Married filing jointly - itemized deductions

[landmb 2]

I moved to the US in May on a K1 and subsequently married my US citizen husband. For several tax reasons related to the period when I was a non-resident alien, we are thinking it likely I will elect to be treated as a dual status alien for the first year. Hence, according to this IRS page, my husband and I will have to file married filing separately, and I will have to itemize deductions.

 

What I can't figure out is will my husband also have to itemize? According to this different IRS page:

"Certain taxpayers can't use the standard deduction:

• A married individual filing as married filing separately whose spouse itemizes deductions." 

So it looks like my husband will be required to itemize too. Or does my requirement to itemize not pass on to him in this case, as it is a special circumstance?

 

If the answer is yes, my husband would have to itemize, is there another option for me to avoid him itemizing? The first link above states:

"You cannot use the standard deduction allowed on Form 1040, U.S. Individual Income Tax Return. However, you can itemize certain allowable deductions."

So can I choose not to itemize but also not to use the standardized deduction? I.e. could I put $0 in line 40 of form 1040, allowing my spouse to use the standardized deduction on his return?

 

Thanks in advance for any help and I hope this makes sense. Just getting to grips with the US tax - very different from the relatively passive system in the UK!

 

[Cyberfx1024 7,978]

43 minutes ago, landmb said:

I moved to the US in May on a K1 and subsequently married my US citizen husband. For several tax reasons related to the period when I was a non-resident alien, we are thinking it likely I will elect to be treated as a dual status alien for the first year. Hence, according to this IRS page, my husband and I will have to file married filing separately, and I will have to itemize deductions.

 

What I can't figure out is will my husband also have to itemize? According to this different IRS page:

"Certain taxpayers can't use the standard deduction:

• A married individual filing as married filing separately whose spouse itemizes deductions." 

So it looks like my husband will be required to itemize too. Or does my requirement to itemize not pass on to him in this case, as it is a special circumstance?

 

If the answer is yes, my husband would have to itemize, is there another option for me to avoid him itemizing? The first link above states:

"You cannot use the standard deduction allowed on Form 1040, U.S. Individual Income Tax Return. However, you can itemize certain allowable deductions."

So can I choose not to itemize but also not to use the standardized deduction? I.e. could I put $0 in line 40 of form 1040, allowing my spouse to use the standardized deduction on his return?

 

Thanks in advance for any help and I hope this makes sense. Just getting to grips with the US tax - very different from the relatively passive system in the UK!

 

My advice and take it from experience only itemize deductions for a LARGER refund. If y'all are trying to itemize to nickel and dime stuff it is just not worth it at all. 

[landmb 2]

1 hour ago, cyberfx1024 said:

My advice and take it from experience only itemize deductions for a LARGER refund. If y'all are trying to itemize to nickel and dime stuff it is just not worth it at all. 

Yes, we know this which is why we don't want to itemize. The problem is to file as a dual status alien I must itemize. What I am trying to figure out is whether this means my husband must itemize too.

[Wuozopo 4,285]

Are you sure dual status is best for you? Have you worked out a joint return, taking the foreign earned income exclusion for your wages earned while resident in the UK?

 

 

[Suss&Camm 2,213]

4 hours ago, landmb said:

Yes, we know this which is why we don't want to itemize. The problem is to file as a dual status alien I must itemize. What I am trying to figure out is whether this means my husband must itemize too.

Why dual? Why don't you elect to be treated as a tax resident for the entire year. Then you'd file MFJ.

[landmb 2]

20 hours ago, Wuozopo said:

Are you sure dual status is best for you? Have you worked out a joint return, taking the foreign earned income exclusion for your wages earned while resident in the UK?

 

 

We believe it may be better for us due to PFICs that were divested during my non-resident period. It is difficult to figure out the tax burden/fines levied on the PFIC without a CPA (as I can't find any consumer tax software that will do the PFIC calculations), which would be an additional expense. Hence why we are trying to figure out how much the dual status would cost us in increased taxes. If only I have to itemize due to the dual status, it would be a manageable amount. If my husband and I would both have to itemize, the amount starts to get rather large so that it may be worth investigating the PFIC/CPA route. Do you know if my husband would have to itemize too?

[Wuozopo 4,285]

That does complicate things because there are so many rules about the gain and interest. Have you read all the reporting info and alternate method of calculation that does not require historical data.? 

