Do I have to declare my foreign husband's interest he earns in his savings accounts?

C

carmen blue

New Member
I'm an American citizen living in the UK and married to a Brit. We have two children (both US citizens). We've never lived in the States as a family so my husband has never had a green card - they don't even know he exists! We're thinking about selling our house here (I know I have to let the IRS know when I do my taxes next year but as our capital gains isn't much, I won't owe anything). If my husband puts the money into his own savings account (not joint), do I have to declare the interest at part of my worldwide income? We're hoping to travel later this year for a while and we'd like to live off that interest but I'm hoping that if it's not in a joint account, I won't have to declare it. Thank you!
 
How have you been filing your 1040 in the past?

If you jhave been filing as joint (MFJ) then you should always report his world income, including wages, interest, etc.

If, like most US citizens abroad, you have been filing married separately (MFS), then you don't report any of his income. If you file separately (he of course would not file anything), you are allowed $125K as capital gains from sale of home. So if your gain is less than this, then I would continue to file MFS. If your gain is more than this, themn you may have to begin filing jointly (which would now get you $250K gain tax-free) and report all his income, taking advantage of whatever credits, deductions, and exemptions, you are entitled to.

Did you realize that your 2 children, if you file 1040 properly, will get you a nice $2000 gift from IRS, even if you paid no US tax. This has been trur for about 5 years now.
 
Thanks, nelsona.

I have been filing MFS (1040 plus the 2555).

I thought I could exclude up to $250k as an individual. I found this:

Under 26 U.S.C. §121 an individual can exclude up to $250,000 ($500,000 for a married couple filing jointly) of capital gains on the sale of real property if the owner used it as primary residence for two of the five years before the date of sale.

Our overall gain will be about £160k, so I assumed I could take half of that (£80k), which is near $125k. But I thought I had a $250k exclusion so I'd be well under it. Not sure now...

How do I find out more about the $2k for the kids? Is that true even if we're living abroad?!

Also, the whole point of having an offshore account is so we (ie my husband) do to not have to pay tax on it. When we start his green card process, at what point should we either move the money out of the offshore account into a US account or tell the IRS about it? In other words, at what point is he required to pay US tax?

Thanks again! Cristin
 
Sorry. I had the numbers crossed. You do indeed have the $250 by yourself.

Child tax credit and additional child tax credit. Its on the 1040. I wouldn't have mentioned it if it was not available. Have you not been using software to do your taxes? This would have come out automatically. Relying on handwritten 1040, is like England relying on Referee to judge goals.

As to his account. Only when he gets GC will he need to report it.
 
Do the kids need Social Security Numbers to get the child tax credit, or will a W7 to acquire an ITIN be sufficient? My children are not U.S. citizens yet.
 
Are there any circumstances where a non-resident alien spouse's income (not effectively connected to the U.S. nor U.S. source) is taxable by the U.S. when Married Filing Separately (MFS)?

Is co-mingling funds a problem? Our income gets wired together to my wife's account, then to my account, then to our joint account (for reasons of pure banking trivia).
 
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