Turns out the IRS doesn’t look the other way, even when you’re a duchess. By now Meghan Markle is probably used to paying taxes as a U.S. citizen living abroad, since she worked in Toronto for years while filming Suits. But her taxes will become even more complicated once she marries Prince Harry on May 19 at Windsor Castle.
Here’s just a short list of the things she’ll have to report to the IRS as an expat with a spouse who is a non-U.S. citizen, according to The Wall Street Journal:
- Any tiara or diamond bracelet Queen Elizabeth gives—or even just loans—her.
- The value of her half of the free rent of the cottage she shares with Prince Harry at Kensington Palace.
- Any debit or credit card she has linked to Prince Harry’s bank account with more than $10,000 in it.
- A vacation at one of the Queen’s castles (yes, really).
- While she wouldn’t necessarily have to pay more taxes because of these things, if she fails to report them, the penalties could be severe. And because most of the royal family’s assets are held in trust, Markle might even owe tax on the value of the benefits she receives from those assets up to a rate of 37 percent, hence the possible castle vacation tax.“IRS agents are highly aware of these rules,” Dianne Mehany, a tax lawyer with Caplin & Drysdale, told The Wall Street Journal.The scrutiny Markle will have to endure from the IRS might even make it worth it for her to renounce her U.S. citizenship, some think.
- Kensington Palace confirmed that Markle will start the process of becoming a U.K. citizen after her wedding, but she won’t officially receive that status for at least three years. While she could choose to retain her American citizenship and become a U.K. citizen—meaning her and Harry’s children could carry both U.S. and U.K. passports—she could also choose to renounce her U.S. citizenship to avoid this intense tax situation.But if she does choose to do that, she’ll have to pay an exit tax on assets like a house or stock portfolio—even if she doesn’t sell those assets. Plus, regaining U.S. citizenship is very hard once you renounce it.“If she did, it would be for keeps,” Peter Spiro, a Temple University law professor, told The Washington Post. “Those who renounce are treated as if they never had citizenship. To get it back, she would have to go through the ordinary naturalization process.”