A look at form 1040NR shows that it must be possible for some nonresident taxpayers to claim a spouse or dependents. The section labelled Exemptions has boxes to check and lines to complete for 7b Spouse, and 7c Dependents, as well as 7a, Yourself.
If you have heard that non-residents must file alone, whether as single or ‘other married’ (treated as married filing separately), these lines are puzzling. And perhaps tax software seems not to let you place a spouse or child on the completed 1040NR return.
The answer lies partly in the U.S. tax code, and partly in bilateral tax treaties.
Look above Exemptions at the Filing Status section of 1040NR. Three choices list ‘resident’ of a specific country, or a personal status (QW- qualifying widow/er). The countries are Canada, Mexico, or U.S. national, and South Korea. Residents of those countries may be able to claim a spouse or dependent. A resident of India who is a student or business apprentice may also be able to claim a spouse or dependents on the tax return.
(A U.S. national, for tax purposes, is someone who owes sole allegiance to the U.S., was born in American Samoa or the Commonwealth of the Northern Mariana Islands, and elected (chose) to be treated as a U.S. national and not a U.S. citizen.)
Some conditions apply equally to each of these situations and some are specific to only one situation.
All people for whom a personal exemption will be claimed on Form 1040NR:
Must have a social security number, or other Individual Taxpayer Identification Number (ITIN), or have a W-7 ITIN application attached to the tax return.
A spouse must not have any U.S. source gross income.
A spouse must not be claimed on another U.S. income tax return. This would disqualify a spouse who is under age 19, or under age 24 and a full-time student, and has been claimed as a dependent on a family member’s tax return.
Most spouses are shown on the last line in the Filing Status section, below the numbered boxes. That line is divided into i, ii, and iii, for first name, last name, and either SSN, ITIN, or a literal (letters) such as NRA.
An Indian spouse is shown in the Dependents section.
A potential dependent must be a U.S. citizen, or a resident of the U.S., Canada, or Mexico. The tax code wording is: a resident of the United States or a country contiguous to the United States. IRC 152(b)(3)(A). I refer to these three countries as North America. The first dictionary definition of ‘contiguous’ is touching, in contact. A country contiguous to the U.S. shares a common land border with the U.S.
Country-specific requirements:
South Korea residents: A claimable spouse or dependent must have lived in the U.S. in the same household as the taxpayer for some of the tax year. The amount of the personal exemption that may be claimed is pro-rated according to the ratio of U.S. source income effectively connected to a U.S. trade or business as defined in IRC 864( c ), over total worldwide income. See Article 4(7) of the U.S. Korea treaty.
Indian Students and Business Apprentices:
A claimable spouse or dependent must meet the conditions in the U.S. – India Treaty article 21(2). The spouse is claimed on a line for Filing Status 7c, Dependents, not by checking 7b, spouse. Dependents must not have entered the U.S. on an F-2, J-2, or M-2 visa.
The U.S. – India tax treaty also allows Indian students and business apprentices to claim the standard deduction instead of itemizing deductions, if that is more advantageous. There is a special worksheet for comparing and making the choice of standard vs itemized deductions.
See worksheet 5.1 in Publication 519. Specialized tax software will make this calculation and enter the appropriate choice according to the tax rules.
What are the keys to having an eligible spouse or dependents appear on the tax return?
–entering the country of residence or citizenship into tax software usually invokes the rules that may apply
-additional pop-ups appear at key points, such as choice of filing status, to allow the entry of a spouse or dependents
Go slowly, or you may go right past an entry point!
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