# Tax Implications of UK/US citizen marriage



## citizen99 (May 3, 2012)

Hello,

I am a UK citizen married to a US citizen. We are both currently resident in the UK. Pretty complex and will depend on exact personal circumstances I think but:

1. Are there any direct tax implications of a US citizen being married to a UK citizen e.g. with property sales?

2. My US citizen spouse is required to file with the IRS as an expat living in the UK but is not currently caught by US tax - do we simply avoid filing jointly in order to avoid any possible requirement to pay US tax not covered under treaty rights?

3. Is there any tax you are obliged to pay that would not be excluded under assertion of treaty rights?

4. We are planning on remaining in the UK for the moment but would not rule out relocating to the US for a time; which would likely necessitate LPR and associated IRS filing requirements whether resident in the US or not.. if we returned to the UK what are the implications in terms of IRS filing?

5. Or.. do we need to think about tax planning and get hold of an accountant!?

It would be great to hear from anyone with previous experience of this sort of situation.

Whoever thought tax could be so much fun...


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## Bevdeforges (Nov 16, 2007)

For some of the details about a US citizen filing taxes from overseas, you should have your spouse take a look at our Expat Tax section: Expat Tax - Expat Forum For Expats, For Moving Overseas And For Jobs Abroad

But to answer your specific questions: 


> 1. Are there any direct tax implications of a US citizen being married to a UK citizen e.g. with property sales?


Other than the filing requirement, no. The one thing you might want to consider is how you make joint purchases of assets that might have income tax consequences for the US citizen. It may not be advisable to automatically purchase all property in joint name.



> 2. My US citizen spouse is required to file with the IRS as an expat living in the UK but is not currently caught by US tax - do we simply avoid filing jointly in order to avoid any possible requirement to pay US tax not covered under treaty rights?


"Earned" income (i.e. salary and similar) is pretty much safe, at least up to the FEIE level - currently about $92K. Means that you declare salary income, but then exclude the first $92K using form 2555. Most other forms of income that would incur taxes to the US on are then covered by the foreign tax credit - for taxes paid in the country in which you're living. This includes interest, dividends, other investment income, etc. There's an argument to be made for your spouse only having to declare one-half of any investment income that is received in joint title. But of that, s/he needs to be filing "married, filing separately."



> 3. Is there any tax you are obliged to pay that would not be excluded under assertion of treaty rights?


Some folks have reported having problems with UK retirement or other savings plans that are tax-free in the UK, but not recognized as such in the US.



> 4. We are planning on remaining in the UK for the moment but would not rule out relocating to the US for a time; which would likely necessitate LPR and associated IRS filing requirements whether resident in the US or not.. if we returned to the UK what are the implications in terms of IRS filing?


You, as the UK citizen, are not subject to IRS filings until and unless you become resident in the US. While you're both there, you can file "married, filing jointly" which is usually an advantageous filing status. When you return to the UK, you should be sure to file a "sailing permit" - which is the document that confirms that you are giving up your US residence (and makes sure you've settled your share of the taxes before you go). This can get complicated if you have a green card, because the IRS states that they may or may not recognize the surrender of a green card as the end of your tax liability.



> 5. Or.. do we need to think about tax planning and get hold of an accountant!?


Don't incur the expense of an accountant or other tax adviser until you need to. Depending on your circumstances, you may want to consider limiting your joint holdings (just to keep things "neat" for reporting purposes).
Cheers,
Bev


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## citizen99 (May 3, 2012)

Many thanks Bev - that is very useful.

I am interested to find out more about joint/sole property purchase and the tax implications of that if anyone has any further information. 

Would property purchased through a UK company be of interest to the IRS?


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