Hey Guys,
I'm still thinking over everything we would need to consider if we decide to return to the UK and I have just spent a couple of hours getting totally confused about tax stuff. I was wondering if anybody can let me know if I understand things correctly.

I am currently a US permanent resident married to a US citizen. If I get my citizenship before leaving my wife and I will both have to file a tax return every year from the UK but will not have to pay any US tax unless our income is over $80,000. If I do not become a citizen and let my resident status drop, only my wife will have to file a return, but will not have to pay tax on income under $80,000. Is that correct?

Also, I am assuming that my dual citizen children would also have to file returns from the UK once they start working.

Thanks!

Hi Kai,
If you are a US citizen you have to file a 1040 every year. You get an exemption of $80k for foreign income. Even then, because of the tax UK/US treaty there are ways to avoid double taxation.

If you have a Green card and spend even one day in the US during the tax year you are liable to US tax. I think you have to actively renounce the Green Card to not be resident for tax purposes. However, I also believe that if the IRS thinks you are doing this to avoid taxes they might not let you do this and may still require you to file a 1040. In the UK you and your wife will be required to pay taxes per your UK status, i.e. as UK residents.

I think the complications of dual citizenship and taxation is one situation where a qualified tax specialist is really useful. There are just too many potential pitfalls and a few hundred dollars spent on getting an expert to file your taxes is worth the saving in worry and the avoidance of dual taxation.
See you again