Are you contemplating starting or extending your family whilst in the USA? Or, perhaps you have a child that was born in the USA after 2010? This page is for you. New taxation rules were introduced in 2010 for dual citizens you need to be aware of.

Who does the new ruling effect?

Children born in the USA after 2010, including those yet to be born. If you have served in the USA and had children born there, they will have dual citizenship and the taxation rules will apply them – even if a US passport is not applied for.

What do the taxation rules mean?

US rules state that children born in the USA will receive US citizenship alongside that of their parent nation. Being a dual citizen can have significant tax implications which many people are unaware of, until they receive a tax bill owed to the Internal Revenue Service (IRS).

What are the tax obligations?

The worldwide income and gains of dual citizens is subject to US tax. Whether or not you are a citizen of another country and whether or not you live in the US.

Why were these rulings made?

The new taxation arrangements became law in the US in 2010, and were introduced to combat tax evasion by US persons holding account and other financial assets abroad. It was not aimed at facilitating the taxation of those who happen to have been born in the US but who hold another nationality and reside there.

Can I avoid paying US taxes?

Waiver of US taxation

Individuals who hold dual US/UK citizenship can apply for a waiver of US taxation. citizenship waiver will be granted from US taxes provided foreign-earned income is within the exclusion credit, currently equivalent to just over £81,000 UK tax affairs are in order, and a tax return is submitted. Further information can be found on the US government website.

Surrender citizenship

Alternatively, the US authorities will make individual contact on an individual’s 18th birthday with a request to surrender US citizenship without the requirement to submit a tax return at no cost. If citizenship is not surrendered, the US IRS will be alerted if the child travels to the US or when they renew a passport and they will be pursued for taxes owed. So it is essential that a US tax return is complied with. Many British accountancy companies can offer this service. Professional, independent taxation experts can provide further, tailored advice.

US dual citizens who don’t live in the US and don’t intend to in the future can consider renouncing their US citizenship (at their own cost). This cannot be done by parents or guardians, only by the individual themselves. Any consideration of rescinding US citizenship warrants very careful deliberation since it is generally irreversible. The cost is approximately £1,850.00. This can be done at the Embassy of the United States in London. Detailed information can be found on the U.S. Embassy & Consulates in the United Kingdom website.