Duchess Meghan’s 2018 American tax filing is going to be a gigantic mess

The Duke of Sussex and Duchess of Sussex attend a traditional Fijian ceremony

I have zero expertise on American tax law. I still pay people to do my taxes for me, although I think if I really wanted to, I might be able to figure out my own taxes myself. Still, I like the comfort of handing off all my paperwork to a professional, and I am merely a humble gossip blogger. I would imagine a Hollywood actress -turned-British-duchess would have access to even better tax advisors and tax specialists. I have faith that Meghan’s 2018 tax situation is probably well-handled, since she’s still an American citizen and she’ll have to pay taxes here. But that’s not going to stop the British tabloids from claiming that Meg’s taxes will, like, bring down the monarchy.

Despite marrying into Britain’s most famous family earlier this year, Meghan Markle is still an American citizen. Her journey to legally become a British subject will take several years to complete and during this time, the Duchess of Sussex will still have to pay tax in the United States. This means that every penny of her royal income will need to be declared to US officials, who will be keen to know how much the 37-year-old earns, saves on rent and receives in gifts from the Royal Family.

But that’s not all. Strict American rules could mean that Prince Harry’s money also comes under threat from the tax man. This is because guidance notes for US citizens state that “you are generally taxed on income available to you, regardless of whether it is in your posession.” Therefore, the Duke of Sussex’s £20million trust fund, set up with money he inherited from the late Princess Diana and the Queen Mother, could be liable for tax, as it is money which is “available” to Meghan as Harry’s wife.

This account produces an income of £300,000 a year for the 34-year-old prince, on which he already pays UK income tax. If that weren’t bad enough, royal aides recently told The Sunday Express that the tax probe could also extend further into the family and impact the Queen and Prince Charles as they both provide funding for the couple.

One aide revealed: “We’re looking at a level of financial exposure the Royal Family has never had to face before. It’s the royal household’s worst nightmare.”

Buckingham Palace will reportedly be recruiting a team of US financial experts to assist with Meghan’s tax returns.

[From The Daily Mirror]

“Buckingham Palace will reportedly be recruiting a team of US financial experts to assist with Meghan’s tax returns.” I imagine the Queen herself will fly in a team of H&R Block employees and sit them down in her office. I need to hear the Queen ask, “But is a tiara a business expense?” From what (admittedly little) I know of American tax code, I tend to believe that Meghan will probably just have to pay taxes on her Suits income, and she probably won’t have to declare most of the “gifts” she’s received as a duchess, right? She didn’t receive the tiara as a gift, it was just a loan. Harry has gifted other jewelry to her, but that’s a matter for his taxes, not hers? And most of her new clothes have been bought by Prince Charles, so… yeah, actually, her taxes are going to be a mess. WRITE IT ALL OFF AS A BUSINESS EXPENSE.

The Royal Family attends a Service to commemorate the Armistice on the centenary of the end of WWI

Photos courtesy of WENN, Backgrid and Avalon Red.

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80 Responses to “Duchess Meghan’s 2018 American tax filing is going to be a gigantic mess”

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  1. Loretta says:

    This week the tabloids have tried one story after another not realizing that they were ridiculed by everyone LOL

    • Meowuirose says:

      Since when did jewelry become taxable? It’s not income. You dont declare a car or other large purchase/gift. I’m sure this was all worked out before they got married. It’s the BRF, they know what they are doing.

      • dota says:

        Someone needs to go review the IRS rules about gifts. Unless there is a specific exclusion then everything is taxable.

      • Meemow says:

        Dota- I’m not sure that’s entirely accurate. My husband gifted me diamond earrings for my birthday this year. Since he paid taxes on his income and sales tax when he purchased them, additional gift tax is not due just because he gave them to me, his wife. I believe the same will apply to jewelery and such that was gifted from Harry to Meg.

      • jan90067 says:

        She will have to pay gift tax (like on the jewelry Charles gave her as a wedding gift.

        I wrote this in a post here yesterday:

        As for the rest, she’s probably (wisely!) going to file as “Married Filing Separately”, where she will disclose all income/residuals from Suits and any other movies that may be running somewhere. I’m sure as far as her clothes, the black AmEx Charles extends goes right to Charles’ office, so it is not really “gifted” to her: HE is paying directly. Doesn’t matter if he or she wears it. SHE is not “deriving income” for/from it.

