Skip to comments.How Will Meghan Markle's Finances Change Now that She Married Harry?
Posted on 05/19/2018 8:32:28 PM PDT by SeekAndFind
The marriage of Meghan Markle and Prince Harry is anything but ordinary. Even among royal marriages its unique because Meghan is American and, like many Americans, she is biracial. But while her race isnt a issue, her nationality is thanks to the U.S. tax code.
American citizens like Markle, who was born in Los Angeles, must report their worldwide income to the IRS even while living abroad. (For more, see How to Pay Taxes If You're Overseas.) She will have to file U.S. tax returns and Foreign Bank Accounting Report (FBAR) forms, assuming she becomes the signatory on or holder of accounts worth $10,000 or more. The penalties for not filing FBARs can be harsh and include both fines and possible jail time.
Although Markle has left her acting role as an attorney on the television show Suits, she will continue to earn residuals from reruns and DVD sales. But that income is insignificant compared to what she could receive as a member of the royal family. And thats what will make the couples tax situation, and the familys desire for financial privacy, so tricky to navigate.
Markle could have to report to the IRS as income the value of seemingly inconsequential things, such as being lent expensive jewelry, being given a vacation, or living in a Kensington Palace home with her husband. Merely failing to report something shes required to report, even if its not taxable, could result in major tax penalties.
Prince Harry shares with his brother, Prince William, and sister-in-law, Kate Middleton, the Duke and Duchess of Cambridge, an annual allowance that came to £3.5 million ($4.7 million) in 2017. We dont know if Markle will receive her own allowance or if she will be dependent on Harrys.
In addition, Prince Harry earns money from a $1 billion portfolio of investment properties called the Duchy of Cornwall that funds his familys public, charitable and private activities. Together, Prince Harry and the Duke and Duchess of Cambridge received several million from the portfolio in 2017. Prince Harry could also be receiving money from other royal trusts, but such information is not public.
The Foreign Account Tax Compliance Act (FATCA) will also affect the married couple. As long as Markle remains a U.S. citizen, she will have to file form 8938, Statement of Foreign Financial Assets, with the IRS each year. The reason: She will have an interest in foreign financial assets worth more than the threshold, which is either $200,000 (if she elects the married filing separately status) or $400,000 (if the couple chooses to file jointly). Markles share of the royal familys assets wont come in below either threshold.
Still, for other reasons, it will matter which filing status the couple chooses. Writing for the European Financial Review, San Francisco-based tax lawyer Robert Wood explains that while almost all married couples file joint tax returns with the IRS, Markle and her prince should choose the married filing separately status, which limits each spouses liability for what is and isnt reported on the return.
While choosing this filing status makes couples ineligible for certain tax credits and limits certain deductions, such concerns are unlikely to be meaningful for such a wealthy couple. More important, filing separately would mean Markle would not have to report Prince Harrys assets or income. The royal family would probably prefer that its finances not become the knowledge of the Internal Revenue Service. The temptation for someone to leak that private information would be great.
The only way for Markle and the British royal family to extricate themselves from the tax nightmare the IRS has created for U.S. citizens living abroad is for Markle to renounce her U.S. citizenship, something only a few thousand Americans do each year. But even if Markle renounces her U.S. citizenship, she will still have to report any U.S. source income from her acting residuals to the IRS. And should Markle renounce her U.S. citizenship, her high net worth could require her to pay an expatriation tax.
What kind of money is the future Duchess of Sussex bringing into the marriage? Celebrity Net Worth reports that 36-year-old Markles net worth is around $5 million. She earned about $450,000 annually as an actress in Suits, which she joined in 2011 (the show is entering its eighth season). She has also earned income from her womens fashion line at Montreal-based clothing store Reitmans, plus six-figure sums from her film appearances.
The IRS requires expatriating Americans to pay an exit tax if their net worth is $2 million or more on the date of expatriation, which Markles certainly will be. And she would have to file form 8854 listing her net worth and property owned on the date of expatriation and certifying that she has complied with all of her U.S. tax obligations for the past five years. The form includes a detailed balance sheet and income statement, too.
But even if she wants to or her in-laws pressure her into it, Markle wont be able to renounce her U.S. citizenship right away. She will eventually become a British citizen, but she cant even apply for citizenship until shes been married and living in the U.K. with Prince Harry for three years. So the couple will have no choice but to deal with the IRS for the next several years.
