How to report foreign maternity benefits for resident alien spouse?

[rehtri101]

I am a U.S. citizen. My spouse is a Hungarian citizen and received her green card in Aug. 2024. We resided in the US the entire year. We are trying to file Married-filing-jointly.

She received maternity allowance last year from the Hungarian government. It has already been taxed in Hungary. 

• How should I report this on my tax return? Right now, it's under Misc. income because I cannot find an appropriate category.
• How can I report foreign taxes paid on this amount? We do not qualify for the FEIE since we were US residents the entire year. 
• Alternatively, since she received her green card toward the end of last year and was not subject to taxes the previous year, does she have the option of not being treated as a resident for last year?

I appreciate the help!

[DaveF1006 · Accepted solution]

Yes, miscellaneous income is the most suitable way to report this income. Rather she received the green card or not, she's a US resident because she resided in the US more than 183 days. She cannot opt to be a non-resident for the entire year.

To claim the Foreign Tax Credit:

1. Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit
5.  As you go through the screens, when it asks "Tell Us About Your Foreign Taxes" select none of these apply.
6. When it asks if you wish to take the deduction and credit, take the credit.
7. Continue through until you reach a screen that says "No other income or expenses" Say no
8. Continue through until it asks the income type, say Passive Income
9. Next add a country pick Hungary
10. Other Gross Income say Maternity Allowance and the Gross Amount of the benefits paid
11. Continue through the interview until it asks for the foreign taxes you paid, here record the amount.  
12. Now you are done reporting the foreign taxes. Just keep going through the section without making any more entries. You will have finished reporting your gross income from the sale and the foreign taxes paid.

[ChrisUK]

I have a similar situation. My wife (British) moved to spend all of 2024 with me in US while receiving UK maternity pay. I am worried if we add this as Other income on the 1040 then we will have to pay full US income tax on it before being credited it back for next years taxes, which comes to a crazy amount of dollars (around $20,000!). Have I understood this correctly that we'll have to pay all this money and then wait a year to get it back?

[rehtri101]

From all the advice I received, it will depend on your wife's residence and tax status for last year for reporting, and the foreign taxes already paid on that amount.

I can confirm that when I reported the income in TurboTax, it lowered my return initially - but once I reported the foreign taxes paid on it and received the Foreign Tax Credit, the refund amount bounced back up. So it showed up for this tax year on our return. 

[DaveF1006]

it depends. Article 22 of the UK/US tax treaty says "Items of income beneficially owned by a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention (other than income paid out of trusts or the estates of deceased persons in the course of administration) shall be taxable only in that State".

Since she is a resident of the US for tax reporting purposes in 2024, the income should only be taxable in the US. If the income was reported and taxed in the UK, you may claim a foreign tax credit on your return.

So you would report this as other income in the manner you mentioned above. If she reported this income in the UK and paid taxes on this income, you may claim a foreign tax credit in 2024.

1. Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit
5.  As you go through the screens, when it asks "Tell Us About Your Foreign Taxes" select none of these apply.
6. When it asks if you wish to take the deduction and credit, take the credit.
7. Continue through until you reach a screen that says "No other income or expenses" Say no
8. Continue through until it asks the income type, say General category income
9. Next add a country pick UK.
10. Finish out the section.

[ChrisUK]

Thanks both