Will Harry & Meghan’s Child Pay U.S. Taxes? The New Royal Baby Is Likely To Have Dual UK & U.S. Citizenship
Unless you've been living under a rock for the past few months, you'll know that the Duke and Duchess of Sussex are expecting their first child together, and I for one couldn't be more excited. The baby is due any day now, and questions are beginning to arise about what life will be like for the brand new royal baby — including when it comes to the child's citizenship. It seems there could be a bit a sticky situation brewing for both Meghan and her baby when it comes to U.S. tax requirements. So, the question is, will Harry and Meghan's child have to pay US taxes?
The Independent states that "[a]s the child of Prince Harry, the royal baby will automatically be a British citizen, due to its father’s UK citizenship." But will the baby also have American citizenship?
According to the U.S. Embassy, a child born to an American parent "may acquire U.S. citizenship at birth if the U.S. citizen parent has been physically present in the United States or one of its outlying possessions for a period of five years, two of which were after the age of fourteen." And Meghan falls within these parameters.
This is where the issue of taxes will come in. As the Internal Revenue Service states:
"If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside."
This means that, no matter where you live in the world, if you are a U.S. citizen, you are required to file your tax returns. Even though, following the birth, Meghan and the baby will be living in Frogmore Cottage in Windsor, England, they will still be subject to U.S. tax requirements.
According to the BBC, American citizens abroad are required file tax returns that reflect their income, as well as gifts they received that were worth more than £12,080 ($15,797) and assets they have that are worth over £152,930 ($200,000). They are also obliged to disclose any foreign bank accounts in their possession.
As the BBC states, Meghan's baby shower gifts are likely to be taxable, along with "[a]ny future income from investments or trusts put in the child's name."
One way of avoiding U.S. taxation would be for both Meghan and her child to renounce their American citizenship. However, quoting from the U.S. government website, the BBC states: "Under US law minors under the age of 16 are 'presumed not to have the requisite maturity' to relinquish citizenship." This means Meghan and Harry's child will have to wait until 16 before any changes can be made to their citizenship.
It's likely, due to her new role as the Duchess of Sussex, Meghan will eventually apply to become a British citizen by naturalisation. According to gov.uk, one way a person can apply by naturalisation is if they are married to, or have a civil partnership with, a British citizen, and they have lived in the UK for the last three years.
But we'll have a while to wait to learn any news about the new royal baby. Any updates will be kept private for a while, as Buckingham Palace announced:
"Their royal highnesses have taken a personal decision to keep the plans around the arrival of their baby private. The Duke and Duchess look forward to sharing the exciting news with everyone once they have had an opportunity to celebrate privately as a new family."
Fingers crossed we won't have to wait too long for the news. I can't wait!