When one spouse (Spouse A) is a nonresident alien or holds dual-status residency, and the other spouse (Spouse B) is a U.S. resident at the end of the tax year, they have the option to make a joint election to be treated as full-year U.S. residents for tax purposes. This allows them to file a joint tax return. IRC section 6013(g) addresses situations where Spouse A is a nonresident alien, while section 6013(h) pertains to when Spouse A is a dual-status resident.

A standard election statement might read as follows:

As of the last day of the tax year ending on 12/31/23, Spouse A was a nonresident alien, and Spouse B was a U.S. citizen or resident alien. In accordance with IRC Section 6013(g), we elect to be treated as U.S. residents for the entire tax year ended 12/31/23, and for all subsequent tax years.

This election has both numerical and legal ramifications.

By choosing to be treated as a full-year U.S. resident, Spouse A is required to report worldwide income. However, when income is low or nonexistent, the benefits of a joint tax rate often outweigh the increase in reportable income. Moreover, the foreign income may not be fully taxed due to the availability of the foreign earned income exclusion, the foreign tax credit, or both. For a detailed numerical analysis, please refer to this post of mine.

Once made, the election remains in effect for all subsequent years unless it is suspended or terminated.

The election is suspended in years when neither spouse is a U.S. citizen or U.S. resident alien.

The election is terminated if either spouse revokes it, in the event of the death of either spouse, or in the case of legal separation. Once terminated, neither spouse can elect this option again, even if remarried. “It is a once-in-a-lifetime choice,” according to the IRS, as stated on their website.

It’s important to note that termination of this election doesn’t preclude Spouse A from becoming a resident through other means. For instance, Spouse A could still achieve resident status by holding an F1 visa for over five years, transitioning to an H1-B visa, or by obtaining a permanent residency. It is just that once the election under IRC Section 6013 is terminated, Spouse A cannot elect resident status again while being a nonresident.

If Spouse A is on track to become a U.S. resident, making the election may not have additional consequences. However, if Spouse A plans to work abroad and prefers not to be taxed as a U.S. resident, careful reconsideration is advised.