By Dan Miller, WCI Contributor

Much of the financial advice written on the internet focuses primarily on residents of the United States who are investing in the US. But if that doesn't apply to you, you may still be looking for financial or other investment advice. This is especially common in the medical field, which has a fairly substantial number of foreign residents. Often referred to as foreign medical graduates (FMGs), they may be wondering if non-residents can open brokerage accounts in the US.

 

An Overview of Non-Resident Eligibility

The good news is that no law specifically forbids non-residents from opening a brokerage account in the US or owning any specific stock, bond, or mutual fund. However, ever since the Patriot Act was passed in 2001, there are additional requirements for brokerage accounts and other financial institutions to know who their customers are.

This means that if you are not a US citizen and are trying to open a brokerage account, you may be subject to additional paperwork and/or scrutiny. You may be required to present proof of employment or your US visa as part of the application process. Additionally, some brokers may require that you fill out your application in person rather than online. These are just some of the security requirements that might be in place to allow these financial institutions to comply with all of the relevant regulations.

More information here:

Coming to America Without Knowing How This (Financial) World Works

 

Best Brokerages for Non-Residents: Checking Out Your Options

If you are not sure about the best way to open an investment or brokerage account in the US as a non-resident, you might be well-served to work with an international broker and/or a company that specializes in working with non-residents. That could help you navigate the requirements, paperwork, and other complications that come from opening a brokerage account in the US as a non-resident.

It also may be worth considering going with one of the larger brokerages—they may have more experience. Here are a few brokerages to consider:

non-resident brokerage account

  • E*Trade
  • Charles Schwab
  • Vanguard
  • TD Ameritrade
  • JPMorgan Chase
  • Zacks Trade
  • Interactive Brokers

 

Tax Implications and Withholding

Another thing to consider when opening and investing in a brokerage account is the potential tax implications. In many cases, it will depend on whether you are classified as a resident alien or nonresident alien by the US government. Often, nonresident aliens do not pay capital gains tax in the US, but they will be taxed in their home country. However, becoming classified as a nonresident alien requires you to meet certain specific criteria.

Additionally, if you are in the US for more than half the year (183 days), you may be subject to a 30% capital gains tax. This is common for many students and medical residents. If you are a resident alien, you are typically subject to the same tax laws as US citizens. If you're not sure of the tax implications of opening a brokerage account in the US, it is probably wise to speak to a tax professional, particularly one who specializes in non-residents.

More information here:

Landing a Physician Job in the US While on a J-1 Visa

 

Paperwork and Getting Started: Step-by-Step for Your US Brokerage Account

If you are considering opening up a US brokerage account as an investment option for a non-resident, you'll want to make sure to have all your paperwork in place before you get started. The exact paperwork that is required will vary depending on the brokerage that you choose. Your brokerage may require you to have a Social Security number as well as information about your visa or resident status.

Depending on your situation, you may also be required to fill out a Certificate of Foreign Status of Beneficial Owner for US Tax Withholding and Reporting (Individuals) form, known as a W-8BEN. The rules, laws, and tax scenarios for non-residents opening brokerage accounts in the US can be challenging to navigate. If you're not sure what the best steps are to move forward, consult with an accountant, tax professional, or trusted financial advisor.

 

The Bottom Line

If you are a non-resident coming to the US for medical school or residency and looking to know how the financial world works as a non-resident, it can be a bit overwhelming. While there are no laws against a non-resident opening a brokerage account or investing in stocks, bonds, or other investments, it can be more complicated than it is for US citizens. Make sure you do your research and understand the paperwork that might be required as well as the potential tax implications. Consult with a tax or other financial professional if you are not sure of the best path for moving forward.

 

In need of help on your financial journey? Over the years, The White Coat Investor has carefully curated a recommended list of professionals who have been thoroughly vetted and trusted by thousands of readers. Explore our handpicked selections today, and get the exceptional support you deserve.

 

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