        Also, I’m sure she and Harry were advised NOT to co-mingle financial accounts, so as to be able to file this way. She may also pay a nominal “rent” so as not to have NotCot be taxed as *her* residence (this could also be why she and Harry haven’t been “gifted” a residence by TQ yet).

        It’s more complicated, but I’m sure they had the BEST advisors put things in place before the wedding. So while she may have to pay stupid-high tax on HER portion, Harry’s is safe from the US Taxman, so far 😊

        (Full disclosure: I am not a tax atty., but do have one in the family).

      • Chrstn says:

        She will not have to pay gift tax on jewelry received. For starters the recipient of a gift is not the one who pays any gift tax, the gift giver is the one who typically files a gift tax return and pays any applicable tax (there’s an exclusion for this up to $15,000 which is why this isn’t something that’s done for most gifts) That would not apply in this case however since the gifts given were likely from a non US Citizen and gift tax doesn’t apply to foreign gifts. What she may have to do is file an informational return (meaning no tax due, just required to report) that states the value of gifts received from foreign persons (depends on the value of the gifts). I would imagine that she has tax accounts and attorneys that specialize in this type of situation as she’ll likely have other reporting requirements if she’s opened any bank accounts there. I work in tax accounting and you do not want to mess up foreign account reporting – typically no tax is due on these accounts, but penalties can be huge for not reporting. I have no idea about UK taxes and what the rest of the royal family will have to do, but as many others said she’ll likely file “married filing separately”
        ETA: obviously please don’t take the above as any tax advice, just stating what is readily available on the IRS site

    • harla says:

      Oh this is so true Loretta, it’s been one thing after another and the DM is keeping these silly stories up for days just hoping for some traction.

    • Lilly says:

      Thanks Loretta, it’s so true. From Kaiser’s tongue-in-cheek “British tabloids from claiming that Meg’s taxes will, like, bring down the monarchy” to the real article’s “One aide revealed: ‘We’re looking at a level of financial exposure the Royal Family has never had to face before. It’s the royal household’s worst nightmare,’” I’ve been laughing. Yeah, that’s their worst nightmare.

      • LeanorRhat says:

        What is exposed is his income and things like the clothes she had bought for her by the Duchy is she keeps them. They are her’s, we’re gifted to her and are over a certain amount of money. A couple of grand, no big deal. 1/2 to 1 million in clothes bought for her? Major taxes.
        And they will tax her on his income regardless unless they are legally separated and living separately.
        This is a hassle and a concern to a family who hides their money.

    • Megan says:

      My gawd, they have it out for Meghan. This may be the greatest work of fan fiction ever written about the US tax code.

  2. Lily says:

    The Royal Family saw all of this coming and I am certain by the time Harry had gained the Queen’s permission to propose to Meghan in 2017, a team of lawyers and experts were hired to handle this. I mean come on, this is a monarchy we are talking about, of course they have a plan. Royal finances are secretive for a reason. Believe me, this is a non story.

    • Seraphina says:

      Riiiiight. Like the monarchy didn’t see this coming. This is a non story and just the press digging to print ona slow news day.

    • Mara says:

      It’s not news to the Royal Family but it is news to me (and some others probably). I’d never stopped to think about Megan’s tax affairs I find this mildly interesting so I think The Mirror are justified as using it as a story.

    • Bex says:

      Exactly. I think Lily has it well summed up. These people are really good at keeping their money safe.

    • april says:

      Exactly. Such a nonstory.

  3. Millenial says:

    Oh please, the fear mongering if that Harry’s Diana money will be up for US tax grabs is laughable. My guess is she will file married filing separately. Who writes this crap?

    • yiza says:

      yes this.

    • Clare says:

      Right? I am an American/Brit dual citizen, married to a Brit, living in the UK and I have never been taxed on my husband’s income or assets. I don’t even have a fancy schmancy tax accountant. Just don’t file jointly, simples.

