Children Born in the USA – US Tax Implications

All BDSUS military and civilian personnel should be aware that any child born in the USA is automatically granted US citizenship and will be subject to US tax laws at aged 18, even if they are not residing in the US at the time of their 18th birthday. The only case by which citizenship is not granted is where military or UKBC staff hold an A1 diplomatic visa as children born to diplomats under the Vienna Convention protocols, do not come under US tax law for children born in the US.

You should therefore be aware and consider fully the implications of this US taxation policy when deciding to have your child birth in the USA.

The Foreign Account Tax Compliance Act (FATCA) which became law in 2010 was introduced to help US Authorities and US Internal Revenue Service (IRS) to combat tax evasion by US persons holding accounts and other financial assets abroad.  

The decision by the US Federal Government to introduce or change tax laws is not something the UK Government can influence or comment on and includes the introduction of FATCA in 2010.

The policy leads, in Armed Forces People Support who work within the auspices of the Armed Forces Covenant have previously spoken to the Treasury and been referred to the 2001 convention between the US and the UK which aims to avoid double taxation, a copy of which can be found here https://www.gov.uk/government/publications/usa-tax-treaties Those individuals who hold dual US/UK citizenship are able to apply for a waiver of US taxation as long as their UK tax affairs are in order and a tax return is submitted.

Individuals who hold dual US/UK citizenship will be granted a waiver from US taxes provided their foreign-earned income is within the exclusion credit, currently equivalent to just over £81,000 and their UK tax affairs are in order. Further information can be found here: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion 

The only mechanism by which a child born in the USA to a military or UKBC spouse can avoid being liable to file a US tax return is if they renounce their US citizenship on reaching 18. The current cost is approximately £1850.00. This can be done at the Embassy of the United States in London. Detailed information is here: https://uk.usembassy.gov/u-s-citizen-services/citizenship/loss-of-u-s-citizenship/

Any consideration of rescinding US citizenship warrants very careful consideration since it is generally irreversible.

Last Updated: Nov 1, 2019 @ 1:45 pm

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