Form 8689 

Department of the Treasury 

Internal Revenue Service 

Allocation of Individual Income Tax 

to the U.S. Virgin Islands 

Attach to Form 1040 or 1040-SR. 

Go to www.irs.gov/Form8689 for the latest information.

OMB No. 1545-0074

2023

Attachment 

Sequence No. 869

Name(s) shown on Form 1040 or 1040-SR (your tax return) Your social security number 

Part I Income From the U.S. Virgin Islands (USVI)

1 Wages, salaries, tips, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 1

2 Taxable interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3 Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 

4 Taxable refunds, credits, or offsets of local USVI income taxes . . . . . . . . . . . . . 4

5 Alimony received . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

6 Business income or (loss) . . . . . . . . . . . . . . . . . . . . . . . . . 6

7 Capital gain or (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 

8 Other gains or (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . 8

9 IRA distributions (taxable amount) . . . . . . . . . . . . . . . . . . . . . . . 9

10 Pensions and annuities (taxable amount) . . . . . . . . . . . . . . . . . . . . 10

11 Rental real estate, royalties, partnerships, S corporations, trusts, etc. . . . . . . . . . . . 11

12 Farm income or (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 

13 Unemployment compensation . . . . . . . . . . . . . . . . . . . . . . . . 13

14 Social security benefits (taxable amount) . . . . . . . . . . . . . . . . . . . . 14 

15 Other income. List type and amount 15

16 Add lines 1 through 15. This is your total USVI income . . . . . . . . . . . . . . . 16

Part II Adjusted Gross Income From the USVI

17 Educator expenses . . . . . . . . . . . . . . . . . . . 17

18 Certain business expenses of reservists, performing artists, and fee-basis government officials 18

19 Health savings account deduction . . . . . . . . . . . . . . 19

20 Moving expenses for members of the armed forces . . . . . . . . . 20

21 Deductible part of self-employment tax . . . . . . . . . . . . . 21

22 Self-employed SEP, SIMPLE, and qualified plans . . . . . . . . . . 22

23 Self-employed health insurance deduction . . . . . . . . . . . . 23

24 Penalty on early withdrawal of savings . . . . . . . . . . . . . 24

25 IRA deduction . . . . . . . . . . . . . . . . . . . . . 25

26 Student loan interest deduction . . . . . . . . . . . . . . . 26

27 Reserved for future use . . . . . . . . . . . . . . . . . . 27

28 Reserved for future use . . . . . . . . . . . . . . . . . . 28

29 Add lines 17 through 28 . . . . . . . . . . . . . . . . . . . . . . . . . . 29

30 Subtract line 29 from line 16. This is your USVI adjusted gross income . . . . . . . . . . 30

Part III Allocation of Tax to the USVI

31 Enter the amount from the total tax line on your tax return . . . . . . . . . . . . . . 31

32 Enter total of certain amounts from your tax return. See instructions on page 4 for amount to enter. . . 32

33 Subtract line 32 from line 31 . . . . . . . . . . . . . . . . . . . . . . . . 33

34 Enter the amount from the adjusted gross income line on your tax return . 34

35 Divide line 30 above by line 34. Enter the result as a decimal (rounded to at least 3 places). Do not 

enter more than 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . 35 .

36 Multiply line 33 by line 35. This is your tax allocated to the USVI . . . . . . . . . . . . 36

Part IV Payments of Income Tax to the USVI

37 Income tax withheld by the USVI . . . . . . . . . . . . . . . 37

38 2023 estimated tax payments and amount applied from 2022 return . . . 38

39 Amount paid with Form 4868 (extension request) . . . . . . . . . . 39

40 Add lines 37 through 39. These are your total payments to the USVI . . . . . . . . . . . 40

41 Enter the smaller of line 36 or line 40. Add this amount to the total payments line of your tax return. 

On the dotted line next to it, enter “Form 8689” and show this amount . . . . . . . . . . . 41

42 Overpayment to the USVI. If line 40 is more than line 36, subtract line 36 from line 40 . . . . . 42

43 Amount of line 42 you want refunded to you . . . . . . . . . . . . . . . . . . . 43

44 Amount of line 42 you want applied to your 2024 estimated tax . . . . 44

45 Amount you owe to the USVI. If line 40 is less than line 36, subtract line 40 from line 36 . . . . . 45

46 Enter the amount from line 45 that you will pay when you file your income tax return. Add this amount 

to the total payments line of your tax return. On the dotted line next to it, enter “Form 8689” and 

show this amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 64603D Form 8689 (2023)
[This page left blank intentionally]
Form 8689 (2023) Page 3 

Section references are to the Internal Revenue Code 

unless otherwise noted. 

