Married to a Non-Resident Alien? What You Need to Know For Filing U.S. Taxes

Navigating U.S. taxes can be confusing enough when you live stateside, but if you're living abroad and married to a non-resident alien (NRA), the complexity reaches another level. This is a situation we regularly see at McGowin Tax, and one recent question from a client in the Netherlands perfectly illustrates the challenges—and opportunities—involved.

The client asked:
"I live abroad and I’m married to a non-resident. Can we still file a joint return? Are there any tax strategies we should be aware of?"

This is a fantastic—and common—question. Let’s break it down.

Filing Status When Married to a Non-Resident Alien

In the U.S., married couples typically file joint tax returns because of the more favorable tax brackets and broader eligibility for deductions and credits. But when your spouse is a non-resident alien—meaning they are not a U.S. citizen or green card holder—the default filing status is Married Filing Separately (MFS).

That’s because the IRS does not allow joint returns with an NRA spouse unless you proactively elect to treat them as a U.S. person for tax purposes.

Why does this matter?

Filing as MFS generally results in higher marginal tax rates and the loss of some tax benefits, such as:

• The Earned Income Tax Credit (EITC)
• The Child and Dependent Care Credit
• Education credits
• Deduction limitations that phase out sooner

For that reason, many expats and Americans living abroad with NRA spouses consider making an IRC Section 6013(g) election.

The Section 6013(g) Election: Treating Your Non-Resident Spouse as a U.S. Taxpayer

Section 6013(g) of the Internal Revenue Code allows a U.S. citizen or resident to elect to treat their non-resident spouse as a U.S. resident for the entire tax year. This enables the couple to file jointly and potentially benefit from:

• Lower overall tax liability
• Better marginal tax brackets
• More favorable deduction rules

But there’s a big catch:
Once you make the election, your spouse’s worldwide income becomes subject to U.S. taxation.

In other words, the IRS will treat your non-resident spouse as if they were a U.S. citizen for tax purposes. That means:

• You must report their foreign income
• They may have FBAR and FATCA reporting requirements (for foreign accounts, trusts, or corporations)
• They are subject to all the same U.S. tax rules that you are

Also, the election is generally permanent unless revoked, and revoking it requires written permission from the IRS, which is notoriously difficult to obtain.

So it’s a powerful tool—but not one to use lightly.

When Electing to File Jointly Makes Sense

Filing jointly with a non-resident spouse can be beneficial, especially if your spouse:

• Does not work
• Earns little to no income
• Does not own complex foreign assets

In these situations, you may enjoy a lower tax bill without substantially complicating your return.

However, if both spouses are earning roughly equal incomes or if your non-resident spouse owns foreign entities, the added reporting and tax obligations may outweigh the benefits.

Alternative Strategies When You Don’t Elect to File Jointly

If filing jointly isn’t the right fit, don’t worry. There are still tax planning strategies available to help reduce your burden and simplify your filing.

1. Strategic Foreign Business Ownership

Let’s say you own a foreign corporation as a U.S. citizen. If you own 100% of it, it’s classified as a Controlled Foreign Corporation (CFC) under IRS rules. That triggers:

• Subpart F income rules
• GILTI (Global Intangible Low-Taxed Income)
• Form 5471 filing obligations
• Possible U.S. taxation on the company’s income—even if you never take a dividend

One way to avoid CFC classification is by having your non-resident spouse own 50% of the business. Now the ownership is split 50/50—half U.S., half foreign—and the business is no longer classified as a CFC. That can allow income deferral, meaning profits inside the company may not be taxed in the U.S. until they’re distributed.

It’s a simple shift that can yield big tax advantages, but it must be executed carefully and with consideration for your spouse’s home country tax laws.

2. U.S. Investments Through the Non-Resident Spouse

Here’s a little-known fact:
The U.S. is one of the most favorable tax havens in the world—for non-U.S. persons.

If your spouse is a non-resident alien, they can often invest in U.S. stocks and securities with little or no U.S. tax liability, including:

• No U.S. capital gains tax on the sale of stocks
• No U.S. tax on interest income
• Low or no dividend tax, depending on the tax treaty with their country

This is particularly valuable if you’re living in a country that only taxes income sourced within that country (territorial tax system), like Costa Rica. In that case, your spouse might not owe tax anywhere on those U.S. investments.

Key Considerations Before Making the Election

Before deciding whether to elect joint filing or pursue other strategies, you need to assess:

• Your spouse’s total income
• The type of assets they own
• Their reporting obligations (like FBAR, FATCA, Form 5471)
• Your country of residence’s tax system and treaties
• Whether the tax benefit outweighs the added complexity

A seasoned international tax advisor can help you model the different outcomes and choose the best path.

Conclusion: The Right Strategy Depends on Your Unique Situation

If you're married to a non-resident alien and living abroad, you have more than one path to optimizing your U.S. taxes. Whether it’s making the Section 6013(g) election or using strategic ownership and investment structures, your approach should be tailored to your income, residency, and financial goals.

At McGowin Tax, we specialize in exactly this kind of cross-border tax planning. We can help you:

• Evaluate whether to treat your spouse as a U.S. person for tax purposes
• Reduce tax liability through optimized filing strategies
• Simplify compliance while taking full advantage of legal opportunities

Ready for a Cross-Border Tax Diagnosis?

If you're in a similar situation, let’s talk. Visit mcgowintax.com and book your free consultation. Get clear, personalized advice—because international tax shouldn't be this complicated.

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