Should I apply for The First Year Choice (and Joint Return Election)?

[Pickled-James]

I'm trying to work out if it is better to apply for the First Year Choice (to file as a resident alien, jointly with my wife) or not (and file as non-resident aliens, separately).

Details:

• My wife and I moved to the US in August 2017. 
• In the UK, I earned c.$100,000 p.a., or c.$60,000 for the first 7 months of the tax year.
• My wife earned c.$10,000 over the first 7 months.
• On moving to the US, I still earn c.$100,000 p.a., or c. $42,000 for the last 5 months.
• My wife hasn't yet worked in the US
• I rent out my property in the UK, at c.$17,550 for the whole tax year.
• I will qualify as a resident alien in 2018 due to the Substantial Presence Test

As a non-resident alien, I don't have to pay tax on my UK income, although I know the US has a tax treaty with the UK. As a resident alien, I do have to pay tax on UK income, but I can claim more with-holding tax (such as spouse) than as a non-resident alien - I just can't work out if I will end up paying more tax by making the First Year Choice or not.

Any ideas or suggestions how I can work this out welcomed!!!

Thank you,

James.

[DS30 · Accepted solution]

You will probably have less US income tax liability by filing as a nonresident alien for 2017 if you do not meet either the Green Card Test or the substantial presence test.

If you make the first year choice, your US income will be taxed at a higher marginal tax rate because you will only be able to claim either a foreign tax credit or foreign earned income exclusion on your foreign sourced income only.

Also if you make the first year choice and want to file jointly, both you and your spouse will need either social security numbers or ITINs.

You may just want to prepare 2 sets of returns (one as full year resident file married filing jointly) reporting worldwide income and one as nonresident alien reporting US sourced income only.

Please click the following links for more information - US Tax Guide for Aliens.

[Pickled-James]

Will TurboTax Live help me prepare both sets, to see which is better?

[DS30]

I am not sure if TurboTax live can do dual-status returns. You can always contact them and ask. Here is a link <a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/personal-taxes/online/turbotax-live.jsp">https://turbotax.intuit.com/per...>