 

I have no experience dual status and MFS filing. On face value I take it to mean if you itemize, then you spouse does too even though at this point neither of you  likely have much  to itemize. And anything is better than a poke in the eye, even if it's not the full standard deduction. The standard deduction of $12,700 on a joint return reduces your spouse's taxable income,  but the tax benefit is not $12,700 less in taxes, but just less income to calculate tax on. It may be an additional tax you have to swallow if the PFIC is going to cost more. The old lesser of two evils kind of thing. Ugh!

[landmb 2]

3 hours ago, Wuozopo said:

That does complicate things because there are so many rules about the gain and interest. Have you read all the reporting info and alternate method of calculation that does not require historical data.? 

 

I have no experience dual status and MFS filing. On face value I take it to mean if you itemize, then you spouse does too even though at this point neither of you  likely have much  to itemize. And anything is better than a poke in the eye, even if it's not the full standard deduction. The standard deduction of $12,700 on a joint return reduces your spouse's taxable income,  but the tax benefit is not $12,700 less in taxes, but just less income to calculate tax on. It may be an additional tax you have to swallow if the PFIC is going to cost more. The old lesser of two evils kind of thing. Ugh!

Yes it does complicate things! I am trying to wade my way through the PFIC rules and figure out how they relate to me but finding it very confusing. I think the fact that the PFIC was divested before I became a US person leads to me avoiding excess distribution, therefore not so punitive taxation on the gain, but I really can't be sure if I have interpreted the rules correctly. I don't know how anybody deals with PFIC forms and rules without having a tax background! In any case, it looks like PFIC filing is extremely difficult to do oneself, so we may have to hire a CPA if we want to investigate it. Not knowing the CPA fees or being able to understand the levels of taxation that will apply to PFIC, it is difficult to know which route to take! Like you say - lesser of two evils, and two evils which I do not fully understand!

 

Yes I have read a little about the MTM method, but I was not sure that this applied to me as you must do it from the first year of investment, which 2017 is not. However as this is my first year as a US person maybe 2017 is effectively my first year of investment? Add to this - I am not sure that my PFIC (stocks and share ISA) even qualifies for MTM.

Edited September 30, 2017 by landmb

[Wuozopo 4,285]

8 minutes ago, landmb said:

Yes it does complicate things! I am trying to wade my way through the PFIC rules and figure out how they relate to me but finding it very confusing. I think the fact that the PFIC was divested before I became a US person leads to me avoiding excess distribution, therefore not so punitive taxation on the gain, but I really can't be sure if I have interpreted the rules correctly. I don't know how anybody deals with PFIC forms and rules without having a tax background! In any case, it looks like PFIC filing is extremely difficult to do oneself, so we may have to hire a CPA if we want to investigate it. Not knowing the CPA fees or being able to understand the levels of taxation that will apply to PFIC, it is difficult to know which route to take! Like you say - lesser of two evils, and two evils which I do not fully understand!

 

Yes I have read a little about the MTM method, but I was not sure that this applied to me as you must do it from the first year of investment, which 2017 is not. However as this is my first year as a US person maybe 2017 is effectively my first year of investment? Add to this - I am not sure that my PFIC (stocks and share ISA) even qualifies for MTM.

 

I can't offer anything because I don't know what you owned, who you invested with, how much, when you sold, what date you are using as "US person" or any of that to try to wade through it or ask my wife who is really good at reading IRS jargon. And she calls the IRS all the time and works her way up the line to some decent help in very specialized areas.  But this time of year before tax filing season, there isn't a lot of good help available on the phone. They tend to tell you to make an appointment at an IRS office. She went through that recently but eventually got an answer without going to an appointment. You might try and appointment to sit down with somebody, spread out your paperwork, and see where it goes. 

[landmb 2]

37 minutes ago, Wuozopo said:

 

I can't offer anything because I don't know what you owned, who you invested with, how much, when you sold, what date you are using as "US person" or any of that to try to wade through it or ask my wife who is really good at reading IRS jargon. And she calls the IRS all the time and works her way up the line to some decent help in very specialized areas.  But this time of year before tax filing season, there isn't a lot of good help available on the phone. They tend to tell you to make an appointment at an IRS office. She went through that recently but eventually got an answer without going to an appointment. You might try and appointment to sit down with somebody, spread out your paperwork, and see where it goes. 

Of course, each case is unique! Thanks for your help, I wasn't aware the IRS would advise you of the rules over the phone or in person. It may be a good route to explore before - or instead of - hiring a CPA.

 

I noticed you are in Dallas - we are in DFW too. I'm finding it rather different from the UK but loving the Texas hospitality!