      The IRS DO chase you for every penny, though, including gifts and assets. So if Meg and Harry are given a property, then I suppose that would be taxed. (although surely crown properties can’t actually be GIVEN outright, to anyone, but rather given for use?)

      • Ainsley7 says:

        If it’s a crown property than it is not an actual gift but more like a loan. However, they don’t actually have that many properties available at the moment. Both Anne and Andrew were gifted houses and not crown owned properties when they married because there weren’t any available. Andrew moved into Royal Lodge after the Queen Mother died and sold his house. Edward got lucky with Bagshot park being available. Will and Kate only got Amner because the tenants were willing to move.

    • Roux says:

      I think @Clare is right. Harry’s personal income will be kept out of it. They’ll only be interested in Meghan’s income but that will include gifts and accommodation. They’ll expect her to be paying market rates or she will be taxed on the difference. Market rates on a huge apartment in Kensington would be pretty huge so it would explain why they’re sticking with Nottingham cottage.

  4. Becks1 says:

    I’m sure her taxes are going to be messy. I’m also sure that the palace is going to hire top tax lawyers and accountants and in the end it will be fine.

    • Melly says:

      I really don’t see her taxes being that messy. Her tax lawyers have probably had MUCH messier clients. This seems almost basic rich people tax return.

      • Becks1 says:

        I mean, they’re not going to be the messiest ever, but I don’t think they’re going to be basic. I also don’t think they’re going to bring down the monarchy lol.

      • Melly says:

        Not basic like you and I basic (no offense!), rich people basic.

  5. Chaine says:

    This is just the dumbest story. Pretty sure the US government is not going to subpoena the Queen of England’s financial records to see if they can tax her over mythical availability of her wealth to Meghan.

  6. OriginalLala says:

    The story is stupid but what it underlines is just how little of the Royal’s own money is actually used to support their lifestyle – those are numbers that would be fascinating to see!

  7. Lala11_7 says:

    Everyone’s taxes are going to be messy next year…thanks to the BS tax cut that was done…and the changes that were made…but weren’t really EXPLAINED to corporations regarding withholding…

    If you don’t file zero deductions through the whole year…may G-d help you….

    • Surely Wolfbeak says:

      This is correct. Everyone should be very afraid.

    • Hotsauceinmybag says:

      Deductions or exemptions?

      I always find this so confusing, even though I try my hardest to educate myself!

    • harla says:

      I had extra withholding taken out of my check to make up for what ever tax cut I received. I fear for those who didn’t.

    • Millenial says:

      Yeah, we were worried this year’s taxes would be a sh**show, so we made sure they took out more this year than they normally do. We also had another child, so I’m hoping that helps. But I definitely think some folks (maybe even us, despite our planning) are going to be in for a surprise.

      • IlsaLund says:

        Another child may not help this year: The Tax Cuts and Jobs Act of 2017 eliminates personal exemptions for tax years 2018 through 2025.

    • lucy2 says:

      Ugh that tax cut. I’m in a highly taxed blue state and going to end up owing a lot more thanks to that mess. My rep was the only in my state to vote for it, and we just voted him out of office. :) I pre-paid some property taxes last year to soften the blow this year, but next year should be even more painful.

  8. Who ARE these people? says:

    When did she leave Toronto? She may also need to file a Canadian return (including Ontario ) for that portion of the year. The split-year returns are, to me, the messier part. Once they have a full year of her living in the same place, it’s going to be still complex but not so messy. And should she renounce US citizenship at any point, then she sheds that obligation.

    • Nic919 says:

      She’s American and would not be paying income tax in Canada at all. If she was a dual American and Canadian citizen she would have to reconcile her Canadian and American income, but that’s not the case here.

    • Jaded says:

      She won’t have to pay Canadian taxes, she’ll be taxed as an American citizen living outside the country.

      • Andrea Lupparelli says:

        Wrong. I am an American living in Canada. If she was paid canadian dollars, she would have to file a canadian tax return(which is what I do). The nasty bonus is she has to file an irs claim, whether she made money in us dollars or not. Then she has to show whether she has made money in the uk too.

