What if I'm a dual citizen?

If you hold dual citizenship with the US and another country, you are treated as a US citizen for tax purposes and must file US tax returns on your worldwide income, regardless of where you live or which passport you use day-to-day. Your other citizenship does not reduce or eliminate your US tax obligations.

As a dual citizen, you have access to all the same tax benefits available to other US expats, including the Foreign Earned Income Exclusion, Foreign Tax Credit, and applicable tax treaty benefits. However, tax treaties often have special provisions for dual citizens. Many treaties have a 'savings clause' that preserves the US right to tax its own citizens, which limits some treaty benefits. However, exceptions to the savings clause may still provide certain advantages.

The treaty tie-breaker rule is particularly relevant for dual citizens. If you are considered a tax resident of both countries, the applicable tax treaty may contain tie-breaker rules that determine which country has primary taxing rights. Even when a treaty assigns primary residence to the other country, the US still requires you to file and pay US taxes as a citizen.

One area of complexity for dual citizens is when both countries offer credits or exclusions. You may need to carefully coordinate which benefits you claim in each country to minimize your total global tax burden. For example, if you claim the FEIE in the US to exclude your foreign earned income, you cannot also claim a Foreign Tax Credit on that same income.

If you are considering renouncing your US citizenship, be aware of the expatriation tax rules under IRC Section 877A. If you meet certain income or net worth thresholds, you may be classified as a 'covered expatriate' subject to an exit tax on unrealized gains, and potentially subject to ongoing US tax on certain US-source income for 10 years.

Dual citizenship creates unique tax planning opportunities and challenges that benefit significantly from professional guidance.