When everyone in the family is from the same country, claiming taxes is typically pretty straightforward. However; when you have a household with a range of nationalities or if you’re spouse is a non-citizen, filing your taxes can become a bit more complex. When tax season rolls around you may be wondering how to file taxes when married to a foreign resident. While the process can take a little more effort, you can still claim a non-resident spouse on your taxes, even if they don’t have a social security number.
Let’s walk through the process.
How to File Taxes When Married to a Foreign Resident
Step 1: Determine Residency Status
In order to start the process of claiming your non-resident alien spouse, you must first determine your partner’s residency status, which will either be “resident alien” or “nonresident alien.”
A resident alien is a foreign person who is considered a permanent resident of the country in which he or she resides but does not have citizenship. To fall under this classification in the US, a resident alien needs to either have:
- A current green card
- Or has had a green card in the previous calendar year
Your spouse may also qualify as a resident alien if they can pass what the IRS calls the substantial presence test. This test determines if a foreign individual was present in the United States for at least 31 days of the year, and at least 183 days during the three-year period which also includes both the current year and the two years immediately preceding it.
The substantial presence test can be a bit tricky in itself. To count the number of days correctly over the duration of the three-year period you don’t have to include each and every day. To help figure out if your spouse qualifies, there are substantial presence guides to help determine what days to include and what days not to.
If your spouse doesn’t meet any of these requirements than they are automatically considered a non-resident alien.
A nonresident alien is defined as a person who is not a U.S. citizen and does not pass the IRS Green Card Test or the substantial presence test used to determine tax status. All nonresident aliens must pay taxes on income they earn in the U.S.
Step 2: Obtain a SSN or an ITIN
Overall, resident aliens are taxed as if they were U.S. citizens. For resident-alien spouses you simply list them on your return along with their Social Security Number. But how do you file taxes if your spouse doesn’t have a SSN, or isn’t eligible for one? In that case your spouse will need to apply for an Individual Taxpayer Identification Number, or ITIN, from the IRS.
In order to do this, you must file Form W-7, which is the official application for IRS Individual Taxpayer Identification Number. If your spouse doesn’t qualify for an exception, along with this form, your spouse may also need to include original documentation or certified copies from the issuing agency to prove identity and foreign status. There is also the option of applying in-person using the services of an IRS-authorized Certifying Acceptance Agent.
Step 3: Decide to File Taxes Jointly or Separately
When filing taxes with a nonresident alien spouse, you have two filing options:
Option 1: File your spouse as a resident alien. With this option you can file a joint tax return which will increase your standard deduction. Keep in mind, with this option all your spouse’s worldwide income will be taxed by the US government. However, for Social Security and Medicare tax withholding purposes, the nonresident alien may still be treated as a nonresident alien. Refer to Aliens Employed in the U.S. – Social Security Taxes.
This option will be reflected as the Married Filing Jointly (MFJ) on your tax return. Typically, an MFJ filing status yields lower tax rates and deductions which are typically not available to other MFS filers. However, because your spouse’s entire income is subject to U.S. taxation it may also require your nonresident partner to jump through other informational reporting hoops.
Despite additional reporting, filing your nonresident alien spouse as a resident alien, is considered the most practical option, especially if your spouse doesn’t earn U.S. income or any other financial entanglements on U.S. territory. However, for this filing option, if your spouse does not have a social security number they MUST obtain the ITIN we spoke about above.
Option 2: File your spouse as a nonresident alien. If you choose this option, you cannot file a joint tax return. Instead, you will file under the status “married filing separately.”
In fact, Married Filing Separately (MFS) is considered the default filing status when a U.S. citizen marries a nonresident. It’s typically the smoothest, and easiest way to file with this type of situation, but it does come with the risk of higher tax rates if your income is above $75, 600. You may also lose out on the opportunity to qualify for certain tax credits. But, if you’re married to a nonresident and are without dependents, it’s also likely the only filing option you have.
If your spouse has no American income and will not be claimed as a dependent by anyone else for tax purposes you may be able to use the “Head of Household” filing status. However, only the American spouse will qualify for Head of Household and you must pay more than half the cost of maintaining a household, depending on the number of dependents or other family members outside of your nonresident spouse alone. Referring to Head of Household and Publication 501, Exemptions, Standard Deduction will provide the most up to date filing information. In either case, there are a variety of tax preparation services that help you make the best decision for both you and your family.
Step 4: Other Considerations
While nonresident alien spouses cannot claim standard deductions, you can claim certain itemized deductions if you can effectively show income that’s somehow related to U.S. trade and business for charitable contributions to the U.S. as well as casualty and theft loss from a federally declared disaster. To do this you’ll need to use Schedule A of Form 1040NR to claim these deductions.
Unfortunately, beginning on December 31, 2017, nonresident aliens were no longer allowed to claim personal exemption deductions for themselves, their spouse or other dependent family members. However, it’s still possible to claim certain adjustments to gross income if they qualify under any of the following:
- IRA Deduction
- Archer MSA Deduction
- Health Savings Account Deduction (see the Instructions for Form 8889)
- Student Loan Interest Deduction
- Moving Expenses (for members of the Armed Forces only)
- Self-Employed Health Insurance Deduction
- Self-Employed SEP, SIMPLE, and Qualified Plans
- Scholarship and Fellowship Grants excluded from income
If your nonresident alien spouse can prove some U.S. income (depending on how you file — either jointly or separately) there is the possibility of earning credit for foreign tax, child and dependent care, retirement savings contributions, child and adoption credits as well as minimum tax from the prior year. For more specific information involving tax credit, you can refer to Publication 519 through the IRS.
Qualifying Widow (or Qualifying Widower) is a filing status which allows you to retain the benefits of the MFJ status for up to two years after the year of a spouse’s death. However, in order to do so, you must have a dependent child in order to file under this option.
In the unfortunate event that your nonresident alien spouse becomes a widow, he or she may still be able to file as a Qualifying Widower if:
- Your nonresident alien spouse is a resident of Canada, Mexico, South Korea, or was a U.S. national,
- The American spouse died during one of the two prior tax years and your nonresident alien spouse have not remarried before the end of the current year, and
- Your spouse has a dependent child living with them
This filing status allows the Qualifying Widow or Widower to use the MFJ tax rates and to receive the highest standard deduction amount possible so long as if you do not itemize deductions. If a spouse dies during the tax year MFJ may still be used for that year and for the two years after that as long as the dependent is still living with the filer, no remarriage has occurred, and other requirements have been met. These include:
- Filing a joint return with your deceased spouse in the year he/she died
- Not remarrying in the full, two-calendar-year period after your spouses’ death.
- Having a child or stepchild (foster children do not qualify) as a dependent.
- The child living with you full-time except for some temporary absences.
- Paying more than half the total cost of keeping up the home during the year the dependent lives/lived with the Qualifying Widow/Widower, which includes all cost of living from food and rent, to home repairs and real estate taxes and other miscellaneous expenses.