Tax on worldwide income?

[NYEXPAT]

We are contemplating a move to the USA. I am a retired American citizen and my young Peruvian wife will probably work at some point during our stay.

Two part question:

1. If my wife works as a green card holder, will she be taxed on US earnings only or worldwide income?

IF NO

2. Does the situation change if we file "married filing jointly"?

[Alan]

All US residents whether citizens, green card holders or on work visas are taxed on their worldwide income, and also have to file FBAR reports if they have signatory authority over overseas accounts amounting to more than $10k.

I have been all 3 of the above and am now a US citizen living abroad and still am taxed on my worldwide income.

[NYEXPAT]

Thank you for your rapid and informative answer!

[MichaelB]

Quote:

Originally Posted by Alan All US residents whether citizens, green card holders or on work visas are taxed on their worldwide income, and also have to file FBAR reports if they have signatory authority over overseas accounts amounting to more than $10k.

For some reason I thought it was $5K.

Just to compliment your post, green card holders are taxed on WW income even if they do not reside in the US - as is your case.

[Sue J]

I have recently been reading up on this as my daughter-in-law (married in April, 2017) is still a resident of China. My son has submitted the petition for her to get a green card but she does not have one yet.

What I've learned so far is that she can be treated as a resident alien for the purposes of filing married filing jointly. Her worldwide income is taxable, but there is a large exclusion ($102,100) using IRS form 2555. She only earned a few thousand when her Chinese income is converted to dollars so they won't have to pay tax on it.

Please comment or make corrections if I am not understanding this correctly.

[NYEXPAT]

Quote:

Originally Posted by MichaelB For some reason I thought it was $5K. Just to compliment your post, green card holders are taxed on WW income even if they do not reside in the US - as is your case.

FBAR is 10k, but it does not include crypto as that is considered property currently.

My wife does not have a green card at this point, only a 10 year multiple entry visa.

[ocean view]

Yes, taxed on WW income (as others have said) but you can also claim a foreign tax credit to mitigate double taxation on the non-US income. Not sure if the new tax bill changed any of the FTC rules. When it comes to FTC I always suggest consulting a professional.

[Alan]

Quote:

Originally Posted by ocean view Yes, taxed on WW income (as others have said) but you can also claim a foreign tax credit to mitigate double taxation on the non-US income. Not sure if the new tax bill changed any of the FTC rules. When it comes to FTC I always suggest consulting a professional.

Lots of discussion on an expat board I frequent and the conclusion was that the new tax laws did not change any rules on FTCs.

As mentioned above if your affairs are simple there should be no need to consult with a tax professional after the first year when there may be “split year” possibilities or complications in filing with the country you have left from.

After that first year software like TurboTax handles foreign income very well, including the FEIE credit for Foreign Earned Income, and foreign pensions where it guides you through creating a substitute 1099-R.

[Alan]

Quote:

Originally Posted by MichaelB For some reason I thought it was $5K. Just to compliment your post, green card holders are taxed on WW income even if they do not reside in the US - as is your case.

The FBAR limit is $10k but uses IRS arithmetic so be careful when calculating what you have as it is the sum of the max values of all accounts.

e.g.
Say you have $6,000 in a foreign bank checking account and move $4,000 to a savings account. You still only have $6,000 but the max value for the year in your checking account was $6,000 and the max in your savings account was $4,000 so you need to file FBAR.

[MichaelB]

Quote:

Originally Posted by Sue J I have recently been reading up on this as my daughter-in-law (married in April, 2017) is still a resident of China. My son has submitted the petition for her to get a green card but she does not have one yet. What I've learned so far is that she can be treated as a resident alien for the purposes of filing married filing jointly. Her worldwide income is taxable, but there is a large exclusion ($102,100) using IRS form 2555. She only earned a few thousand when her Chinese income is converted to dollars so they won't have to pay tax on it. Please comment or make corrections if I am not understanding this correctly.

What you wrote is correct. Just to add, once the couple chooses to treat the non-resident as a resident for tax purposes, they have to make that same choice in subsequent years. If they want to change it they need written permission from the IRS.