If you are married to a non-US citizen and you both live abroad. you may be wondering how this would affect your US tax filing situation when it comes to determining whether you have a legitimate marriage, the IRS defers stating foreign law. A marriage in a foreign nation is usually acceptable for tax purposes in the United States. As an American citizen married to a non-US citizen, you will be facing one of these two situations whether your spouse has a green card or not. First, if your spouse is given a green card, is a naturalized US citizen, or is otherwise considered a resident alien. Even if you both live abroad, they will be taxed like US citizens if your spouse has resident alien status. This means that world income is taxed on both of you. Not only is each spouse’s labor income subject to US tax, but capital income earned abroad with a foreign spouse as the sole recipient is also subject to US tax. Fortunately, you can use the Married, Joint status to get a higher standard deduction and personal tax exemption for each person
Because the process is simple, your spouse will have no choice but to file their US taxes, whether they live in the US or abroad. This implies they must declare all their income, even if it is produced in a foreign country and received only by them, whether it comes from work, investments, or asset returns.
Second, if your spouse earns all their money outside of the United States, they don’t have to file in the United States if they aren’t a dependent of anyone in the United States, which may be the way you wish to follow as you can benefit from lower tax payment if you are living in a foreign country with lower tax rates than the USA. in this case, you have these options to fill:
- Married Filing Separately:
the default filing status for U.S. citizens who are married to a non-resident spouse is Married Separately (MFS). Although MFS submission status does not create an additional barrier to simple submission, it does incur a cost. The biggest obstacle to filing a separate marriage application for a resident spouse or U.S. citizen is the loss of potential tax relief and deductions and generally higher tax rates. If you are married to a non-resident spouse and do not have qualified dependents, this may be the only reporting status available to you.
- Filing Head of Household:
If you have dependents, a better option is to apply using your head of state filing status. To apply for head of household, you must have someone who is eligible for head of household status and must meet the requirements to use the head of a household status.
To use this submission status, you must be considered unmarried. You will need to keep a house for more than half a year or use the home of your parents and claim to be their dependent. Your parents do not have to live with you to do so. the advantages when marrying a non-resident spouse is a lower tax rate and additional deductions. however, the dependent must have a valid Social Security number or TIN to maintain this status.
- Married Filing Jointly:
The final alternative is to decide to treat your nonresident spouse as a US resident for tax purposes. If your spouse does not have permanent residence in the United States, you can declare them a resident alien for tax purposes. Making this decision allows you and your spouse to file a joint marriage application (MFJ) tax return. By filing an MFJ, you may be entitled to lower tax rates and deductions not available to MFS applicants. However, it may also be subject to other reporting requirements for your spouse as all your spouse’s income is taxed in the United States. If you are applying to an MFJ, you must complete Form FBAR and Form 8938.
In practical terms, this status is most advantageous if your spouse is not receiving income or has no accounts or investments that could result in negative tax consequences in the United States.
Another obstacle to choosing this option is the requirement to obtain an Individual Taxpayer Identification Number (ITIN)for your spouse in order to qualify for the exemption. With an SS-5 form, you can apply for your spouse’s SSN at any Social Security office, as well as at a US Embassy or Consulate in another country. If you are unable to obtain an SSN, you may apply for an ITIN, which is issued to nonresident alien spouses of US citizens in these situations. The first step in obtaining an ITIN and filing those taxes is to complete a W-7 form.