Tax for Expats When Married to a Non-US Citizen

Tax for Expats When Married to a Non-US Citizen

If you’re married to a non-US citizen, you might realize your tax situation is a bit more complicated. After all, tax for expats can be complicated enough on its own, but then determining your filing status and what requirements affect you and your spouse can be downright confusing! Luckily, we’re breaking it down and helping you find the information you need in this article.

Claiming a Foreign Spouse On Your Tax Return

Determining whether it makes sense to include your non-resident spouse on your tax return may take some research and evaluation of the different filing options. You should know that in order to claim your foreign spouse on your taxes, though, they must have an Individual Taxpayer Identification Number (ITIN). This number is similar to a Social Security Number, but it’s only used for IRS purposes. You would request the ITIN with your “Married Filing Jointly” tax return and provide the additional requested information, like a Form W-7 and forms of identification.

Also to note, you are able to claim your foreign stepchild on your tax return if they fall within these qualifications:

  • Under 19 years old
  • Lives with the taxpayers
  • The taxpayer must provide more than half of the support for the child

The qualifying stepchild will also need to obtain an ITIN in order for you to take advantage of additional deductions.

If You File “Married Filing Jointly”

Many couples choose to file their tax for expats as “Married Filing Jointly” because of the deductions and credits they become eligible for by doing so. However, it’s something to think through before making the decision, as this filing status has additional implications for non-US residents.

First things first: a foreign spouse isn’t automatically able to file jointly on a US return. A statement must be prepared and attached to the first return, stating that the foreign spouse wishes to be treated as a US resident for tax purposes. This election means the foreign spouse will have a permanent filing obligation within the US unless and until both taxpayers are no longer US citizens or residents. There is one opportunity to revoke this election, though. If he or she revokes the election, the foreign spouse can never take the election again in the future, even if they remarry. It is not a decision to be taken lightly!

Here are the reasons why you would want to file jointly:

  • Child and Dependent Care Credit: This allows you to receive a credit on childcare costs incurred while you and your spouse are working
  • American Opportunity Credit: This credits you for making contributions made toward higher education
  • Earned Income Credit: This is a refundable credit based upon income level

Tax credits are a great way to save money on tax for expats, as they are a dollar for dollar reduction of your tax liability. You may also be able to use these credits if you file as “Married Filing Separately,” but it’s important to note that they would be greatly reduced. Generally speaking, your total income tax liability is lower in most cases filing jointly rather than filing separately due to tax rates and computation.

However, when you file jointly, it means you must report all worldwide income on your US tax return. Therefore if your foreign spouse has foreign-earned income (that may not otherwise be reported if you didn’t file jointly), it must be reported on your tax return – and it means it could be taxed by the US.

Additionally, when you file jointly, that opens up additional reporting requirements, such as the FBAR. Even if your spouse is in sole control of a foreign bank account, trust or business interest, among other forms of income, it means you’d need to report the foreign bank account holdings on the FBAR if the amounts exceed $10,000 at any point during the tax year.

If You File “Married Filing Separately”

If you file separately, it means that the tax liability falls solely on the individual filing the return. This means your spouse wouldn’t be liable for your tax obligations and vice versa. If you have a significant amount of itemized deductions that are subject to a percentage of Adjusted Gross Income (AGI), having a lower AGI is a good thing – so filing separately may be the best choice.

If your non-resident spouse has foreign-earned income that may not otherwise be subject to taxation in the US, filing separately can prevent that income from being reported and taxed by the IRS.

Ultimately, deciding whether or not you should include your foreign spouse on your tax return is something you should take very seriously. It’s wise to consult with a tax professional, so you can be sure the decision is the right one for your situation!

Married to a Non-US Citizen and Have Tax Questions?

We’re here to help you with all questions regarding tax for expats. Contact one of expat-expert CPAs or IRS Enrolled Agents today for the answers you’ve been looking for!

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