Tax implications of a foreign spouse of a US Citizen

If you are married to a non-American and you both live overseas, you may have wondered how this impacts your US tax filing situation, if at all. As with most concerns involving taxes, the more complicated they can make it, the better Congress likes it! This article will try to present your various tax obligations (and options) with regard to a non-American spouse as simply and precisely as possible.

Key factors to consider in tax planning

The decision on how to treat your foreign spouse for income tax purposes is a critical part of tax planning. These are important points to consider that can affect international taxpayers' filing status if married to a nonresident alien. When determining your tax strategy:

• the residency status of your spouse (whether they’re a nonresident alien, green card holder, or resident alien)
• your combined worldwide income and its sources
• potential tax treaty benefits between the US and your spouse’s home country
• long-term implications of your filing choices, as some elections can be difficult to reverse
• your spouse’s future plans for obtaining US citizenship or permanent residency

These factors all come into play when determining the most advantageous filing approach. Carefully weighing these factors will help you optimize your tax situation and avoid potential pitfalls.

Filing status options when married to a nonresident alien

When married to a foreign spouse, your filing status can make a significant difference to your tax obligations. Here are the main options available:

• Married Filing Jointly (MFJ): This is the default filing status for a US citizen married to a nonresident alien. While it’s straightforward to file, it often results in higher tax rates and the loss of certain tax credits and deductions.
• Married Filing Separately (MFS): This option requires making an election to treat the nonresident alien spouse as a US resident for tax purposes. Benefits include:
  - higher standard deduction ($27,000 for the 2024 tax year)
  - access to more favorable tax brackets and certain tax credits
  - the ability to combine incomes, which can be beneficial if the foreign spouse has little or no income
• Head of Household (HOH): To qualify for HOH status, you must be considered unmarried for tax purposes, have a qualifying dependent (usually a child), as well as meet other IRS HOH criteria.

Possibility #1: Spouse has a green card or is a resident alien

Imagine you are a US citizen married to a foreign spouse who holds a green card or qualifies as a resident alien. You may be thinking, can I file Married Filing Jointly (MFJ) if my wife lives abroad? Well, this status simplifies your tax filing process, as your spouse is treated similarly to a US citizen for tax purposes. Both of you are subject to US taxation on your worldwide income, including any income earned abroad.

You can choose to file your taxes jointly or separately. If you file Married Filing Jointly (MFJ), you benefit from a higher standard deduction ($27,700 for 2024) and potentially lower tax rates.

Additionally, you may qualify for tax credits like the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC), depending on your financial situation.

However, if filing jointly isn't advantageous (if your spouse has significant foreign income, for example), you can opt for Married Filing Separately (MFS). This option separates your tax liabilities but may limit access to certain deductions and credits.

Let’s say both of you qualify for the Foreign Earned Income Exclusion (FEIE). You could exclude up to $120,000 each (2024) of foreign income from US taxes, reducing your taxable income significantly.

A resident alien status significantly simplifies your tax filing process and provides more flexibility in choosing beneficial filing options. However, if your spouse resides in another country, you should consult tax treaties or a professional to address potential double taxation issues.

Possibility #2: Spouse is a nonresident alien (NRA)

Understanding NRA status and tax implications

When married to a nonresident alien spouse, your spouse's worldwide income isn't taxed by the US, but any US-source income must be reported. But, you may ask how does my foreign spouse have to pay US taxes? Essentially, you have two primary options. The key word here is treating. You can treat your spouse as a resident alien or as a nonresident alien for filing your taxes, each with its own implications, as we’ll explore below.

Option 1: Treating your spouse as a resident alien

The 6013(g) Election allows you to file jointly as Married Filing Jointly (MFJ) with your nonresident alien spouse, offering a higher standard deduction ($29,200 for 2025) and access to credits like the Earned Income Tax Credit (EITC). However, it mandates reporting both spouses' worldwide income on your US tax return.

To make this election, attach a signed statement to your joint tax return declaring one spouse as a US citizen or resident and the other as an NRA, with both spouses’ names, addresses, and Social Security Numbers (SSNs) or Individual Taxpayer Identification Numbers (ITINs).

For the first year, you must file jointly, but subsequent years allow for separate filing unless the election is revoked or terminated due to divorce, death, or other circumstances.

For example: Sarah, a US citizen, is married to Eduardo, an NRA with foreign income. They elect to treat Eduardo as a resident alien and file jointly, reporting their combined worldwide income, but benefit from lower tax rates and deductions available under MFJ status. If Eduardo qualifies for the Foreign Earned Income Exclusion (FEIE), his foreign income may be excluded from US taxation.

Option 2: Treating your spouse as an NRA

Making the decision for your nonresident alien spouse to file separately, lets you file as Married Filing Separately (MFS) status, keeping their foreign income off your US tax return. However, MFS has drawbacks: higher tax rates and limited access to credits and deductions. Note that the US-sourced income of the NRA spouse remains taxable.

Alternatively, if you meet certain conditions, such as paying more than half of household expenses and having a qualifying dependent – you may qualify for the Head of Household (HOH) status. HOH offers better tax rates and a higher standard deduction than MFS.

For example: John, a US citizen, is married to Adriana, an NRA with significant foreign income. To avoid including Adriana’s income on his return, John files as MFS and writes "NRA" where Adriana’s SSN would be required. While this simplifies their situation by excluding Adriana’s foreign earnings from US taxes, John faces higher tax rates due to the limitations of MFS status.

Some additional considerations

• If filing jointly or separately with an NRA spouse, they must obtain an ITIN if they don’t have an SSN, and here at Taxes for Expats, we can help you with this.
• Tax treaties between the US and your spouse’s home country may affect how their US-source income is taxed.
• Once you elect to treat an NRA spouse as a resident alien (6013(g) Election) for tax purposes, the decision remains in effect until formally revoked or terminated.

As you can see, each option has distinct advantages and drawbacks depending on your financial situation and goals.

Obtaining a Social Security Number (SSN) or ITIN for a foreign spouse

This begs the question, can I claim my wife who lives overseas? Your foreign spouse will need either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) for tax purposes, depending on their residency status and work authorization:

SSN: Available to those authorized to work in the US. Apply at a Social Security Administration office or US consulate using Form SS-5, providing original or certified documents verifying age, identity, and citizenship.

ITIN: For those who need a tax ID but aren’t eligible for an SSN. Apply using Form W-7, which must be submitted with your tax return. The application can be mailed to the IRS ITIN Operation or processed through a Certifying Acceptance Agent (CAA) to avoid surrendering original documents.

An ITIN is crucial for filing jointly or claiming your spouse as a dependent. The process typically takes about seven weeks, and the ITIN must be renewed every few years to remain valid.

Need expert tax assistance? Let us help!

Navigating international tax obligations can be complex, but this is what we do best. Our experienced team at Taxes for Expats specializes in helping Americans with foreign spouses understand and meet their tax obligations. Contact us today for a comprehensive and free tax consultation.