Future Developments 

For the latest information about developments related to 

Form 8689 and its instructions, such as legislation 

enacted after they were published, go to 

www.irs.gov/Form8689.

Instructions 

Purpose of form. Use Form 8689 to figure the amount of 

U.S. tax allocable to the U.S. Virgin Islands (USVI). 

Who must file. If you were a U.S. citizen or resident alien 

(other than a bona fide resident of the USVI) and had 

income from sources in the USVI or income effectively 

connected with the conduct of a trade or business in the 

USVI, you may owe tax to the USVI. Your USVI tax 

liability is a percentage of your U.S. tax liability. 

▲!

CAUTION

Do not use this form if you were a bona fide 

resident of the USVI during the entire tax year, 

or were considered a bona fide resident of the 

USVI for the entire tax year under the special 

rules for the year of a move (see chapter 1 of Pub. 570, 

Tax Guide for Individuals With Income From U.S. 

Territories). 

Joint returns. If you file jointly and only one spouse is 

a bona fide resident of the USVI for the entire tax year, 

the resident status for both spouses and subsequent tax 

treatment is determined by the spouse with the higher 

adjusted gross income (AGI) (disregarding community 

property laws). File Form 8689 only if the spouse with the 

higher AGI is not a bona fide resident of the USVI for the 

entire tax year. 

Where to file. You must file identical tax returns with the 

United States and the USVI. If you are not enclosing a 

check or money order, file your original tax return

(including Form 8689) with the Department of the 

Treasury, Internal Revenue Service, Austin, TX

73301-0215 USA. 

If you are including a check or money order, file your 

original return with the Internal Revenue Service, P.O. Box 

1303, Charlotte, NC 28201-1303 USA.

File a signed copy of your tax return (with all 

attachments, forms, and schedules, including Form 8689) 

with the Virgin Islands Bureau of Internal Revenue, 6115 

Estate Smith Bay, Suite 225, St. Thomas, VI 00802. They 

will accept a signed copy of your U.S. return and process 

it as an original return. 

Amended returns. You can e-file Form 1040-X, 

Amended U.S. Individual Income Tax Return, using tax 

filing software. Go to www.irs.gov/Filing/AmendedReturn-Frequently-Asked-Questions for more information. 

Or, you can send your paper Form 1040-X to the IRS at 

the address in the Instructions for Form 1040-X. Send 

your Form 1040-X to the USVI at the address for the 

Virgin Islands Bureau of Internal Revenue under Where to 

file, earlier.

Additional information. See Pub. 570, available at 

www.irs.gov/Pub570.

Part I—Income From the U.S. Virgin Islands 

(USVI)

Source of income. The rules for determining the source 

of income are explained in sections 861 through 865 and 

937, Regulations section 1.937-2, and chapter 2 of Pub. 

570. Some general rules are: 

• The source of wages, salaries, or tips is generally where 

the services are performed. If you worked both in and 

outside the USVI, include on line 1 only wages, salaries, 

or tips earned while you were in the USVI. However, 

certain income earned while temporarily performing 

services in the USVI will not be considered USVI source 

income. For details, see De minimis exception, later.

Active duty U.S. Armed Forces. If you are a bona fide 

resident of the USVI and are stationed outside of the 

USVI, your military compensation will be sourced in the 

USVI under the Servicemembers Civil Relief Act (SCRA). If 

you are not a bona fide resident of the USVI but are 

stationed in the USVI, however, your military 

compensation will not be sourced there. For further 

details, see Pub. 570. 

Military spouses. If you are the civilian spouse of a 

member of the U.S. Armed Forces, work in the USVI, and 

retain a residence or domicile in one of the 50 states, the 

District of Columbia, or another U.S. territory, under the 

Military Spouses Residency Relief Act (MSRRA) your 

wages, salaries, tips, and self-employment income will 

not be considered income from the USVI. Under MSRRA, 

the military spouse must be in the USVI solely to be with 

their servicemember spouse who is serving in compliance 

with military orders. For details on MSRRA, see Pub. 570. 

• The source of interest income is generally where the 

payer is located. For example, interest from a certificate 

of deposit issued by a USVI bank or a USVI branch of a 

U.S. bank is USVI source income. 

• Generally, dividends are sourced where the paying 

corporation is created or organized. 

• Taxable refunds, credits, or offsets of local USVI income 

taxes include only nonmirror code income taxes.

• Alimony received from a person who is a bona fide 

resident of the USVI is USVI source income. 

• Except as provided in regulations, income that is from 

sources within the United States or effectively connected 

with the conduct of a trade or business in the United 

States is not income from the USVI. 

• The source of gains, profits, or income from the sale or 

disposition of real property (and any interest in real 

property) is generally where the real property is located. 