If the couple resided in the United States, Prince Harry would not have to file British taxes: Britain doesnt have a worldwide tax system. But that wouldnt solve the problem of the IRS learning certain details of the royal familys finances.
Some details are already public. The Duchy of Cornwall publishes annual financial statements of its income, expenditures and staff. And we know that Prince Harry brings an estimated net worth of $40 million into the marriage, according to the U.K.s Daily Mail. About one-third of his fortune comes from the $13.3 million he inherited from his late mother, Princess Diana.
The tax implications of the royal couples marriage highlight the complexities of the U.S. tax system. Its convoluted enough if youre a U.S. resident, and it only gets worse if youre a U.S. citizen residing abroad. As the couples totally unromantic tax story unfolds over the next few years, it will be interesting to see if the extra attention their situation brings to the difficulties of the U.S. tax code will spark any changes.
Thanks. Perhaps she will do, which seems to me appropriate.
(This was always a sticking-point in my girlish fantasies of marrying a foreign Prince Charming: I assumed I would have to give up my American citizenship - and didn’t think I could ever do that ;-)
I spent a year working as an expat with 99% of my income from offshore. The offshore taxes by the country I was residing in were themselves greater than what I would be burdened with with the same income in the USA. However, at face value, the USA taxes layered on top of the offshore tax liability actually exceeded the total gross income. So, I'm supposed to work at a loss?
Some assumptions on what is applicable taxable income or not and deductible items eligible or not got me to a plausible and defensible position on taxes so I could have a few $$$ for myself out of the deal. USA tax law sucks and the expat extension of this is worse. Bottom line on this is that expat taxable issues are a setup for the IRS to play hell with a person if they decide it would be fun.
Since he’s sixth in line to the throne, the blood of his heirs won’t make any difference, barring a catastrophe in which William and his children all die at once.
I can’t imagine giving up my citizenship. Years ago, when the U.K. and Canada were still God fearing countries, it might not have seemed such a tragedy, but can you imagine being under the socialist thumb of their government, now? As bad a shape as we are in now, we’re STILL the greatest country on the face of the earth, and giving up the freedoms and sacred foundations we have, would be unthinkable. But she won’t have to; the rich have special rights. (Even with that, we’re STILL the greatest!)
My understanding is that she’s becoming a British citizen. I think that solves the IRS problem.
Funny practice there. To think of it reminds me oddly of the Eastern Bloc.
The Brita already have a tax agency every bit as evil as the IRS. I’m sure the lawyers and solicitors for the two already have this in hand and dont need advice from blog pimps.
Holy eff, I would. Nothing like the IRS and state taxation departments to ruin everyones fun.
Americans broke away due to excessive taxation. And without representation.
The Brits will now taste it in return done 250 years later in one big karma turnaround.
Is there a bigger IRS felon/criminal than Koskinen?
If her name is on any property that they own ( that just doesn’t mean land ), then upon it’s sale, she would have to pay capital gains tax to the IRS.
Did you see how much Harry’s wedding cost? the last I read was 32 million pounds!
I couldn’t blame her, married into foreign wealth as her romance led her.
If she wanted to stay American, it would be a major tax hassle. Can she deduct what she pays in British taxes?
Becoming British and giving up American citizenship.
And then she still pays the taxman, but it’s only the British one.
My take is that she will pay her taxes in sorts of fines that will be funneled by the Obama DOJ to community organizing groups.
That they had a bunch of Chicago ganstas singing “stand by me” should be the clue of how the communist gold digging fix is in.
How many decades (millenia ?) must pass before we never have to hear about Meghan Markle again ?
What is the problem. She files married/seperately. She does not work. She has no income. All the income is from Harry. No tax burder there.
I’m sure they sorted this out well before the wedding, or the wedding would not have happened.
Meghan owes taxes to Canada because she worked on “Suits” in Toronto for several years.
She’s not a Canadian national but her income in Canada is taxable, so she owes taxes both to Ontario province and Ottawa so that’s a combined provincial and federal tax burden.
And there are American taxes, too. Not to worry, her family’s tax preparers will take care of all that and at $5 million worth, she doesn’t exactly have to apply for welfare any time soon.
Your story sounds unusual. I was in a similar situation, and the taxes I paid in the foreign country were credited against my U.S. tax liability. I still had to file a U.S. tax return, but I owed $0 because the amount of taxes I paid in the foreign country exceeded what I owed in the U.S.
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