Married Filing Seperately

Tried doing a search on this here in the forums but couldn't find the answer.

I'm a U.S. Citizen married to British wife.  Originally lived in the U.S. with the wife and she resided on a temp to U.S. Permanent Resident Visa . 

Move here to the UK about 7 years ago.  Within the first year we officially forfeited her U.S. Permanent Resident Visa and received receipt of the forfeiture (we knew we were living here permanently and had to surrender it due to this).

Now, I've been filing my taxes every year since moving.  Through the advice of the tax person I use he advised I file Married but Separate.  I do the standard forms for bank accounts, etc. that I have access to and have nothing other than a house jointly with the wife, work pension, and no investments in the U.S. or UK.

After reading some stories on here I decided to ask the specific question which would pertain to my situation.  Do I ever need to file income my wife earns if she is not a U.S. citizen or Resident?  Earnings include work, if she won the lottery, her pension, etc. 

I'm under the impression that her income is not part of my income so we don't need to file in the U.S. for her.  I'd like to make sure his is correct to avoid any shock now or in the future.

Regards

You can only include your spouse's income if you both elect under IR Section 6013(g).

Do I want to include my spouses income?  What I really want to know is, does her income stay her income for life while we are married with no affect on my filings?  I would think that it is in my best interest that her earnings remain hers.


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Do I want to include my spouses income?  What I really want to know is, does her income stay her income for life while we are married with no affect on my filings?  I would think that it is in my best interest that her earnings remain hers.


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He earned income remains her own and in your current way of filing it is not liable to US tax. FYI filing separately is the bets thing to do in most circumstances.

If you hold things jointly then you'd have to pay tax and do the informational forms for your share of the income or gains.

He earned income remains her own and in your current way of filing it is not liable to US tax. FYI filing separately is the bets thing to do in most circumstances.

If you hold things jointly then you'd have to pay tax and do the informational forms for your share of the income or gains.

We only have a house together.  What situations would we need to do something different on my taxes?  If we sold the house and made money, how would this change anything?  I'm thinking here I treat that gain like it was my own.  Is that correct?  In other words, having the house jointly changed nothing. 


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We only have a house together.  What situations would we need to do something different on my taxes?  If we sold the house and made money, how would this change anything?  I'm thinking here I treat that gain like it was my own.  Is that correct?  In other words, having the house jointly changed nothing. 


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Your wife's share of the house sale would not be US taxable.....your half would and you would only get $250k CGT allowance.

Thanks.  Good to know.


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Your wife's share of the house sale would not be US taxable.....your half would.....

I'd be interested as to your (or anyone's) cite for the 'half' in the above statement if the property is held as "joint tenants" under UK law.

The assumption is the individual is filing a 1040 as Married filing separate.

(UK) Joint tenants: "joint owners are regarded by the law as owning the whole of the property without any form of separate share or distinction between them"

(UK) Tenants in common: "the co-owners are regarded in law as having separate and distinct shares"

It's understandable if it's tenants in common and the share is 50%, but I'm looking for a cite for joint tenants and the 'half' referred to (and why it could not be 100% under IRS rules). Do the US definitions of the comparable 'joint tenants' and 'tenants in common' vary resulting in a different interpretation for the IRS? When filing MFS, are all jointly held assets valued at 'half' on all IRS forms? 

http://www.moerans.com/what-is-the-difference-between-joint-tenants-and-tenants-in-common/

I'd be interested as to your (or anyone's) cite for the 'half' in the above statement if the property is held as "joint tenants" under UK law.

The assumption is the individual is filing a 1040 as Married filing separate.

(UK) Joint tenants: "joint owners are regarded by the law as owning the whole of the property without any form of separate share or distinction between them"

(UK) Tenants in common: "the co-owners are regarded in law as having separate and distinct shares"

It's understandable if it's tenants in common and the share is 50%, but I'm looking for a cite for joint tenants and the 'half' referred to (and why it could not be 100% under IRS rules). Do the US definitions of the comparable 'joint tenants' and 'tenants in common' vary resulting in a different interpretation for the IRS? When filing MFS, are all jointly held assets valued at 'half' on all IRS forms? 

http://www.moerans.com/what-is-the-difference-between-joint-tenants-and-tenants-in-common/

By coincidence today I just filled in some paperwork for a house we are buying and we actually chose a 3rd option, to be "Beneficial Joint Tenants" where the definition on the paperwork from the lawyer states, "This means that you each own an equal share of the property and if one of you dies then the share of the deceased person passes automatically to the survivor"

However, that definition is not quite the same as that on the UK gov website, where as you point out it says nothing about owning 50% of the property.

https://www.gov.uk/joint-property-ownership/overview

Joint tenants
As joint tenants (sometimes called ‘beneficial joint tenants’):

you have equal rights to the whole property
the property automatically goes to the other owners if you die
you can’t pass on your ownership of the property in your will

If the OP is filing separately then he will only get the $250k CGT allowance and will report the gains on the portion of the home that he owned. The IRS follows the state rules on community property.....so would the UK rules be used? I think the default as far as both HMRC and the IRS is going to be 50:50 unless an explicit contract is drawn up to change that ratio.

I got advice on this recently, but you must get independant advice particular to your situation - what I say here is a guide only, and I'm specifically not commenting on the joint tenant or otherwise form of ownership.  1. Get the house professionally valued by a surveyor - not an estate agent.  it will cost £1000 or so.  2.  Get a lawyer to write the required documents to specifiy the present share of ownership.  3. Work out what the US citizen's capital gain would be if the house were sold.  4. If the capital gains tax is enough to be worth avoiding, the US citizen formally gifts a bit of the house to the other spouse - 10% was suggested. Gifts to foreign spouses are subject to an annual limit of $148,000 in 2016.  You may have to fill in US gift forms which may reduce your lifetime exemption.  5. The valuation is good for 3 months i believe, so if you do it in November, you can make one gift in 2016 tax year, and another in 2017 year without the expense of another valuation.  6.  Do it again at the end of 2018 until the value is transferred to the required extent.

Do this only with competent professional advice.

Interesting.  I'm going to look into this.


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You say your wife formally renounced her U.S. Permanent Resident Visa about 7 years ago.  Did you look into any issues regarding Expatriation Tax.  It may be worth checking this before you leap in any direction, and certainly before she does anything that will make her richer in the eyes of the IRS.  This may be painfull.  https://www.irs.gov/individuals/international-taxpayers/expatriation-tax
I suspect that there are other threads on the forum dedicated to this.