Are you an American living abroad and married, wondering whether your foreign spouse must file or pay US taxes? The truth is, there are advantages and disadvantages to filing US taxes separately or jointly with your foreign spouse. In the post below, we’re going to explain what you need to know about filing and paying US taxes with a foreign spouse.
Is Your Foreign Spouse a Green Card Holder?
The IRS explains on their website that as a Green Card Holder, you are required to report your worldwide income and file a US tax return. Even if you are living overseas, it’s the same law even if you are a US citizen abroad.
Generally, there is no difference between US Green Card Holders and US citizens. For example, if your spouse receives their Green Card, they’re considered a US tax resident and are subject to worldwide income tax, no matter where they live in the world. Plus, they can take advantage of expat tax benefits like the Foreign Tax Credit and Foreign Earned Income Exclusion.
So, in this situation, your foreign spouse – who is also a Green Card Holder abroad – can choose to file US taxes jointly or separately with you through the MyExpatTaxes tax software. In this particular scenario, your spouse may want to file jointly with you since this will give you both a higher standard deduction.
Is Your Foreign Spouse a Non-Resident Alien?
If your foreign spouse does not have US residency or citizenship, you can declare them as a non-resident alien for filing taxes purposes. From this, you both will have a higher standard deduction and pay less tax together.
Yet, if your foreign spouse makes all their income outside the United States and is not dependent on you (a US citizen), they are not obligated to file a US tax return.
Married Filing Jointly
If you choose married filing jointly on a US tax return, this communicates to the IRS that you will make your foreign spouse a US resident alien. This is a good idea if your foreign spouse has low-to-no income because it will reduce your tax liability.
Plus, it’ll help you and your spouse be able to apply for specific exclusions and deductions on your combined income (or, in some cases, your income).
However, when you choose the file jointly, you need to register your foreign spouse as a US taxpayer by obtaining a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
Getting a Social Security Number
Since the IRS does not issue Social Security Numbers, you will need to contact the Social Security Administration by using:
Form SS-5-FS, Application For A Social Security Card, which may be obtained from and filed with the Social Security Administration.
Or better yet, visit your local US embassy or consulate to apply!
Getting an Identification Taxpayer Identification Number
An ITIN is for people who are not eligible to have a Social Security Number but must file US taxes because they are either a resident or non-resident alien. This is perfect if you have a foreign spouse and you both want to file married filing jointly for your US taxes.
Yet, having an ITIN does not grant you access to work in the US or receive Social Security benefits.
Individuals need to file US taxes with an ITIN for the following reasons:
– If they are a student and need to report grant and scholarship receipts
– Are a US resident (foreigner) and need to claim dependents
– Filing a joint return if you have a spouse with a SSN
– Are depending on a spouse who is a non-resident alien visa holder
– You are claiming a tax treaty as a US non-resident
– If they are working as a contractor/contractor for a foreign company and need to report US-earned wages
Married Filing Separately
Here are five reasons why you could choose married filing separately as a US expat with a foreign spouse:
1. If you know, your foreign spouse will remain as a non-resident alien for the IRS. Thus, your spouse will not have to pay and file US taxes.
2. Your spouse makes a large amount of income that surpasses the typical FEIE limit (around $105,000).
3. Or your spouse will have significant assets or investments that may be liable for US taxes in the future.
4. If you already know you will owe $0 income taxes and do not need a higher standard deduction
5. You, as a US expat have significant investments and assets that can be gifted to your foreign spouse
We at MyExpatTaxes suggest you think long-term because it may be more helpful to exclude your spouse’s worldwide income from your US tax return. Of course, if you have any other questions about the married filing separately option, please reach out to us!
Head of Household
It is possible to file as head of household as an American abroad and keep your foreign spouse outside of US tax liability. The perks of this are having lower tax rates and a higher standard deduction.
To qualify for the head of the household status when filing US taxes, you need to:
- Have children who are your dependents with US citizenship and Social Security Numbers
- You pay for half or more of your household’s living expenses
Learn more about head of household tax information via the IRS page.
Filing US Taxes 101
If you have a US passport, take a look inside, and you’ll see a section that states all American expats and Green Card Holders must report their worldwide income to the IRS if they reach the tax filing threshold.
You need to file a US tax return if for example you’re a single filer making at least $12,000 per year. But, make sure that you convert your foreign money into USD to see if you reach the threshold. If you have another filing profile (married filing jointly, etc.), the threshold changes, and you need to know every year if you reach it. Learn more about filing taxes in our expat tax guide!
Foreign Spouse Pays US Taxes?
Most expats and their foreign spouses do not have to pay US taxes. But your foreign spouse could have to pay US taxes is if they file jointly with you, a US expat, and you both have combined worldwide income that surpasses all US tax exclusions and deductions from expat tax benefits like the FEIE, FTC, etc.
Have More Questions?
You may have more questions about US tax responsibilities for your foreign spouse. As always, our professional tax support is standing by to assist you with anything else you have. If you need further advice on investments and assets you both own and whether the country you live in has an agreement with the US – let us know!
Otherwise, file US expat taxes with our award-winning expat tax software today!