Do I need to report my foreign spouse's income?

Whether you need to report your foreign spouse's income depends on your filing status and whether your spouse is a US person. If your spouse is not a US citizen or resident alien, they are considered a nonresident alien (NRA) for tax purposes, and you generally have three filing options.

First, you can file as Married Filing Separately, which means you only report your own worldwide income. Your NRA spouse does not need to file a US return, and their income is not reported on yours. However, this filing status often results in a higher tax rate and you lose certain deductions and credits.

Second, you can elect to treat your NRA spouse as a US resident for tax purposes under IRC Section 6013(g). This allows you to file Married Filing Jointly, which typically provides better tax rates and access to more credits and deductions. However, this means your spouse's worldwide income must be reported on the joint return and is subject to US tax. Your spouse would also take on all US tax obligations, including FBAR and FATCA reporting. This election remains in effect until revoked and cannot easily be undone.

Third, if you have a qualifying dependent, you may qualify for Head of Household status, which offers better tax rates than Married Filing Separately without requiring your spouse to be taxed on their income.

For FBAR purposes, if you file jointly and your spouse has foreign accounts, those accounts may need to be reported. Even if you file separately, accounts where you have signature authority or a financial interest must be reported regardless of whose name they are in.

The decision of how to file when married to a foreign national is one of the most complex areas of expat taxation. The optimal strategy depends on both spouses' income levels, the tax rates in your country of residence, and your long-term plans. We strongly recommend professional guidance for this situation.