Does Wife Need to File US Tax Returns?

[MaxPwr905]

I'm a dual citizen filing MFS so I can claim the most of the house sales capital gains exemption.

My NRA spouse now has a TIN so I can go ahead and file MFS - but does she actually have to go file a US Return - even with no US income or presence?

[nelsona]

she does not. her ITIN does allow you to claim her as a dependent if she lives in Canada even if you file MFS.

[ND]

Why don't you consider HOH status, which is better than MFS. Two married Americans cannot use HOH status but a USC married to an NRA can as they are considered unmarried for this status.

Further, if your wife does elect to file a NIL US return and you thereby attain MFJ status, your principal residence exclusion jumps up to USD$500,000.

[nelsona]

Filing MFJ to double the exclusion is only beneficial if the property was owned solely by the American. Otherwise, filing jointly would mean she would have to report her 1/2 of the profits, which would in most cases would not put the couple in a better situation.

[nelsona]

And of course she would have to report her world income, which for many USC living in Canada might expose to onerous reporting since the Cdn spouse may hold many of the "restricted" investments and accounts to avoid US reporting.

But HoH may help a little.