  9. Busyann says:

    I work in American Tax law and I’m pretty certain that this was addressed even before they got married. Even the most average joe American can find good people to handle their taxes, and because Meghan was a American celebrity living and working abroad even before her marriage, she probably already had complicated taxes and employed some tax genius to handle her yearly filings. Meghan is bright, I dont doubt they would have thought about taxes before marriage. Besides, she could always file married filing seperately and leave Harry out of it.

    • Originaltessa says:

      Exactly. You don’t have to file jointly with your spouse. This is a non story.

    • Who ARE These People? says:

      Yes exactly, she was already aware of issues with filing as an American abroad. There are tax treaties as well. The main pain about maintaining US citizenship is that you have to keep filing where ever you reside. No other country (except Eritrea) requires that.

      It takes a while to renounce and even if she does, she would need to get British citizenship first, and they’ll probably want to have their children have US citizenship through her, at least at this point.

    • lucy2 says:

      That’s what I figured. Why on earth would anyone expect her to file jointly with him? Ah yes, to sell stupid tabloid stories.
      I bet it will be complex, with the gifts and all, but not crazy like they’re trying to say to rile people up.

      I do keep forgetting she isn’t a British citizen, kind of funny to be the Duchess of Sussex and not be a Brit!

  10. Peg says:

    Enough with the tax hysteria.
    Meghan most likely will file separately, since she is the US citizen.
    Where is the out cry, for Jared and trump not paying taxes at all.

    • niki says:

      Exactly. It’s sick how very little taxes wealthy people and businesses actually end up paying. I’m sure Meghan’s people can work their magic.

      • Thirsty Hirsty says:

        Miniature business here (me and one staff) in Canada and the weight of my tax burden is pulling me under. We are taxed under the same rate as a business with up to 100 employees (my one staff against someone’s 100 staff does not an equal equation make). Niki, I think businesses and corporations need to be separated out of the discussion…because the amount a corporation pays is sometimes less than what I’m paying. You’re right on regarding how sick it is that wealthy people can profit from tax loopholes unavailable to us little guys, but we’re the ones carrying the burden. I’m proud to pay taxes, make no mistake, b ut I wish our systems were fairer.

      • Who ARE These People? says:

        Thirsty Hirsty (great name!), I was a sole proprietor and my tax rate was higher than the corporate rate. Indeed it was not fair.

  11. PeggingOut says:

    Stubbornly have always done my own taxes because I wanted to understand them. It’s a point of pride. Turbo Tax is really great and handles even complex situations well. (Not royal family complex though, I’m sure). But complex enough that the year I retired (and received various deferred income payouts), moved, lived in 2 states, bought and sold 2 houses, and my dependent college aged son earned income in @ 3rd state and a foreign country…….well it handled all that handedly. Even if it did roll its eyes at our lives that year.

    Im not aghast at MMS taxes, They knew it, saw it coming, and….in the words of the famous Joe Walsh…..”they have accountants that pay for it all.”

  12. me says:

    This is just getting ridiculous now. Next will be a story about her bowel movements and how we should all be concerned.

  13. Ninks says:

    Why though, do Americans have to pay tax if they’re living abroad? That makes no sense. Don’t they also have to pay tax in the country they reside and work in?

    • Busyann says:

      If an American lives abroad, but does not renounce their American citizenship, they still have to pay taxes to the US. It’s the same thing in the states, if you move from one state where you must pay income taxes, to another state but you are still a resident of and earning wages in your previous state, you have to file taxes for the previous state as well.

      I think this situation with Meghan is really two-fold, she’s still a US citizen and she’s probably still collecting residuals from her acting gigs.

    • niki says:

      Because she’s still using American resources. If sh*t goes down in England some day, she can always run to the US Embassy and they’d help her. She’s presumably still using a US passport, and that has administrative costs attached to it as well. Just because you’re not using the roads that tax dollars support, you’re still benefiting from tax money.

      • Clare says:

        Niki, the US is one of the few countries that taxes non-resident citizens this way. Personally I don’t mind paying the income tax – I view it as a contribution to my country and a fee for the right to vote – but it is frustrating paying taxes where you live AND where you were born. I am a dual citizen so I suppose I could renounce US citizenship, but many (including Meghan) don’t have that option.

    • Millenial says:

      Ex-pats can still receive Social Security and can always move back to America and receive Medicare. It seems fair that they should still pay (at least those) taxes if they will potentially benefit from them later.

