Don’t you just love summer? Vacations. Pool time. Grilling out. Longer days (the longest one of the year happens this week).
But, it also means the heat gets turned up. This week, a “heat dome” is supposed to settle over the U.S. Hope your AC is up to the task.
And, just like you keep an eye out for your Columbia, SC senior citizen neighbors during the cold months, maybe check in on them this week, too.
Other ways you can help the beloved Columbia, SC senior citizens in your life? Helping make sure they’re not being scammed. The mix of politeness, money in the bank, and a lack of technological awareness can put those in later years at a higher risk. The IRS is especially concerned as they’ve seen an uptick in identity theft and other scams targeting the elderly.
They’ve even issued some guidance to increase detection efforts for those vulnerable. Maybe take some time to go over it with Richland County people you care about in that age demographic.
Now for today’s topic. Let’s discuss what happens if you decide to abandon the summer heat wave in favor of an international address. But not just this summer — anytime in the near future.
Primarily, what happens with expatriate taxes when life happens while you’re abroad? I’m talking about the kind of “life” that involves an exchange of rings or the addition of car seats to your vehicle. So let me show you…
Marriage, Babies, and Expatriate Taxes: A Rejoice Tax Resolution, LLC Guide
“To travel is to live.” – Hans Christian Andersen
Living abroad can be a thrilling adventure, full of new experiences and opportunities. But let’s be honest, dealing with taxes isn’t one of the glamorous parts. Whether you’re marrying a charming foreigner or planning to expand your family overseas, understanding your expatriate tax obligations is crucial.
Let’s dive into some actionable steps to help you navigate these complexities and ensure you’re maximizing your tax benefits.
How marrying a non-U.S. citizen affects expatriate taxes
Finding love while living in another country is the stuff of romance. But when you agree to enter into a marriage vow with a native of said country, you’ll have more than new in-laws and cultural norms to face. Like any taxpayer, marriage changes your tax situation (sometimes with more benefits, sometimes not). But there are some unique considerations for expatriate taxes, starting with your filing status.
Filing separately (and also head of household?)
Typically, the IRS automatically classifies you as filing separately when marrying a non U.S. resident. If your spouse isn’t a U.S. citizen or resident and isn’t making a U.S. based income, you don’t have to account for them in your taxes.
However, if you do choose to maintain this classification, you might qualify for head of household status (if you have children with your spouse… more on that below). To lay claim to this classification, you’ll need to be paying more than half the cost of maintaining a household for your dependents (other than your spouse). This helps you lay claim to a higher standard deduction and more favorable tax rates.
Filing jointly
You could also elect to treat your nonresident spouse as a U.S. resident for tax purposes. This election lets you and your spouse file a Married Filing Jointly (MFJ) tax return, allowing you both to benefit from lower tax rates and deductions not available to MFS filers. For instance, filing jointly could allow you to claim a higher standard deduction, which is 29.2K for married couples in 2024.
But be aware, this will subject your spouse’s entire income to U.S. taxation and may bring additional reporting requirements, such as FBAR and Form 8938.
Practically speaking, MFJ status is mostly beneficial if your spouse has no income and no investment accounts that could trigger adverse U.S. tax implications.
If you choose this option and your spouse doesn’t have a SSN, they’ll need an Individual Taxpayer Identification Number (ITIN). Both of you must have either an SSN or ITIN.
A caveat…
If your spouse has U.S. income or is engaged in a U.S. trade or business, they might need to file Form 1040-NR.
Make sure when choosing a filing status that you determine which one benefits you the most. Filing jointly might give you a higher standard deduction, but filing separately or as head of household might protect your spouse from U.S. tax obligations.
Expecting a little expat?
If your family expands this year, you’ll want to account for how that affects your taxes in 2024 as well. Children born outside the U.S. still maintain their citizenship (as long as you get a Consular Report of Birth Abroad or CRBA). And because they’ll be U.S. citizens, they’ll be considered your dependent for tax purposes. And that means access to the typical credits and deductions that come with that.
– You can still lay claim to the Child Tax Credit (CTC), worth up to 2K per qualifying child in 2024. But you can’t lay claim to the refundable part (up to 1.7K) if you claim the FEIE (Foreign Earned Income Exclusion).
– If you choose not to claim the FEIE and opt for the Foreign Tax Credit instead, you may still qualify for a refund through the CTC. Effective until 2025, the refundable part of the credit rises from 1K to 1.4K.
– You can claim the child care tax credit if you pay a foreign caretaker to watch your child while you work. However, you can only claim this credit if you have some income left to be taxed in the U.S. after applying the FEIE. If the FEIE wipes out all your taxable income, this credit won’t be available.
– You can still contribute to 529 plans. Contributions to a 529 can grow tax-free, and withdrawals for qualified education expenses are also tax-free.
It’s never too early to start planning for your 2024 tax filing, especially when dealing with the complexities of expatriate taxes. If you take proactive steps now you can save time, stress, and money come January 2025.
I’m here to ensure you’re on track with all the necessary adjustments and optimizations:
While you’re enjoying life outside the U.S. bubble, I’ll be here, watching out for your interests inside it.
Helping you save,
Akuathayre Snell