Meghan Markle's 2018 US Taxes and Dual Citizenship Status
Millions watched when Prince Harry and Meghan Markle got married on May 19, 2018 at St. George's Chapel in Windsor Castle. Now that the year is ending and the tax season is approaching, Meghan has to deal with a very complicated situation between the United States and the United Kingdom.
Legal experts will work out the details, but it is causing them a headache because there are so many tax laws to deal with. Besides, it is not just Markle's taxable income that must be considered. Tax lawyers might also have to take into account the income of Prince Harry and the royal family. The British royals have been reluctant to disclose their exact net worth over the years, according to most British newspapers.
You probably thought filing your taxes was complicated, but it is a piece of cake compared to what Meghan Markle will have to deal with by April 15, 2019.
According to FOX Business, as long as Markle is an American citizen, her assets and income are subject to US taxation. The newest member of the royal family is required to file a tax form declaring her UK assets as well as her US assets, according to Rebecca Walser, a tax attorney and certified financial planner.
This could pose a major problem for the British royal family who doesn't like giving details of their financial situation even though people speculate about their net worth.
If Meghan's bank account is combined with Prince Harry's account, his finances will have to be reported to the US along with his wife's.
The US is the only country with laws that require citizens to pay taxes no matter where in the world they live.
A law for US citizens like Meghan states that someone is usually taxed on income available to the person whether it is in the person's possession or not. This means it’s not only the Duke and Duchess of Sussex’s money that will be taxed. The expensive pieces of her jewelry, designer clothes, and living quarters may also be included on her tax return.
Buckingham Palace will reportedly recruit a team of US financial experts to assist with the American tax returns since so much has to be considered.
As long as Meghan is a citizen of the United States, she will have to file taxes on or before April 15 like every other American citizen.
The Five-Year Rule
According to Business Insider, becoming a royal did not make Meghan tax-exempt. Even though Queen Elizabeth gave Meghan the title Duchess of Sussex on the day she married Prince Harry, she won't become a UK citizen until she has lived there for at least five years.
After living in the UK for five years, she will be granted permanent residency when she applies for UK citizenship. Then she will be a dual citizen of both the United States and the United Kingdom unless she gives up her US citizenship.
That means she will have to continue filing income taxes each year with the Internal Revenue Service in the United States. If she has had more than $300,000 in assets at any point during the year, she will have to file a specific form that details her foreign assets.
Avani Ramnani, director of financial planning and wealth management at Francis Financial shed some light on the matter by telling Business Insider that US citizens, green-card holders, and permanent residents are required to file tax returns with the IRS every year no matter where they live. That includes the Duchess of Sussex.
Ramnani added that US citizens get taxed on international income earned outside the US and must file a special tax return known as the expatriate tax return. That means Markle may also qualify for a foreign tax credit which allows her taxes to be waived or reduced on any income exceeding $104,100.
Prince Charles, his wife Camilla, Prince William, Kate Middleton, Prince Harry, and Meghan Markle all receive a yearly allowance from the Duchy of Cornwall to cover expenses like travel and wardrobe. That allowance is taxable.
The former Suits actress also might get a foreign housing deduction or credit for living expenses residing abroad.
The United States may be the only country that taxes the income of citizens who live outside the country.
Meghan can renounce her US citizenship after she becomes a citizen of the UK. According to the UK government's website, she would have to live in the United Kingdom for at least three years before starting the process. Therefore, the Duchess of Sussex is not a citizen of the United Kingdom yet. She is still an American citizen and does not have dual citizenship.
If Meghan plans to become a citizen of the UK, she could renounce her U.S. citizenship after she becomes a British citizen, but she doesn't have to. Royal expert Marlene Koenig told Town & Country that if she remains a US citizen, her children will have dual citizenship even if they never live in the country.
Now that she and Prince Harry are expecting their first child in the Spring of 2019, the child will automatically have dual citizenship whether Meghan files or not. What that means is when the child grows up and has money, the child will have to file taxes with the US forever even though the child has not physically lived in the US.
According to the State Department, if one parent is an American, then their children will automatically be US citizens as soon as they are born as long as the American parent has lived in the United States before living abroad.
Doris Meissner, a commissioner of the former Immigration and Naturalization Service, says the parents are required to report the birth to an American consulate.