The reality of life …
U.S. taxpayers can choose (depending on their circumstances) among different “filing categories”. For “Americans abroad” who are married (which well be determined by local law) will choose between “married filing separately” and “married filing jointly”.
That’s great in theory, but a U.S. citizen living outside the U.S. who is married to a “non-U.S. citizen spouse” is likely to file “married filing separately. (It’s unlikely that the non-U.S. spouse would want to enter the U.S. tax system.
The reality of “married filing separately” …
“Married filing separately is the most punitive of the “tax categories”. There are a numbers reasons why.
The reasons include:
1. You will enter a higher tax bracket at a lower level of income
2. The threshold for payment of both the Alternative Minimum Tax (“AMT”) and the 3.8% Obamacare surtax will be significantly lower
3. Your thresholds for certain information returns (Including the FATCA 8938) will be lower.
There are other reasons why are described here:
Some of many disadvantages to "married filing separately" which is how #Americansabroad with an "alien" spouse file http://t.co/3wpHUEx8qN
— US Taxation Abroad (@TaxationAbroad) December 25, 2014
I have alluded to this problem when describing the “FBAR Marriage” (marriage between a U.S. citizen and non-citizen).
The “married filing separately category is a a “hidden tax” on Americans abroad.