Which US Tax Filing Status do you pick as an American Abroad?
Americans abroad are frequently paralyzed with fear on how to file their US tax return. It is well known that the information on the IRS’ website is difficult to navigate for Americans abroad to find information on what their tax filing obligations are and how to file, and then on top of that when you do find information relevant to “international taxpayers” the guidance and forms are very difficult for everyday people to be able to understand. So I thought I would put this simple guide together with the first step - filing status - that everyone needs to figure out before they start filling in the forms for filing their US tax return.
What is a filing status?
Simply put, filing status determines the rate at which you are taxed. Certain filing status have more favorable tax treatment to others. For example, a couple filing together will be taxed at a more favorable rate compared to someone who is single, this is because there are benefits for certain kinds of people that is ingrained in US tax law. A family with children, the elderly, unemployed, and disabled will be eligible for certain tax breaks or benefits that those who are on high incomes, working full-time, or with good health are not eligible for. Filing status is the same for all US citizens, regardless of whether they live in the US or not. This means that all of the filing statuses I’m about to go over are the same filing statuses that someone in the US will be selecting from. The only difference in this article is that I’ll point out the pluses and minuses to be aware of specifically for those residing outside the US.
Sometimes it’s really easy to figure out which filing status you should select, like if you’re single and not in a relationship, filing single makes sense for you. But for others, if you’re married to a non-US spouse, there might be a few filing statuses for you to consider. Also if you’ve had a major life event occur like giving birth to a child or experiencing a death in the family, selecting your filing status might not be so straightforward, and you will want to consider all your options before selecting the best filing status for your circumstances. You can also change filing status from one year to the next as long as you meet the eligibility requirements. Just as life circumstances change, your filing status will change with it.
Just a reminder here, that it is ok for you to select the status that lowers your US tax due (if any!), and it is actually legal for you to select the tax status that reduces or even eliminates any US tax. Some people crunch the numbers for various filing statuses before filing out the forms and submitting their tax return to the IRS in order to see which filing status will help reduce or eliminate their US tax liability completely. You are fully within your right to do that, so make sure you select the best filing status for your circumstances.
The other thing to consider when selecting your filing status, is that the IRS says you should select your filing status based on your circumstances on December 31 in the previous year. Let’s look at each filing status in more detail to help you figure out which one might be the best fit for your circumstances.
Using The IRS “What Is My Filing Status?” Online Form To Select Your Filing Status
If you want to save yourself hassle and not have to research which filing status you should select, you can use the IRS’ “What Is My Filing Status?” Interactive Tax Assistant to help you determine your filing status.
Others may want to better understand the detail of how the IRS determines your filing status and the IRS Interview Tips PDF below will give you an idea of what goes into determining your Filing Status.
5 Filing Status
There are 5 filing status options, and we’ll go into detail on each one below. The options are:
- Single
- Married Filing Jointly
- Married Filing Separately
- Head of Household
- Qualifying Widow(er) with Dependent Child
Single
This is the least advantageous tax filing status out of all the filing status options, but it’s the status that most people file from abroad. It’s relatively straightforward, you need to be unmarried, “legally separated”, or not in a partnership.
The IRS website also says “Legally separated” for this purpose means legally separated under a decree of divorce or separate maintenance. If you were “legally separated” on the day your spouse died during the tax year and you did not remarry on or before the last day of the tax year, you are also legally separated on the last day of the tax year.
Note that if you are single and have children or dependents, you may be eligible for the more favorable Head of Household status, which I go into more detail below.
Married Filing Jointly
If you are married to another US citizen or green card holder, then you will file married filing jointly. It is advantageous to file jointly since you both qualify for a higher level of exemptions and credits that will help reduce your US tax liability, if you have one. Very rarely, if ever, would you file married filing separately if you and your spouse have a US tax filing obligation.
I understand that many people who are married to non-US spouses do not want to report their non-US spouse to the IRS, and often the spouse themselves doesn’t want to get involved in US taxes and report if they can avoid it! But it’s worth thinking about filing married filing jointly if any of the following circumstances may occur:
- You sell your home outside the US and could face a large US capital gains tax. If you file married filing jointly, then your exemption increases from $250,000 to $500,000 for joint filers. So this could potentially eliminate or at least reduce your US tax liability in this circumstance.
- You sell shares in a business or stocks and would be subject to US capital gains tax, you’d qualify for double the 0% tax if filing married filing jointly.
- If you decide to move to the US and want to obtain a mortgage, it can be easier to qualify for a bigger mortgage if you have a few years of US tax returns on file in advance of your move.
This list isn’t exhaustive, but it’s to give you an idea of the reasons why you might want to file married filing jointly, even with a non-US spouse, to help eliminate or reduce your US tax liability. In the case of filing with your non-US spouse for the first time, you would first need to obtain an ITIN (Individual Taxpayer Identification Number) in order for them to file a joint US return. Keep in mind that it can take a while to get the ITIN, so be sure to plan your finances and filings well in advance before filing with your non-US spouses’ ITIN for the first time.