Personal property. The source of income from the sale 

of nondepreciable personal property is generally the 

seller’s residence. For example, if you are a U.S. citizen or 

resident alien and not a bona fide resident of the USVI, 

gain from the sale or disposition of personal property is 

generally treated as U.S. source. Income from the sale of 

inventory is generally sourced where the title to the 

property passes. However, in some cases, such as when 

the taxpayer produces or purchases the inventory within 

a U.S. territory, and then sells the inventory within the 

United States, source is based on allocation. See section 

865 for details. 
Form 8689 (2023) Page 4 

De minimis exception. This is an exception to the 

general rule for determining the source of income earned 

in the USVI. Generally, income from the USVI does not 

include compensation for services performed in the USVI 

if during 2023 you:

• Were a U.S. citizen or resident;

• Were not a bona fide resident of the USVI;

• Were not employed by or under contract with an 

individual, partnership, or corporation that is engaged in a 

trade or business in the USVI;

• Temporarily performed services in the USVI for 90 days 

or less; and

• Earned $3,000 or less from such services.

Part II—Adjusted Gross Income From the 

USVI

Lines 21 through 23. If you had USVI source selfemployment income, figure the amount to enter on each 

line by (1) dividing your USVI source self-employment 

income by your total (worldwide) self-employment

income, and (2) multiplying the total amount of each 

deduction that applies to you by the result in (1). 

Line 24. Enter the amount of penalty on early withdrawals 

from savings accounts in USVI banks or USVI branches 

of U.S. banks. The Form 1099-INT or Form 1099-OID you 

received will show the amount of any penalty you were 

charged. 

Line 25. Enter the total of your and your spouse’s IRA 

deductions attributable to USVI compensation or earned 

income. Figure the amount to report on line 25 by (1) 

dividing your USVI compensation or earned income by 

your total (worldwide) compensation or earned income, 

and (2) multiplying the amount of your IRA deduction by 

the result in (1). Figure the amount of your spouse’s IRA 

deduction the same way. 

Line 29. Include in the total on line 29 the amount of any 

other deductions included on the Archer MSA deduction 

line and the Total other adjustments line of Schedule 1 

(Form 1040) that are attributable to your USVI income. On 

the dotted line next to line 29, enter the name and amount 

of each deduction attributable to your USVI income. On 

line 29, enter the total amount of deductions attributable 

to your USVI income. If you or your spouse had an Archer 

MSA deduction on Schedule 1 (Form 1040), figure the 

amount to report on line 29 the same way you would an

IRA deduction (see Line 25 above). 

Line 30. This amount is your adjusted gross income.

Line 32. Enter the total of the amounts from:

Form 1040. 

• Earned income credit (EIC);

• Refundable child tax credit or additional child tax credit; 

and 

• American opportunity credit.

Schedule 2 (Form 1040).

• Self-employment tax;

• Social security and Medicare tax on unreported tip 

income;

• Uncollected social security and Medicare tax on wages;

• Household employment tax;

• Uncollected social security and Medicare or RRTA tax 

on tips or group-term life insurance from Form W-2, box 

12;

• Tax on excess golden parachute payments;

• Excise tax on insider stock compensation from an 

expatriated corporation; and

• Additional tax on excess contributions or accumulation 

from Form 5329.

Schedule 3 (Form 1040).

• Health coverage tax credit from Form 8885;

• Credit for repayment of amounts included in income 

from earlier years; 

• Net section 965 liability remaining to be paid in future 

years; and

• Other payments or refundable credits reported on line 

13z.

Part IV—Payments of Income Tax to the USVI

Amounts overpaid to the United States will generally not 

be applied to the amount you owe to the USVI. Similarly, 

amounts overpaid to the USVI will not be applied to the 

amount you owe to the United States. 

Line 46. Enter the amount you owe to the USVI that you 

will pay when you file your income tax return.

Credit for U.S. tax paid to the USVI. You can take a 

credit on your U.S. return for the U.S. tax allocated to the 

USVI only if you actually paid the tax to the USVI. To take 

the credit, you must complete Form 8689 and attach it to 

your Form 1040 or 1040-SR. Add line 41 and line 46 of 

Form 8689 and include the amount in the total on Form 

1040 or 1040-SR, Total payments line. On the dotted line 

next to it, enter “Form 8689” and the amount paid. 

Penalty for Failure To Furnish Information 

If you became or ceased to be a bona fide resident of a 

U.S. territory, you may be required to file Form 8898,

Statement for Individuals Who Begin or End Bona Fide 

Residence in a U.S. Possession. If you fail to provide the 

required information, you may have to pay a $1,000 

penalty for each failure unless you can show the failure 

was due to reasonable cause and not willful neglect. This 

penalty is in addition to any criminal penalty provided by 

law. For details, see the Instructions for Form 8898.