Will the babies of Meghan Markle and Prince Harry have to pay US taxes?

April 15, 2019, 20:46 GMT

By Alyssa Newcomb

The baby of Meghan Markle and Prince Harry will be born into the privileges as a member of the British royal family, but he will also have the rights of a US citizen.

It is also the obligation to file an annual income tax return with the Internal Revenue Service, an obligation that must be met by Americans born abroad, even if they have never lived in the United States.

"If you're an American citizen, you have to pay US taxes anyway," said Steve Dean, faculty director of the Graduate Tax Program at New York University School of Law.

Under US law, a US parent automatically passes citizenship to a child born abroad, provided the parent has lived in the United States at some point in the past five years. In the case of the royal baby, he will probably be eligible for a US passport.

The United States is one of the only countries in the world to tax non-resident citizens. This means that even the Duchess of Sussex had to file a tax return with the IRS this year, while she was a member of the British Royal Family and lived thousands of miles away.

"The United States is exceptionally broad in its idea of ​​taxation of citizenship," said Michelle Lyon Drumbl, a clinical law professor and director of the Washington & Lee University Tax Clinic.

According to the Association of US Overseas Residents, about 8.7 million Americans, not counting the military, live abroad in more than 160 countries. Americans have the burden of compliance to file a tax return, but most of them will be exempt from paying additional taxes to the IRS, because of the exclusion of income tax earned at abroad. This allows people who earn a normal-sized income to not have to pay extra taxes if they do not live in the United States. They simply have to account for it.

"For most people, it's not such a big problem, but if you're very rich, you'll have a lot to worry about your filing obligations," Dean said. Although, theoretically, the royal baby does not have to file a tax return next year, any investment in his name could potentially be within the reach of the IRS.

And if it is not enough to suffer the imposition of a massive tax debt, Americans abroad must also prepare their own tax bill. Most countries tell every citizen what they owe, but in the United States it is up to the taxpayer to calculate his own bill and send the appropriate payment to the government.

Boris Johnson, former mayor of London and UK foreign secretary, drew the attention of the IRS in 2014 after selling his house in London for profit. Johnson was born in New York in 1964 to British parents, but returned to the UK when he was young.

Johnson eventually paid the tax bill, which he called "absolutely scandalous," and renounced his American citizenship. But in the land of freedom, nothing comes free. The price to give up US citizenship is $ 2,350, one of the highest in the world.