Selecting the best tax filing status is an important factor in tax planning. Making the decision how to treat your foreign spouse for US income tax filing purposes can mean either the loss or savings of significant tax dollars. While we all love to save tax dollars, saving them should not be the only factor considered in making the tax filing status decision. For example, if your nonresident alien (NRA) spouse plans to apply for a green card, and eventually to apply for US citizenship, it may be best to make a special tax election to treat the spouse as a US person for tax filing purposes and to file joint tax returns. The special election (under Section 6013(g) of the US Internal Revenue Code) will be discussed in a later blog posting.

Tax Benefits of Filing Head Of Household

If you do not elect to file a joint income tax return with your NRA spouse, you might qualify to file as head of household (HoH). The qualification requirements are set out later. Filing HoH generally means the income of the NRA spouse is not included on the tax return (a big benefit) and also results in a lower tax rate than if you file as married filing separately (MFS). In addition to lower effective tax rates, you can claim a higher standard deduction when filing HoH. For 2013, the standard deduction for MFS is $6,100 whereas for HoH, it is $8,950.

If you do not elect to treat your spouse as a US person, and you do not qualify to file HoH, you would have to file using MFS status. Many clients come to me having made the mistake and filed using “Single” status when they have a NRA spouse. You may NOT file as “Single” if you are married, regardless if your spouse is a NRA. Read more