Foreign Spouse And Your Taxes

As international travel has become more and more accessible, and businesses send valued employees to work all over the world, many U. S citizens and resident aliens are meeting and marrying people from other countries. The people who are involved in these marriages face a number of special considerations, and are also faced with important decisions regarding how to go about filing their taxes.

Whether you are a citizen who was born and raised in the United States or are a U.S. resident alien who holds a green card or meets the substantial presence test of having had a substantial presence in the United States in the current and previous two years, the U.S tax rules apply to you in the same way. However, if you fall into either of these two categories and are married to a nonresident alien, you are required to choose between two possible “married” elections for your filing status on your tax return. Your two options are either to file separately or jointly.

As a citizen or U.S. resident alien married to a foreign national, filing jointly means that you are required to pay taxes for both spouses’ worldwide income.  By contrast, you can choose to file separately, which then requires the citizen/resident to pay taxes only on his or her worldwide income, and the non-resident spouse to file their own income tax return (also as married filing separate) for any income that they earn in the United States.

The difference between the two can be significant, so couples should carefully consider which filing status offers them the most advantage. Where couples filing jointly get the benefit of a lower tax rate, the higher standard deduction of $12,600 in tax year 2015 as compared to just $6,300 for those filing married but separate, and a $4,000 per person personal exemption, the joint status can end up working against you if the non-resident spouse earns a high income, and particularly a high income from outside of the United States. In these circumstances, it may be more beneficial to file married but separate and exclude that taxable income.

One of the reasons that non-resident aliens are not required to pay the 3.8% surtax that is required of higher income taxpayers with investment income. For those who are married filing jointly, the income threshold for this surtax is $250,000, while for those filing separately it is $125,000. Couples who are in this situation should take care in calculating the impact of this 3.8% tax when making their decision about how to file. The earned income tax credit is another issue that requires special attention from U.S. citizen or resident and non-alien couples. The only way this type of couple can get the earned income tax credit is to file a joint return.

When a couple makes the decision to use the married filing jointly tax status, they must both sign and attach the required statement of election on the first year that they file in that manner. In order to do so they will need to get an individual taxpayer identification number (ITIN) for the non-resident spouse, since they do not have a Social Security number.

Couples who are trying to determine whether filing jointly or separately need to take care in making their calculations, as there are a number of factors that need to be taken into account. 

For help in deciding which option is best for you, or if you need help in applying for an ITIN for the non-resident spouse, call our office for assistance at (407) 680-0900 to discuss your options.