between lending and owning.

When you buy a bond or open a CD, you’re a lender. You handed over money and you’re getting it back with interest. Congress decided, decades ago, that taxing foreign lenders would just make US debt more expensive to sell abroad — so it exempted “portfolio interest” in 1984 and left bank deposit interest exempt on top of that.

When you buy a stock, you’re an owner. You own a slice of a US company, and when that company sends you a piece of its profits as a dividend, the US treats that as US-source income it’s entitled to tax. No exemption.

So the test for any product is simple: am I lending or owning? Bond funds and Treasury ETFs pass through interest — generally friendly. Stock funds pass through dividends — 30%. A “dividend ETF,” however safe it sounds, is still dividends.

The estate-tax bonus almost nobody mentions

There’s a second reason Treasuries are quietly excellent for foreign investors, and it connects to a trap we’ve written about before.

As a nonresident, if you die holding US assets, your US estate-tax exemption is a brutal $60,000 — far below the multi-million figure US citizens get. Your US stocks and brokerage holdings count toward it. (We covered this in detail in what happens to your 401(k) when you leave the US.)

Here’s the bonus: US Treasury bonds and bank deposits are generally exempt from that estate tax. So Treasuries do double duty for a foreign investor — the interest is income-tax-free while you’re alive, and the holding is largely outside the estate-tax net when you’re not. For someone parking a meaningful US-dollar sum, that combination is hard to beat.

US stocks get neither break. Same dollar, very different exposure, depending on whether you lent it or invested it in equity.

What this means for how you invest

None of this means “never own US stocks.” Stocks are where long-term growth lives, and capital gains on them usually aren’t US-taxed for nonresidents anyway. The point is subtler: the US tax code treats you differently than it treats a US citizen, and that changes the math on where you hold what.

A few honest implications:

If you want a safe US-dollar yield, a US CD, high-yield savings account, or Treasury is genuinely tax-efficient for you — often more so than for a US citizen, who pays ordinary income tax on that same interest. What’s boring for an American can be quietly optimal for you.

If you’re choosing between a dividend-heavy fund and a growth fund for a taxable account, remember the dividend fund is handing the US 30% (or your treaty rate) of every distribution, while a growth fund that pays little and appreciates instead defers — and the eventual gain usually isn’t US-taxed.

We’re not going to pretend this is the whole picture. Your home country almost certainly taxes this income too, and whether it gives you credit for US tax paid — or taxes interest your home country cares about even when the US doesn’t — is a question only a local professional can answer. We cover the US side. The other half of the equation lives in your own tax system.

Frequently asked questions

Do foreigners pay US tax on Treasury bonds?

Generally no. Interest from US Treasury bonds, notes, and bills qualifies as “portfolio interest” and is exempt from US tax for nonresident aliens. You still need a valid W-8BEN on file with your broker so they don’t withhold 30% by default.

Is CD or savings account interest taxed for nonresidents?

No. Interest from US bank deposits, including CDs and high-yield savings accounts, is exempt from US tax for most nonresident aliens — and generally isn’t even reported to the IRS. It’s one of the cleanest tax breaks available to foreign savers.

Why are dividends taxed at 30% but interest at 0%?

Because the US taxes ownership income (dividends) but deliberately exempts most lending income (interest) for foreigners, to keep its bonds and banks attractive to foreign capital. The test is whether you’re lending money or owning equity.

Can a non-US citizen buy US Treasury bonds?

Yes, usually through a brokerage account rather than the government’s TreasuryDirect platform, which typically requires a US SSN. Any broker that serves nonresidents and holds your W-8BEN can buy Treasuries for you.

Do I still need to file anything if my interest is tax-free?

Often not, since exempt bank and portfolio interest is generally nonreportable. But if a broker withholds tax by mistake, or you have other US-taxable income, you may file Form 1040-NR to reconcile. Keep your W-8BEN current to avoid accidental withholding.

New to all this? Start with whether a non-US citizen can open a brokerage account, then see how the W-8BEN and 30% dividend rule work. To actually buy Treasuries or open a US CD, you’ll need an account that serves your country — compare the best brokerages for non-residents.

Published: July 21, 2026 · Last updated: July 21, 2026 · Reviewed by the KoruVest Editorial Team