Married Filing Separately
I hear from many people who are married to non-US spouses that they do not want their US spouse reported or or subject to US taxes and reporting. I don’t blame them! Equally, the non-US spouse doesn’t want to be reported or subject to US taxation either, and they don’t need to be.
This filing status is basically the same as filing single, but oddly the filing threshold starts at $5, which is a substantially lower filing threshold compared to the single threshold of $12,950 in 2023. I don’t know why the filing threshold is so low, I only know that it was lowered starting in 2018. It might change in the future, but this is what it is for now. Just be aware that if you are on a very low income and you’re married to a non-US spouse, even if your income is lower than the $12,950 single filing status filing threshold, you’ll still be required to file, so watch out.
Additionally, I get a lot of reports from Americans abroad that they’re not eligible to e-file their return when filing married filing separately, but this isn’t true. There are some online tax prep software options that do not allow you to e-file if you are filing married filing separately, and this comes down to the tax prep software and what they do or don’t support in their software. There are many online tax prep software options that do allow you to e-file married filing separately, and you can read more about the options that exist on this blog post 2024 Free Online US Tax Preparation Software Options for Americans Abroad.
Head of Household
If you’re married or legally separated, one of you may be eligible to file as head of household if all of these apply:
- Your spouse didn’t live in your home for the last 6 months of the year
- You paid more than half the cost of keeping up your home for the year
- Your home was the main home of your dependent child for more than half the year
If you’re married to a non-US citizen and have dependents, you may want to consider filing with this status. The IRS website also says “You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you don’t choose to treat your nonresident spouse as a resident alien. However, your spouse isn’t a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as head of household.”
This filing status can be advantageous since you would qualify for a higher level of exemptions or better tax rates (but not as high as married filing jointly), so it’s worth being aware of the criteria and using this status if you qualify.
Qualifying Widow(er) with Dependent Child
Widows and widowers with one or more dependent children may be able to use the qualifying widow(er) with dependent child filing status.
Tax rates for qualifying widow(er) with dependent child and for married filing jointly are the same. They are the lowest tax rates and usually result in the lowest total tax.
Taxpayers can claim the qualifying widow(er) with dependent child filing status if all of the following conditions are met:
- You were entitled to file a joint return with your spouse for the year your spouse died.
- Your Spouse died in 2012 or 2013 and you did not remarry.
- You have a child for whom you can claim an exemption. This does not include a foster child.
- This child lived in your home all year, except for temporary absences.
- You paid more than half the cost of keeping up a home for the entire year.
Still not sure which filing status to use?
People who might be filing for the first time, going through some kind of spouse or partner transition (separation, divorce, death), or those who are transitioning with parental duties (birth, adoption, child turns 18 or no longer qualifies as a dependent if they enter the workforce) may still wonder which filing status they are. If you are still unsure, you should call the IRS to ask and they will be able to help you determine your filing status. Unlike in the past where people were on hold for hours to the IRS, this changed in 2023 and current wait times for calling the IRS are between 10–15 minutes. You can find more info on how to call the IRS for free or cheap from outside the US on this blog post.
Have a Suggestion to Improve IRS Processes or Customer Service?
If you have a suggestion on how the IRS can improve processes or customer service for people living outside the United States with a U.S. tax obligation, please consider submitting a suggestion on the Taxpayer Advocacy Panel’s website here: https://www.improveirs.org/submit-a-suggestion/
About the Taxpayer Advocacy Panel
The Taxpayer Advocacy Panel is a United States Federal Advisory Committee whose mission is to listen to taxpayers, identify taxpayers’ issues and make suggestions for improving IRS service and customer satisfaction. TAP is comprised of approximately 75 members who volunteer to serve a three-year term, and represent all 50 states, District of Columbia, Puerto Rico and a member to represent U.S. Citizens living or working abroad.
About the International Member of the Taxpayer Advocacy Panel
I am originally from Ohio, went to college in Wisconsin, and moved to London, United Kingdom to do my masters and upon completion was offered a job, and so I stayed. 17 years later, I am married to a Brit, run a UK company, and volunteer to help Americans abroad in tax advocacy work. I serve on the Special Projects Committee for TAP, which is the committee that handles international issues within the IRS. I am not an accountant, which makes me a minority on TAP, in addition to being the only member on TAP not in the United States, my unique perspective helps bring clarity to the issues, prioritize problems, and provide solutions.
My three-year Taxpayer Advocacy Panel term ends at the end of 2024. Recruitment for the next International Member of the Taxpayer Advocacy Panel has already begun. Consider applying to become the next International Member of TAP! Read more about what this voluntary role entails. You can contact Rebecca on tapinternational1 at gmail dot com