Thinking Of Marrying A Mexican?

The tax man is lying in wait for you
BY: ORLANDO GOTAY

If you are a U.S. citizen expat in Mexico, and you’re thinking you’ve become lucky and are considering marrying a Mexican national. ¡Orale! as they say. 

But it is important to understand there will be U.S. tax consequences and important choices to be made in connection with marriage to a non-US citizen, when both of you reside outside the United States.

If you marry a “non-resident alien” and do nothing else, you will be required to file returns at the married filing separate rates, which are usually very inconvenient.  Generally speaking —and there are exceptions— one will end up paying more tax this way.

Both spouses can elect to have the non-resident alien treated as a resident alien for U.S. income tax purposes. That way, the married filing joint status is available. 

But with the IRS, nothing comes for free.  The joint return would have to include the other spouse’s worldwide income as well, just like the U.S. citizen spouse.  For those who marry often, beware—this can only be done once.  It can be revoked, but once taken, neither spouse can take it again.  And of course, the non-U.S. citizen spouse has to get an Individual Tax Identification Number, or ITIN—always a fun endeavor outside the U.S.

Of course, that person’s income and possible deductions, now and in the future, (in addition to those of the U.S. citizen spouse), are key to deciding if this is a worthwhile decision to make. It is also important to know this action forgoes any US-Mexico tax treaty benefits that may be otherwise available as a resident of Mexico.

Some marriages bring additional people into the picture. Parents and preexisting children come to mind.  Instead of the election, or the married filing separate status discussed above, the more favorable head of household status may be available if support tests are met.  In some cases, the relatives have to live in one’s household, but not in others.

Lastly, timing is everything.  It is important to know that filing status is determined as of the end of the tax year, usually December 31.  Depending on individual circumstances, it may be advantageous to marry in either one year, or the next.  I always tell people to run their numbers.

Marriage is of course, a major milestone, and it brings about significant tax consequences, only magnified in the case of marriage to what the IRS calls a non-resident alien.

Orlando Gotay is a California licensed tax attorney with a Master of Laws in Taxation admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies.  His love of things Mexican has led him to devote part of his practice to the tax matters of U.S. expats in Mexico.  He can be reached at tax@orlandogotay.com.