Some US Taxpayers living abroad have a spouse and children whom are not US Citizens or Residents. Here are the rules and instructions for including and claiming them on your tax return.
Disclaimer: When it comes to foreign income and non resident families, there are a lot of complicated rules and inter-correlating tax issues to deal with. The following article is only meant as a general guide. Please consider further research or hire a tax professional to ensure tax code compliance and filing in the most favorable manner.
US Citizens Living Abroad – Claiming a Foreign Spouse
Note that you are not really “claiming” a spouse but including him or her on your tax return. This is true on any US Tax Return, not just returns with foreign earned income.
The IRS does give you the option of including your non resident spouse on your tax return to file married filing jointly. This is sometimes an advantage, as it allows for a higher standard deduction, higher income caps on many credits and deductions, and an additional personal exemption. Before claiming your foreign spouse, however, your should realize how this effects your taxes.
- When you include a non resident spouse, you both are considered US Residents for income tax purposes for the year that he or she is included on the return.
- You must file married filing jointly for the first year you make the choice, and then you can file married filing separately in subsequent years.
- When included, your spouse will be taxed in the US on all worldwide income.
- You give up the special instructions and restrictions for dual-status taxpayers.
- Neither of you will be able to claim the treaty benefits of being residents of your foreign spouse’s country (though there may be exceptions).
- Generally, you may still be treated as a nonresident alien for the purpose of withholding Social Security and Medicare taxes.
- If you become a non resident at any time during the tax year, the choice is suspended.
When you include a non resident spouse in one year, you are not required to include him or her in subsequent years. You have the option of how you would like to file each year.
How to Include a Foreign Spouse on Your Tax Return
You have to attach a statement to your tax return that is signed by both you and your spouse. According to the IRS, your statement must include:
- A declaration that one spouse was a nonresident alien and the other spouse a U.S. citizen or resident alien on the last day of your tax year, and that you choose to be treated as U.S. residents for the entire tax year
- The name, address, and identification number of each spouse. (If one spouse died, include the name and address of the person making the choice for the deceased spouse.)
Foreign Spouse and a Social Security Number
- You need to apply for a social security or tax identification number as appropriate. For a social security number, your spouse will have to fill out form SS-5 and provide additional documents to prove identity. If your spouse does not qualify for a social security number he or she can apply for an individual tax identification number by filling out Form W-7.
- If your spouse does not yet have a social security number or individual tax identification number, you can write “NRA” into the appropriate field in place of the number. Note that you will not be able to e-file your tax return unless your non resident spouse has a social security number or tax identification number.
For more information on claiming a non resident spouse you can visit the IRS’s page on treating a non resident spouse as a resident.
Expats with Non-US Citizen Children (Dependents)
To be claimed as a qualified child, a dependent must actually be a citizen or resident of the United States, Mexico, or Canada. The child must also have a social security or individual tax identification number. These can be obtained in about two weeks time, so plan accordingly.
In most cases, if your child does not meet the above criteria, they cannot be claimed.
Expat Taxes and Head of Household Status
A common error with the Head of Household Status is that taxpayers do not realize that they must have a qualifying dependent for whom they maintain a home. For tax purposes, maintaining your own home or the home for a girlfriend or foreign spouse does not qualify you for the status.
Foreign income filers do get some relief, however, if they are married to a non resident spouse and wish not to include her on the tax return. Remember that the taxpayer must have a dependent and meet all other Head of Household filing criteria.
For more information on foreign income earners claiming Head of Household Status, click here.
Foreign Income and the FBAR Return
Please be advised in all cases, that if you or your spouse has signing authority over foreign bank accounts that they likely must file the FBAR return. The penalties for not filing this return are quite large, so further research on the subject would be prudent.