Should I add my foreign spouse to my US tax return?

It’s an important question and the answer can differ depending on your individual circumstances.

The decision on how to treat your foreign spouse for income tax purposes is an essential part of tax planning. We will cover what it means if your spouse has a green card or is otherwise considered a resident alien, and if your spouse is considered a nonresident alien for US tax purposes.

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Your spouse has a green card or is otherwise considered a resident alien

As long as your spouse has the status of a resident alien, they will be taxed as if they are a US citizen – even if living overseas. This means that for both of you, world-wide income is subject to US tax. Not only is earned income taxed for both of you, but also investment income – even if it was earned in a foreign country and the foreign spouse is the sole recipient.

You can use the ‘married filing jointly’ status when filing your tax return and may be able to receive a higher standard deduction and personal exemptions.

If your resident alien spouse is a citizen of another country and living in this country, you should look to see if the US has a tax treaty with the foreign country.

Your spouse is considered a nonresident alien for US tax purposes

When your spouse doesn’t have a green card nor a resident alien status they will be considered a nonresident alien. In this case, you have two choices:

Choice 1: Choose to treat the spouse as a resident alien for tax purposes

• This means that you’ll have to report all of your spouse’s worldwide income which will then be subject to US tax. For the first year you make the choice, you have to file a joint return. But in later years you can file joint or separate returns.
• If your spouse is a nonresident alien and you file a joint or separate return, your spouse must have either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).

Choice 2: Choose to treat the spouse as a nonresident alien for tax purposes

• This means that you’ll use the married filing separately status. However, if your spouse has no income from sources within the U.S. and is not claimed as a dependent of another U.S. taxpayer, you can claim an exemption for your NRA spouse. You need to be sure to obtain an Individual Taxpayer Identification number for your spouse before filing the return.
• Additionally, if you have other qualifying relatives living with you, you may be eligible to file as ‘head of household’ and receive a better standard deduction than if you filed a married, separate return.
• If you decide that the married, separate status has too many negative tax implications, you can always decide in the future to file a joint return.

Electing to File a Joint Return with a Foreign Spouse

Filing jointly with a nonresident alien spouse is a popular choice, and in certain circumstances, can give you a big boost in the standard deduction.

For example, a US citizen married to a Canadian citizen who doesn’t work – by filing separately you would only receive the standard deduction of $12,950. If you decide to treat your nonresident alien spouse as a resident and file jointly, you would receive the standard deduction of $25,900.

If you make the choice to elect a joint tax return, the following rules apply:

• You and your spouse are treated as US residents for all tax years the choice is in effect (until suspended or ended). However, for Social Security and Medicare tax withholding purposes, the nonresident spouse may still be treated as a nonresident.
• You must file a joint income tax return for the year you are making the election.
• Each spouse must report their entire worldwide income until the election has ended.

Generally speaking, neither you nor your spouse will be able to claim tax treaty benefits as a resident of a foreign country during the tax year you are filing jointly. However, tax treaty benefits may be available on certain specified income.