Marrying a Foreign Prince Like Meghan? You will still Owe U.S. Taxes by Rick Bazzani, CPA

Posted on May 18, 2018 by Rick Bazzani

Behind the fairytale nuptials of British Prince Harry to American actress Meghan Markle is a dose of reality that the recently betrothed couple will need to pay their share of U.S. taxes during their marriage.

Under U.S. tax laws, U.S. citizens must report and pay taxes on their worldwide income, including assets held in overseas bank accounts, regardless of whether or not they reside in the U.S. By law, Markle must maintain her U.S. citizenship and pay U.S. taxes even if she applies for residency status in the U.K., which can be a three-year process.  Any money that she earns in Britain or elsewhere will be subject to U.S. taxes.

Moreover, if Markle and the Prince have joint financial accounts with a balance of more than $10,000 at any point during the year, the bank or financial institution holding those accounts would be required to share the royal couple’s personal financial information with Uncle Sam, thanks to the U.S.’s Foreign Account Tax Compliance Act (FATCA). This includes all of the royal family’s trusts and offshore accounts in which Prince Harry holds ownership interest or for which he is a named beneficiary. Finally should the royal couple bear children while Markle is a U.S. citizen, those offspring will be considered U.S. citizens subject to U.S. tax laws.

If Markle becomes a dual citizen of the U.S. and the U.K, she may still have to meet her annual U.S. tax reporting requirements and disclose sensitive information about trusts and other financial accounts held by the royal family. However, as a U.S. citizen or dual citizen, she may qualify for either a foreign earned income exclusion or a foreign tax credit for taxes she paid in the U.K. on U.K.-source income. Should she take the deduction, she would be able to waive U.S. taxes on the first $104,000 of non-investment income she earns in the U.K. If she takes the credit, she may be able to use the taxes she paid in the U.K. to reduce her U.S. tax liabilities.

One option to keep the IRS’s prying eyes and hands away from the royal couple’s finances is for Markle to renounce her U.S. citizenship after the requisite three-to-five year waiting period.

While this may appear to be the simplest option, it would subject Markle to a significant exit tax and make it difficult for her to regain U.S. citizenship in the future.

U.S. citizens living abroad should meet with experienced tax advisors to understand their U.S. and foreign tax reporting responsibilities based upon such things as the type of income they receive.

About the Author: Rick D. Bazzani, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where he provides individuals with a broad range of tax-efficient estate-, trust- and gift-planning services.  He can be reached in the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or at