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Dianne Mehany Comments on Tax Concerns for Meghan and Harry's Future Plans

January 11, 2020, Town & Country

Meghan is still a US citizen, and therefore required to pay US taxes on her worldwide income. Prince Harry could technically elect to be treated as a US tax payer and file jointly with Meghan, but "he would never do that," explains Dianne Mehany, a lawyer specializing in international tax planning. "[Meghan] would file as a married filing separately, and only be taxed on her income."

In a few years, if Meghan and Harry stayed on their original path as full-time working royals, Meghan would have become eligible for UK citizenship. When Meghan and Harry announced their engagement back in 2017, Harry's communications team confirmed to the BBC that Meghan "intends to become a UK citizen and will go through the process of that." Said process, as per the UK government's website, would require Meghan to have lived in the country for three years before becoming eligible for naturalization.

Once gaining UK citizenship, Meghan could elect to relinquish her US citizenship, and save herself the trouble and expense of filing US tax returns. "The only problem there is, she would have to pay the exit tax," Mehany notes, referencing the expatriation tax that those forfeiting US citizenship are subject to.

. . .

And, of course, we can't forget Archie. The eight-month-old baby is a UK citizen, but he's also a US citizen—even if his parents never registered him as such, or obtained a social security number and passport for him. On her US taxes, Meghan "would claim him as a dependent, presumably," Mehany says. "And he, from birth, is subject to the kiddie tax, if he earns a certain amount of passive income in his name." So if the royal family has established accounts and investments in Archie's name, Meghan has to report those on her tax return.

. . .

The same goes for Canada, if they choose to spend enough time there in a year. Harry would "likely become a resident of Canada and a nonresident domiciliary of the United Kingdom," Mehany says. "At which point he would pay less tax in the UK and he would remit residence-based tax to Canada first." (The UK classifies taxpayers as "resident domiciliary" and "non-resident domiciliary," with "domiciliary" essentially meaning "UK citizen.")

"The real tricky thing," Mehany notes, "is to make sure they don't spend too much time in the United States, so that Harry becomes a resident of the United States, at which point his entire worldwide wealth would become subject to US taxation, which I know they want to avoid."

For the full article, please visit Town & Country's website.

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