The world at large has been fascinated by the blossoming romance between American actress, Meghan Markle, and Prince Harry. It is estimated that two billion people worldwide watched the royal nuptials take place in a ceremony of royal pride and pageantry. With such a build-up to the event, interest is now turning to what life will be like for the newest member of the royal family post-wedding.
As no one is immune to tax laws, not even royalty, eyes are now on Markle as she faces the complex issues of taxes and citizenship. Whether or not Markle decides to retain or renounce her U.S. citizenship is undoubtedly an emotional decision, but also a potentially expensive one.
The Expatriate Conundrum
There are millions of Americans living abroad, and one thing they all have in common is still having to pay taxes to the American government. While it seems obvious that Markle will obtain UK citizenship, if she chooses to renounce her U.S. citizenship, she will likely be obliged to pay fees of $2,350. Now, with an estimated worth of $5 million and having just married into the British monarchy, Megan Markle is clearly not a person who can’t afford to pay a fee or two, but complicated taxes are complicated taxes and not much fun for anyone.
Renouncing U.S. Citizenship
Should Markle choose to renounce her U.S. citizenship, in addition to the $2,350 renouncement fee, she would also be obliged to pay the exit tax for leaving her country of origin permanently. Under the exit tax her assets of property, stocks, and bonds, would be viewed as sold prior to her date of expatriation. As such, those assets would be subject to levies calculated based on current market value. Clearly, for someone like Markle whose assets are extensive, those levies could prove costly. Looking into the long term, should Markle decide to retain her U.S. citizenship, her children would also be subject to American tax laws.
Foreign Earned Income Exclusion
While American citizens are still obliged to pay U.S. taxes while living in another country, there are ways to pay less with the assistance of an experienced tax attorney. David McKeegan, of Expat Tax Services, explains foreign earned income exclusion as a means of excluding a portion of earnings made while living in another country from your U.S. tax return. Of course, in order to be eligible, there are certain parameters that must be met, further impacting Markle’s decision. Depending on how long an individual has been living in the new country of residence and if that individual is a permanent resident, as in not returning to their country of origin to live, will impact eligibility for foreign earned income exclusion.
Royal Income Disclosure
Further complications arise for Markle as the necessity for full income disclosure would result in the U.S. government being privy to Prince Harry’s financial information, as well as how much Markle receives from the British monarchy. Markle would have to report her husband’s assets as well as any gifts received.
When any couple gets married, life changes forever. Assets are joined and shared and taxes are filed together. For someone like Meghan Markle marrying into the British monarchy, those changes occur on another level. Under the world’s watchful eyes, Markle will have to make the difficult decision as to whether she should retain or renounce her U.S. citizenship and face the consequences when it comes time to pay taxes.
Many citizens might be unaware that the IRS has begun to farm out the task of collecting back taxes to private tax-debt collectors. Furthermore, it seems that the taxpayers who are least able to make payments are the ones being targeted by the...read more
With the passing of the Tax Cuts and Jobs Act (TCJA) in 2017 came the expectation that the majority of taxpayers would be getting a tax break. Despite that expectation, the General Accounting Office (GAO) is cautioning tax payers to pay extra...read more
You certainly don't need a tax attorney to tell you that property has become very expensive across southern California and the Bay Area. Numerous explanations have been offered as to why property prices are soaring, but the truth may be found...read more