Tax for UK spouse

I am a UKC with a 2 year green card and my spouse is a UKC.

I am trying to gather and understand what the best way of going about this would be.

We plan to move back to the U.K permanently to reside, to be closer to family and eventually start our own.

If we work in 2017 and move back to the U.K to reside late 2017 (i.e dont work in the U.S in 2018)

Would we then file a joint tax return before April 2018 (in the U.K), should I wait until doing this return before giving up my green card?

For the next tax year would it just be my wife filing taxes on her own if I surrendered my green card. Does her UK income fall under a foreign earned income exclusion if she earns less than $50,000 a year.

Hi,

Good questions here!

Ideally you would give up your greencard at the end of this year, so you wouldn't have to file a return for 2018.

If you're both working, it may be advantageous to file separately, depending on each of your financial and employment situations.

Once you've moved, so long as you can prove than you are permanent residents in the UK, perhaps using utility bills, of if you spend at least 330 days outside the US in the 365 days after you've moved, you can claim the FEIE. You can actually both claim the FEIE for the days in 2017 after you move. Then for 2018, if your wife earns less than just over $100,000 she can claim it if she is still a US citizen or green card holder.

However - if she is paying UK taxes by then at a higher rate than she would owe US taxes, it may be preferable to claim the Foreign Tax Credit rather than the FEIE, giving her a $1 tax credit for every $1 of UK tax she's paid. This could give her excess US tax credits to carry forward.

I suggest you seek some advice from a US expat tax preparation firm. Google it, there are some great online ones who are specialists in this area and also reasonably priced.

Remember though, that US green card holders and citizens still have to file a US tax return from abroad even if they don't owe the US taxes because they are claiming an exemption, and the FEIE isn't applied automatically, but needs claiming on form 2555.

Good luck!

The foreign earned income exclusion (FEIE if you like acronyms) is elective. Since the stacking rule was introduced - way back in 2005 - one can increase the amount of excess foreign tax credits carrying forward to the next 10 years by NOT making this election. As your family status, income, US tax rates, UK tax rates & exchange rates for the next 10 years are all unknown unknowns; it is a much lower risk strategy NOT to make this election and increase the amounts of excess foreign tax credits that might be used in the next 10 years. It is also helpful if there is income that is currently taxable that does not qualify for the foreign earned income exclusion.

Separately, you'll want to do some pre-UK immigration planning; especially because you and your wife have different domiciles.

jj201 suggests you use Google to find one of the companies who make Google rich by paying for advertising. I suggest you do the thinking yourself. If you need advice, use a dually US/UK qualified tax adviser so who can advise you on both US & UK tax rules; and who you find through personal recommendation.