Duel citizenship and Taxes

[Miss Natalie 0]

Hi there

I have a weird question (and sorry if this has been answered before, I did search the forums).

So the Hubs and I are moving to Australia permanently later in 2015. We do not plan to return to live in the USA, but one never does know where life will take you.

I am considering getting my US citizenship, mainly so I won't need to reenter the US every year to keep my PR valid. And while I know I can have duel citizenship (I do not wish to renounce my Australian citizenship) I have read on several occassions that as an US citizen, I will be required to file taxes with the IRS every year despite living and working in Australia exclusively, (even if I'm not making a US income.)

Can any one confirm if this is correct?

thanks Y'all!

[Ontarkie 13,925]

Yes you would have to file. But as your husband is a USC he will be filling anyways so it really doesn't matter.

I do want to mention that you coming back every year does not secure your green card.

[JohnR! 5,495]

You'd be required to file US taxes as a LPR as well, so you'd be better off getting your citizenship and not worrying about trying to keep your GC.

[Miss Natalie 0]

Yes you would have to file. But as your husband is a USC he will be filling anyways so it really doesn't matter.

I do want to mention that you coming back every year does not secure your green card.

Ok, thanks for the reply.

Why would my husband need to file if he is not making a US income though? He'd be paying taxes in Australia...

Also, I was under the impression that my GC was still valid unless I left the country for more than 12 months. So this is not the case?

Sorry if I sound daft! It's been a while since I dealt with visa stuff. I forgot how confusing and overwhelming it gets

[Ontarkie 13,925]

Your GC is for living in the US. If you move and take up residency back in Australia then you are no longer living in the US, so no longer entitled to the gc.

And yes your husband still needs to file a tax return with the IRS, he may not need to pay anything depending on income and/or tax treaties if that applies.

[JohnR! 5,495]

As a USC your husband will have to file US taxes and include you, as his wife. You wil be included in his taxes as well.

However filing taxes and paying taxes in the sense of being taxed twice are different things.

You can find out more in the links:

http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z

http://www.irs.gov/Businesses/International-Businesses/Australia-Tax-Treaty-Documents

Ok, thanks for the reply.

Why would my husband need to file if he is not making a US income though? He'd be paying taxes in Australia...

Also, I was under the impression that my GC was still valid unless I left the country for more than 12 months. So this is not the case?

Sorry if I sound daft! It's been a while since I dealt with visa stuff. I forgot how confusing and overwhelming it gets

[kzielu 1,147]

Ok, thanks for the reply.

Why would my husband need to file if he is not making a US income though? He'd be paying taxes in Australia...

Also, I was under the impression that my GC was still valid unless I left the country for more than 12 months. So this is not the case?

Sorry if I sound daft! It's been a while since I dealt with visa stuff. I forgot how confusing and overwhelming it gets

Have your husband look into his passport, somewhere around very last pages of it... Yours will look exactly the same.

[Buckyball 22]

Yes, as a citizen you have to file a tax return on your world wide income. It's very annoying, though.

If you have to pay anything in the U.S. depends on the tax rates which are usualy higher everywhere else compared to the U.S. So you should end up with zero taxes in the U.S. Moreover you can claim foreign household deduction etc.

[Miss Natalie 0]

Hi again!

I have a few more questions about these foreign taxes once I'm a US Citizen living permanently in Australia.

Firstly, The Tax Treaty exclusion threshold (which I believe is now around $100000), is that for each person, or is it the max if we're filing jointly?

Also, If I wasn't a USC and forfeited my LPR status, would my husband still have to include me in his US filing from Australia?

We are trying to work out exactly what obligations we'll have in various scenarios. (fun way to spend a Saturday night LOL)

[aaron2020 11,651]

Hi again!

I have a few more questions about these foreign taxes once I'm a US Citizen living permanently in Australia.

Firstly, The Tax Treaty exclusion threshold (which I believe is now around $100000), is that for each person, or is it the max if we're filing jointly?

