I’m getting married on Dec. 5th (provided everything goes smoothly) to an Australian Immigrant. She’s immigrating for the purpose of us marrying and plans to live and work here. However, she won’t be able to work here for a short time until the change of status work visa is approved.
So, we will be married in the 2015 tax year but she won’t have been working HERE for the 2015 tax year.
I’m a dope when it comes to taxes but from what I can glean so far, I have to file my 2015 taxes as ‘married’ (obviously) since I was married by the end of the tax year. If we file as ‘married filing jointly’ it looks like they’ll be able to tax her entire 2015 income at US rates even though she already paid taxes for the year in Australia.
But if I file as ‘married, filing separately’ and she doesn’t file for 2015…given that she didn’t earn any money in the US during 2015…would that be grounds to penalize her/us anyway?
Anyone have any thoughts/wisdom/experience they can impart on this matter?
An Australian resident in the US does not have to pay taxes a second time on income earned and taxed in Australia. Read the “Income Tax Treaty - 1982” linked on this IRS site.
(But it has to be taxed in Australia: while living in the US, I had an untaxed superannuation pension in Australia. Because it was untaxed in Australia, I had to pay income tax on it in the US.)
I know absolutely zilch about state taxes. But for federal tax purposes, here is what happens. You file a joint return and calculate the tax payable. In doing so you take full advantage of income splitting and married rates. Then you calculate the smaller of the two following quantitites:
the amount of Australian taxes paid
(total US income)/(total world wide income))*(US tax payable)
and this will become a tax credit subtracted directly from the US tax payable.
This will likely result in lower net taxes than if you file separately. Incidentally, the fact that she had no US income does not exempt her from filing a US tax return on her world-wide income, calculate her tax owing, then going through the above computation and subtract credit for foreign tax paid. Since AFAIK every civilized country has a higher tax rate than the US, this will almost certainly result in her actually owing no net tax. But it does not exempt her from filing FATCA (which is a Lovecraftian horror, of which I will say not more).
Best to see a tax accountant, one who is accustomed to dealing with foreign income.
The page I grabbed that from has some pretty good info, including the link to Publication 54, the tax guide for Americans living abroad. Basically, your wife will be treated as an American for tax purposes, so look for advice for overseas Americans.
There are some rules if your fiancee is eligible, such as if she was living outside of the US for a certain length of time during the year, but it sounds like she would meet those requirements.
Between the exclusion and foreign tax credit, it really reduces or eliminates taxes for many or most people.
Thank you everyone! I’m not an unintelligent person and I’ve been doing my own taxes since I was seventeen, but this stuff makes my head hurt.
We will be residing in Washington which is a community property state.
Washington doesn’t have state taxes, only federal.
We may actually need to go and see an accountant this year just to figure things out. I normally avoid them because I don’t see the point in spending nearly $150 to do something I’m fully capable of doing myself…but this time it might be wise.
TokyoBayer, I’m going to go through and look at that link. I’m also going to tag my fiancee on this thread. Thank you!
Still new…