Tax Exemptions for Diplomatic Visa Holders: Income, FICA, and Sales Tax

If you hold an A or G visa, your official salary from a foreign government or international organization is exempt from U.S. federal income tax under Internal Revenue Code Section 893, and it is exempt from Social Security and Medicare taxes as well. That is the core of the tax exemptions for A and G visa holders. The exemption stops at official compensation, though. Private earnings, capital gains once you cross a day-count threshold, and gift and estate taxes on U.S. assets all still apply, and the sales tax relief you may have heard about runs through a card program administered by the State Department’s Office of Foreign Missions with rules that vary by rank and by country.

Federal Income Tax on Your Official Salary

Section 893 excludes from gross income the wages, fees, or salary that a foreign government or international organization pays an employee for official services performed in the United States.¹

For a foreign government employee, three conditions have to be met:

You are not a U.S. citizen. A narrow exception exists for citizens of the Philippines.
Your work is similar to what U.S. government employees perform in foreign countries.
The foreign government grants an equivalent tax exemption to U.S. government employees stationed there.

Employees of international organizations face an easier test. You need to not be a U.S. citizen, and the pay has to be for official duties. Reciprocity does not apply.¹

The Green Card Trap

One situation catches people. If you already hold a green card and later take a diplomatic position, 8 U.S.C. § 1257 normally requires you to adjust from immigrant to nonimmigrant status. You can instead keep your permanent residency by signing a written waiver, but that waiver gives up all diplomatic privileges and immunities, including the Section 893 income tax exemption.² Keeping the green card means paying taxes like any other resident.

Social Security and Medicare

You do not pay FICA on your official compensation, and you do not earn credits toward Social Security or Medicare from that work. Section 3121(b) of the Internal Revenue Code excludes services performed for a foreign government from the definition of “employment” for FICA purposes, and separately excludes services performed for international organizations.³ For employees of a foreign government’s wholly-owned instrumentality, the same reciprocity and character-of-service conditions from Section 893 apply.

Self-employment tax follows the same pattern: a resident alien employed by a foreign government, international organization, or their wholly-owned instrumentality is not subject to self-employment tax on income earned from that position in the United States.⁴

The exemption tracks the employer, not the visa. If a dependent on a derivative A or G visa works for the mission itself, the FICA exemption stays. If that dependent takes a job with a private American employer, standard payroll withholding applies: 6.2% for Social Security and 1.45% for Medicare, like any other worker.

What You Still Owe

Private Income

Section 893 covers only official compensation. Anything you earn outside your diplomatic role, whether freelance work, rental income, or business profits, is taxable at the same federal rates that apply to everyone else, currently 10% to 37%. You report this non-exempt income on Form 1040-NR as a nonresident alien.⁵

Capital Gains and the 183-Day Rule

Capital gains are counterintuitive here. If you are present in the United States for 183 days or more during the tax year, which most A and G visa holders easily are, any U.S.-source capital gains that are not connected to a trade or business are taxed at a flat 30%, or a lower rate if a tax treaty applies. This rule catches you even though you are normally treated as an “exempt individual” who does not count days for the substantial presence test.⁶ These gains go on Schedule NEC of Form 1040-NR, not Schedule D.

Article 34 of the Vienna Convention itself carves out taxes on private income sourced in the host country and capital taxes on commercial investments from the general diplomatic tax exemption.⁷ Keeping records that clearly separate your official salary from investment dividends and capital gains is the only way to avoid a surprise from the IRS.

Gift and Estate Tax

This is where diplomatic visa holders often get blindsided. The Section 893 income tax exemption does nothing about federal gift or estate taxes, and the rules for nonresidents who are not U.S. citizens are much less generous than those for citizens.

On gifts, you owe federal gift tax on transfers of real property and tangible personal property located in the United States. The annual exclusion for 2026 is $19,000 per recipient.⁸ If your spouse is not a U.S. citizen, the annual exclusion for outright gifts to them is $194,000 for 2026, and there is no unlimited marital deduction and no lifetime gift tax credit to offset liability above that.⁹ Exceed those thresholds and you file Form 709-NA.

Estate tax is harsher. U.S. citizens get an exemption above $13 million. A nonresident non-citizen gets an effective exemption of $60,000 on U.S.-situs assets. If the fair market value of your U.S.-situated assets at death exceeds $60,000, your executor must file Form 706-NA.¹⁰ A diplomat who buys a home, accumulates investments, or holds significant personal property in the United States can cross that threshold quickly. Whether you are a nonresident for estate tax purposes turns on domicile, and A and G visa holders can potentially establish U.S. domicile depending on the facts.

Sales Tax Exemption Cards

Sales tax relief runs through a physical card issued by the State Department’s Office of Foreign Missions (OFM). The card’s colored border stripe tells vendors what you can buy tax-free:¹¹

Blue-striped cards provide full exemption from state and local sales, restaurant, lodging, and similar taxes.
Yellow-striped and other colors carry restrictions, often a minimum purchase amount or an exclusion for hotel and lodging taxes.

