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 it’s unique because Meghan is American – and, like many Americans, she is biracial. But while her race isn’t 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 that’s what will make the couple’s tax situation, and the family’s 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 she’s required to report, even if it’s 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 don’t know if Markle will receive her own allowance or if she will be dependent on Harry’s.
In addition, Prince Harry earns money from a $1 billion portfolio of investment properties called the Duchy of Cornwall that funds his family’s 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). Markle’s share of the royal family’s assets won’t 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 spouse’s liability for what is and isn’t 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 Harry’s 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 Markle’s 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 women’s fashion line at Montreal-based clothing store Reitman’s, 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 Markle’s 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 won’t be able to renounce her U.S. citizenship right away. She will eventually become a British citizen, but she can’t even apply for citizenship until she’s 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 doesn’t have a worldwide tax system. But that wouldn’t solve the problem of the IRS learning certain details of the royal family’s 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 couple’s marriage highlight the complexities of the U.S. tax system. It’s convoluted enough if you’re a U.S. resident, and it only gets worse if you’re a U.S. citizen residing abroad. As the couple’s 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.
But she would, royalties are earnings and her TV shows will be on re-runs, her movies on DVD, etc. Her previous acting work will prodcue a lifelong income that will require filing of a US tax return.
Only if she has lifelong residuals...which very few do
Plus her so called work as an actress is uninteresting. I doubt it will produce much
My Uncle retired from the Railroad, he then invested in rental homes and an apartment building and a few other things. When he passed away my aunt had more issues with the Railroad Retirement than anything else he left her. I seem to remember she did get a widow’s benefit and health insurance from that but also remember it caused her issues with taxes and things. It seemed to be different than anything else.
I certainly know the implications of the word “commoner” in the Brit system. You are missing my point about the difference between manmade titles and biological bloodlines, nor did I plagarize any post from Closer Magazine (GailA posted it, I merely commented on it as posted); but it doesn’t matter. You like to debate in black and white, absolute terms. I am more interested in shades of meaning. Therefore we may rarely agree on matters of historical dispute, such as whether or not Queen Charlotte was actually part black or whether it was the fake news of the day. Either is possible, but I really don’t care about it. Religion is what matters.
To be honest, I don’t understand your post. I don’t understand this stuff about “black and white” in particular. I am only posting what is defined in the British peerage system. Somehow it seems peculiarly American to rewrite how the Brits strictly define royalty, aristocracy and commoners. But it isn’t all that important, so let’s drop it.
The Arch Duke Franz-Ferdinand and heir to the Austro-Hungarian Empire, had such a union and therefore, his children had NO claim, whatsoever, to the throne, if the monarchy had survived WW I!
Being an aristo, in any nation, but especially in the UK, in 2018,has absolutely NO bearing on being a "ROYAL"; not to mention some many centuries back, legit or wrong side of the sheets, a birth to some long ago ROYAL was! ERGO, NO aristo is a "ROYAL", but IS a "commoner"!
And the whole stupid "QUEEN CHARLOTTE WAS BIRACIAL" crap is not only specious CRAP, but patently ridiculous!
The press in Great Britain, during the time King George III was alive ( and afterwards too ), was as brutal, if not more so, than what we have in the USA today! Political cartoons were vicious; even MORE vicious than today's FAKE NEWS and tweets! And before you claim that this stuff only reached a few, please allow me to disabuse you of that idea. This crude and yes, vulgar stuff was EVERYWHERE and because they were cartoons, even the illiterate could understand what the pictures meant, even though they couldn't read the words.
Di and Kate were/are commoners and "IF" somehow related to the ROYAL family, many, many, many, many generations back ( and far removed from the House of Windsors !), it's so far back, as to be completely removed from "consanguinity", that a claim of "INBRED" is beyond laughable in the extreme!
And FYI...the late Queen Mother ( Elizabeth II's mother ) was also a "commoner", though an aristo!
Thanks for explaining all that, Camilla.
I doubt that you understood my Cliff's Notes history lesson, but you should be. Bless your heart.
It seems you are back.
Bet that nobody reading this thread ( except you ) has ever even heard of a "MORGANISTIC" royal marriage. *snicker*
Oh, yes, I know they tried it with Mrs. Simpson. I’m not nearly the expert on royalty as you are, though.
As you know, the whole kings & queens of Europe and England caught my attention and curiosity, when I was really very young...so I just kept reading and studying history and still do. :-)
The ANGLO-SAXON CHRONICLES is a fascinating book. :-)
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