Also, If I wasn't a USC and forfeited my LPR status, would my husband still have to include me in his US filing from Australia?

We are trying to work out exactly what obligations we'll have in various scenarios. (fun way to spend a Saturday night LOL)

As a USC, the tax treaty will not apply to you. You will be treated as a USC. If your were only an Aussie living in AU - not a USC & not an LPR - then the tax treaty would apply to your US income. Your USC husband's income in AU will not fall under the treaty either since he will be living in AU.

If you give up your LPR status, your husband is only obligated to report his income.

PS. You can not simply visit the US every year to keep your LPR status. Once you claim residency on your AU taxes, you will lose your LPR status for claiming a foreign residency.

Edited March 1, 2015 by aaron2020

[Miss Natalie 0]

As a USC, the tax treaty will not apply to you. You will be treated as a USC.

If you give up your LPR status, your husband is only obligated to report his income.

PS. You can not simply visit the US every year to keep your LPR status. Once you claim residency on your AU taxes, you will lose your LPR status for claiming a foreign residency.

Wait, the Tax treaty doesn't apply?? But I'll be a dual citizen of AU and US. Now I'm totally confused :S. Am I using the incorrect terminology? I'm referring to the clause that prevents double taxation.

[aaron2020 11,651]

Wait, the Tax treaty doesn't apply?? But I'll be a dual citizen of AU and US. Now I'm totally confused :S. Am I using the incorrect terminology? I'm referring to the clause that prevents double taxation.

The tax treaty applies if a person was a citizen of only one of the two countries. If you are a citizen of both, then each sovereign has the right to tax you as its citizen.

http://en.m.wikipedia.org/wiki/Double_taxation

It is worth noting in both Australia and outside, that the DTAs are designed to eliminate double tax, rather than introduce tax. However, if an Australian resident is a U.S. citizen they may be required to pay U.S. tax.

[Miss Natalie 0]

As a USC, the tax treaty will not apply to you. You will be treated as a USC. If your were only an Aussie living in AU - not a USC & not an LPR - then the tax treaty would apply to your US income. Your USC husband's income in AU will not fall under the treaty either since he will be living in AU.

If you give up your LPR status, your husband is only obligated to report his income.

PS. You can not simply visit the US every year to keep your LPR status. Once you claim residency on your AU taxes, you will lose your LPR status for claiming a foreign residency.

Thanks for adding the edits. That made it a bit clearer for me

You say my husband's AU income will not fall under the treaty either, but he will still need to file a US tax return, so would he be paying taxes in both AU and the US?

Not sure getting my citizenship is looking all that attractive anymore...

[JimmyHou 610]

Aaron's advice is excellent and the OP asked some good questions.

You often read on VJ and other sites that the US allows or recognizes dual citizenship; this isn't really correct.

Please note that US law doesn't actually "recognize" dual citizenship, but it doesn't disallow it either. The law is silent on the subject, so the US "tolerates" dual citizenship but sees dual citizens as US citizens only. In fact, the US used to compel immigrants (somewhat on a case by case basis) to renounce their old citizenship before the oath ceremony, but a Supreme Court ruling ended that practice.

In other words, the US won't penalize you for carrying another passport, but they will assume you are only an American for all issues related to the US; this includes taxes and travel into and out of the US. That's why the tax treaty doesn't apply to you, because in the US government's eyes, your maintaining Australian citizenship gives you no legal status beyond any other American. Of course, there are huge benefits to maintaining dual citizenship that do not pertain to dealing with the US government.

[ExPatty 502]

I assume others above already mentioned that if you move to a country that in general as higher taxes--as I assume Australia does--you will get a tax credit in the US when you file taxes for taxes already paid. In short: it is not like you will typically end up paying more taxes even though you are still *filing* US taxes forever. There are some rare exceptions; e.g. If the us has a tax on something that Australia doesn't you could end up paying extra. I think for most people this is unusual and the filing us taxes is more just a pain in the rear than generally an extra financial burden.