OFM evaluates the sending country’s treatment of American diplomatic personnel when deciding what level of exemption to grant, so two people in identical roles from different countries may hold cards with very different privileges.

Who Is Eligible

The following individuals are generally eligible for personal tax exemption cards, provided they are neither U.S. nationals nor considered permanent residents for purposes of the Vienna Conventions:¹²

Diplomatic agents: ambassadors, ministers, counselors, and other accredited diplomats at embassies
Administrative and technical staff handling communications, accounting, and other support functions at diplomatic missions
Consular officers and consular employees at consulates
Household family members: spouses and children ages 18 to 21, or 18 to 23 if accredited as students, who form part of the household

Employees and dependents at international organizations and at Permanent Missions to the United Nations or Organization of American States who have been granted diplomatic-agent-level privileges are also eligible. Mission cards, used for official purchases on behalf of the embassy or consulate, require the individual to hold an A or G series visa and be a principal member or employee of the mission.

Personal Cards vs. Mission Cards

Personal cards cover the cardholder’s own purchases at the point of sale. Mission cards cover official purchases for the embassy or consulate and must be paid for with a mission check or credit card. Cash and personal checks do not qualify for the mission card. Neither type authorizes exemptions for gasoline, utilities, or vehicle purchases, which follow separate procedures.

Using the Card

Present the card to the merchant before the transaction is finalized. The vendor verifies the card and records the tax-exempt number, then removes applicable taxes. Retail staff near embassies or international organizations tend to know the program. Elsewhere, they often do not. If a merchant refuses to honor the exemption, pay the full amount, keep the detailed receipt, and seek a refund afterward through OFM’s administrative process.

Misuse and Return

The card belongs to the U.S. government, not to you, and only the individual pictured on it may use it. Lending it to anyone, even someone who independently qualifies, is prohibited. Consequences of misuse can include invalidating and recalling the card, delaying issuance of new cards to the entire mission, and referral to law enforcement.¹³ When your assignment ends, the card must be returned to OFM. Missions that fail to return departed personnel’s cards may face a temporary suspension on new card issuance for their staff.¹²

Vehicle Purchases

Buying a vehicle tax-free does not work by presenting a card at the dealer. The seller contacts OFM’s Tax and Customs Program Office directly to verify eligibility, providing the buyer’s name, the type of purchase (official or personal), identification details, and the vehicle identification number. OFM then issues a letter confirming eligibility, and that letter is the only legal means of obtaining a tax exemption on a vehicle purchase or lease.¹⁴

After the purchase, missions and their members must register the vehicle with OFM’s Diplomatic Vehicle Office, which issues a registration card and federal license plates. The dealership handles it as an out-of-state registration rather than going through the local DMV. This covers cars, trucks, motorcycles, boats, and other motorized vehicles.

Property Tax

Real estate taxes run through their own OFM channel, separate from sales tax cards. OFM authorizes property tax exemptions on a reciprocal basis for real property owned by a foreign government, including embassy and consulate buildings, the head of mission’s residence, and staff housing and guest quarters.¹⁵

For an individual diplomat, the exemption is narrow. Only the head of a diplomatic mission or consular post qualifies, and only for their primary residence or the mission premises. Other mission members pay property taxes on personal real estate like anyone else. The process requires OFM’s written authorization before any local tax authority extends the exemption, and a head-of-mission residence exemption must be renewed in writing every twelve months.¹⁶ Charges for specific services like trash collection remain payable even on exempt properties.

Applying for a Card

Applications go through the Department of State’s electronic E-Government system, usually submitted by your mission’s administrative office. Processing generally takes about five business days.¹² You will need your full legal name, date of birth, a copy of your passport and A or G visa, and certification from an authorized administrative officer verifying employment and diplomatic standing. Every detail must match what is on file with the Department of State; inconsistencies delay the application.

1
Office of the Law Revision Counsel. 26 USC 893 – Compensation of Employees of Foreign Governments or International Organizations
2
Office of the Law Revision Counsel. 8 USC 1257 – Adjustment of Status of Certain Resident Aliens to Nonimmigrant Status
3
Office of the Law Revision Counsel. 26 USC 3121 – Definitions
4
Internal Revenue Service. Publication 519, U.S. Tax Guide for Aliens
5
Internal Revenue Service. Instructions for Form 1040-NR
6
Internal Revenue Service. The Taxation of Capital Gains of Nonresident Students, Scholars and Employees of Foreign Governments
7
United Nations. Vienna Convention on Diplomatic Relations, 1961
8
Internal Revenue Service. Whats New – Estate and Gift Tax
9
Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States
10
Internal Revenue Service. Some Nonresidents With U.S. Assets Must File Estate Tax Returns
11
U.S. Department of State. The Diplomatic Customer
12
U.S. Department of State. Sales Tax Exemption
13
U.S. Department of State. Diplomatic Tax Exemption Program
14
U.S. Department of State. Vehicle Tax Exemption Program
15
U.S. Department of State Foreign Affairs Manual. Tax Exemptions Accorded Foreign Government Representatives in the United States
16
U.S. Department of State. Real Estate Tax Exemption Procedures