U.S. TAX GUIDE IN CHILE
Do I have to report my spouse’s income if they’re Chilean?
The short answer is no, as long as your spouse is not a US citizen, a green card holder, or hasn’t elected to be treated as a US resident for tax purposes.
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Would I want to add my spouse in my US tax return?
Generally, you wouldn’t want to. CTC is a good reason.
If you have multiple children, you’re looking at upwards of US$10,000.
How much is an ITIN, how long does it last?
US$300 for 3 years. But you’ll get money from CTC, so it technically offsets the cost.
When is it required to report my spouse’s income?
The IRS only requires you to report your non-US spouse’s income if your spouse chooses to be treated as a US tax resident.
This means if your spouse is working in Chile and earning income, but they aren’t a US citizen or green card holder and haven’t opted to file jointly with you, you don’t have to report their income on your US tax return.
Filing as “Married Filing Separately”
In many cases, US citizens married to non-Americans will file as married filing separately. Under this status, the filing thresholds are much lower. For example, if your worldwide income exceeds just US$5 for the entire year, you’re required to file a US tax return.
Yes, even something as small as US$5 in bank interest can trigger the need to file.
This can seem a bit surprising, especially if you don’t have a job or your spouse is the one working. But remember, it’s only your income that matters, not your spouse’s.
So, if you’re at home in Chile, not working, but you earn US$10 in interest on a savings account, you still need to file.
Can I still use the standard deduction?
Yes, you can. Even though you have to file with just US$5 in income, you still get to claim the standard deduction, which is US$14,600 in 2024 for those filing separately.
So, let’s say you have US$50 in bank interest for the year. You’ll need to file a tax return, but after applying the US$14,600 standard deduction, you won’t owe any US taxes since your income is way below that limit.
When does it make sense to file jointly?
There is an option for your spouse to be treated as a US tax resident, even if they aren’t a US citizen or green card holder. If they choose to do this, you can file jointly and potentially get a bigger standard deduction (around US$29,200 for 2024).
This might be a good strategy if your spouse’s income is relatively low and it benefits you tax-wise.
However, there’s a catch. If your spouse is treated as a US tax resident, their worldwide income must be reported on your joint tax return, which means it’s subject to US taxes.
So, whether or not it makes sense to file jointly depends on your overall financial situation and whether the higher deduction outweighs the tax on your spouse’s income.
An Example Scenario
- You’re a US citizen living in Chile, married to a Chilean.
- You don’t have a job, but you earned US$100 in interest from a US bank account.
- Your spouse works full-time in Chile but isn’t a US citizen or tax resident.
In this situation, you’ll need to file a US tax return because your income exceeds US$5, but you don’t have to include your spouse’s income unless they’ve elected to file jointly.
After reporting your US$100 in interest, you’ll apply the standard deduction of US$14,600. Since your income is well below that, you won’t owe any taxes.
What about filing as Head of Household?
In some cases, you may qualify to file as Head of Household instead of Married Filing Separately. This usually applies if you’re supporting a dependent, such as a child, and paying more than half the cost of maintaining your home.
Filing as Head of Household typically results in a higher standard deduction and lower tax rates, but the rules to qualify are stricter.
