How to File Taxes as a U.S. Citizen Married to a Non-U.S. Resident

Introduction

If you are a U.S. citizen married to a non-U.S. resident, your tax filing situation may be more complex than that of a couple where both spouses are U.S. taxpayers. The U.S. requires its citizens to report and pay taxes on their worldwide income, regardless of where they live or where their spouse resides. This article will guide you through the tax filing options available, potential tax benefits, and compliance requirements to ensure you file correctly.

Determining Your Spouse’s Tax Status

Before deciding how to file your tax return, you need to determine your spouse’s tax status. Your non-U.S. resident spouse will fall into one of the following categories:

• Nonresident Alien (NRA): If your spouse is not a U.S. citizen and has not met the substantial presence test, they are considered a nonresident alien.
• Resident Alien for Tax Purposes: If your spouse meets the substantial presence test (i.e., they have been in the U.S. for at least 183 days over a three-year period, using a specific weighted formula), they are considered a resident alien for tax purposes.
• Electing to be Treated as a U.S. Resident: If your spouse is a nonresident alien, you may elect to treat them as a U.S. resident for tax purposes, which allows you to file jointly.

Your spouse's tax classification will affect your filing options and tax obligations.

Filing Options for a U.S. Citizen Married to a Non-U.S. Resident

As a U.S. citizen, you generally have three filing options when married to a nonresident alien:

1. Married Filing Separately (Default Option)

By default, if your spouse is a nonresident alien, you will file your taxes as “Married Filing Separately (MFS).”

Pros:

• You are not required to report your spouse’s income on your U.S. tax return.
• Your spouse is not required to file a U.S. tax return unless they have U.S. income.
• This filing status may be beneficial if your spouse earns substantial foreign income and would otherwise be subject to U.S. taxation.

Cons:

• You lose out on certain tax benefits such as the Earned Income Tax Credit (EITC) and certain education tax credits.
• You are generally taxed at a higher rate compared to filing jointly.

2. Married Filing Jointly (Electing to Treat Spouse as a U.S. Resident)

If you elect to treat your nonresident spouse as a U.S. resident for tax purposes, you can file a joint tax return (Married Filing Jointly). This is done by attaching a statement to your tax return under IRC Section 6013(g).

Pros:

• You qualify for a higher standard deduction (which is $29,200 for 2024).
• You become eligible for more tax credits such as the Child Tax Credit and Education Tax Credits.
• Your spouse does not need to meet the Substantial Presence Test to be considered a U.S. resident for tax purposes.

Cons:

• Your spouse's worldwide income will be subject to U.S. taxation.
• If your spouse has substantial foreign income, this may increase your overall tax liability.
• You may have additional foreign reporting requirements, such as FBAR (FinCEN 114) and Form 8938 (FATCA Reporting).

To make this election, your spouse will need to apply for an Individual Taxpayer Identification Number (ITIN) using Form W-7.

3. Head of Household (If You Have a Dependent)

If your spouse is a nonresident alien, but you have a qualifying dependent (such as a U.S. citizen or resident child), you may be able to file as Head of Household (HOH).

Pros:

• Lower tax rates compared to Married Filing Separately.
• You can claim a larger standard deduction ($21,900 for 2024).
• You may be eligible for additional tax credits.

Cons:

• Your spouse cannot be claimed as a dependent.
• You must have a qualifying dependent who resides with you for more than half the year.

Foreign Reporting Requirements When Married to a Non-U.S. 

Resident

If your spouse has foreign financial assets, you may have additional reporting obligations.

1. FBAR (FinCEN Form 114) – Foreign Bank Account Reporting

• If you have signing authority over a foreign bank account or your combined foreign account balances exceed $10,000, you must file an FBAR (FinCEN Form 114).
• This applies even if the account belongs solely to your non-U.S. resident spouse.

2. Form 8938 (FATCA Reporting)

• If you hold foreign assets worth over $200,000 (single filer abroad) or $50,000 (single filer in the U.S.), you must report them on Form 8938 under the Foreign Account Tax Compliance Act (FATCA).

3. Form 3520 (Foreign Trusts & Gifts)

• If your spouse gifts you over $100,000 from a foreign source, you must report it on Form 3520.
• If your spouse’s foreign pension is classified as a foreign trust, additional reporting may be required.

Tax Credits and Deductions Available

When filing as a U.S. citizen married to a nonresident alien, you may still qualify for various tax credits and deductions, including:

• Foreign Earned Income Exclusion (FEIE – Form 2555): If you live abroad, you may exclude up to $126,500 of foreign-earned income (for 2024) if you meet the Physical Presence Test or Bona Fide Residence Test.
• Foreign Tax Credit (FTC – Form 1116): If your spouse pays foreign taxes on their income, you may be able to claim a credit to offset your U.S. tax liability.
• Child Tax Credit (CTC): If your child is a U.S. citizen or resident, you may qualify for the $2,000 per child tax credit. However, you must have an ITIN or SSN for the child.

Steps to File Taxes as a U.S. Citizen Married to a Non-U.S. Resident

1. Determine Your Filing Status: Decide whether to file as Married Filing Separately, Married Filing Jointly, or Head of Household (if applicable)
2. Apply for an ITIN (if needed): If filing jointly, apply for an ITIN for your spouse using Form W-7.
3. Report Foreign Assets: Ensure you comply with FBAR, FATCA, and Form 3520 requirements.
4. Claim Tax Credits & Deductions: Use available credits such as the Foreign Tax Credit (FTC) or Foreign Earned Income Exclusion (FEIE) to reduce your tax liability.
5. File Electronically or by Mail: Submit Form 1040 and any additional tax forms by April 15 (or June 15 for expats).

Conclusion

Filing taxes as a U.S. citizen married to a non-U.S. resident can be complex, but the right filing status and tax strategies can minimize your tax liability. Whether you choose to file separately, jointly, or as head of household, it is essential to understand foreign reporting requirements and available deductions.

Tax Partners can help you navigate this process efficiently. If you need assistance, reach out to our experts for guidance on tax compliance, filing options, and international tax planning.

This article is written for educational purposes.

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.

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