Meghan Markle’s tax bill will get a lot more complicated after royal wedding

Personal Finance

For Markle, disclosures of the income she receives could reveal information about the royal family to the U.S. government.

For example, Prince Harry reportedly receives both investment income through assets left to him by his mother and an allowance from his father.

If those assets are in a foreign trust, Markle would have to fill out Form 3520 to disclose the gifts she receives from it. She would also have to report other gifts, such as jewelry, that she receives.

“She would be disclosing to the U.S. government how much the British monarchy is giving her,” McKeegan said.

Markle would also be subject to the reporting requirements for Foreign Bank and Financial Accounts, or FBAR, for accounts over which she has ownership or signatory authority. That means she would have to report accounts worth more than $10,000, even if it’s only there for one day, according to McKeegan.

Any foreign institutions that hold Markle’s assets would also have to disclose that to the U.S. government under the Foreign Account Tax Compliance Act, or FATCA.

“There’s probably a high likelihood that they would not combine their bank accounts,” McKeegan said. “I can’t imagine that Harry wants his bank balances reported to the IRS.”

Another potential conflict could come up around the sale of property. While you don’t pay capital gains on the sale of a home in the U.K. if it’s a primary residence, the same does not go for the U.S.

That issue tripped up British Foreign Secretary Boris Johnson. Johnson, who was born in New York, was forced to pay taxes to the U.S. when he sold his London home in 2015. He subsequently renounced his U.S. citizenship in 2016.

Couples can avoid this issue by limiting how much of the home a U.S. citizen owns, according to Joshua Ashman, a partner at Expat Tax Professionals.

“There’s different ways to hold houses that don’t necessarily have to be 50-50,” Ashman said.

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