    • Jaded says:

      Mr. Jaded is a dual American/Canadian citizen and has to file both Canadian and American tax paperwork even though he hasn’t lived in the US for 28 years and doesn’t pay any American taxes. It’s a real pain in the arse, apparently the US may waive Americans abroad having to file taxes if they make under a certain amount a year. Let’s hope.

  14. Cee says:

    I’m sorry but this is ridiculous. Why would Harry’s trustfund be liable to pay american taxes? That’s not Meghan’s money nor income. The trustfund, and the funds themselves, existed prior to any marriage. This is puzzling.

    • jan90067 says:

      Cee, it wouldn’t be his *trustfund* itself, but the *income* he is using with/for her that would be considered *HER* income, too. If they use that *jointly*, then it’s like HER income, too.

      Say you had a trust fund of $1M, and got $20K “interest” from investments. If that $20K is put into a joint acct., and they file jointly, both are responsible for those taxes. If he “gifts” her the money, SHE is responsible for what he gives her. The principal $1M is still HIS money, not taxable to her.

    • Boudica says:

      It is a totally alien concept to me that a person might be required to pay tax in the USA on income that is not hers which her husband earned in the UK and for which he pays tax in the UK. The income has no US connection. It is her British husband’s money, not hers, going into his accounts, not hers. His trust fund, his income, his tax liability in his country on that income. If he pays the tax payable on that income, what he does with it afterwards is no-one’s business, especially not a foreign government’s. This baffles me and seems extremely unjust.

  15. thaisajs says:

    Just because Harry has a trust fund, it doesn’t mean that it would be taxable for Meghan, even if she filed jointly. She’d only have to pay tax on any income from the trust fund, not the trust fund itself. Unless I just don’t understand US tax rules at all…

  16. OCE says:

    This header picture is probably my favourite picture of her to date. She is absolutely radiant. The picture reads like she is so content with her life, so resilient. Possibly thinking how far she has come, and how happy to have met her “prince charming” and be happily married with a baby on the way. Like nothing in the world could dampen her spirit – that is what this picture says to me. I hope everyone feels this way in their own lives too – will make the world a better place if we are all content individually in someway.

    • Melania says:

      I love that pic too. Simply gorgeous.

      • PrincessK says:

        Yes, she is confident and glowing. Trust Harry to come away with a prize like her, he knew she was something very special the moment he set eyes on her. I still would like to know the thought processes of the amazing person who introduced them.

  17. girl_ninja says:

    The British rags are going after Meghan over everything right now. Gross.

  18. Amelie says:

    Such is the curse of being American. You have to pay taxes to the IRS even if you move abroad and are earning money in foreign income. It’s one of those things that “accidental Americans” (people born in the US very young who don’t have American parents and move back to their country of origin when they are still babies not realizing they are American citizens just because they were born on US soil) may discover when they are older when their bank starts harassing them to pay their taxes to the IRS. Even if Meghan renounced her US citizenship she still might be liable for paying taxes to the IRS (I looked it up). I’m assuming the royal family of Monaco has also dealt with this. I think technically Albert, Stephanie, and Caroline are all US citizens due to their mom Grace Kelly (dunno about all their kids though).

  19. spidee!! says:

    I know the situation in the UK used to be that if you worked and earned abroad and paid tax at a lower level in the country, if you came back to the UK within the tax year you had to pay the balance up to our level of tax if you came back for more than so many (90?) days. For example, if you paid 15% tax on your income in another country you would have to pay the balance here, ie 5% at basic rate, 30% at higher rate as our rates are 20%/45%

    Mind you if any of this story were true and I were the RF I would be saying “Oh yes, come and get it if you can!”

  20. Eliza says:

    You can’t write off business expenses anymore… well until 2026. It’s Trumps “simplification” of the tax codes, so no business expenses can offset the tax bill.

    Yes, all income is taxable. Suits residuals, gifts over a specific value (the BRF lists all gifts recieved so this makes it easy for IRS to check), all her or joint assets that earn income in 2018 (interest on stocks, savings, etc.).

    Whether or not Charles pays for events attended (like the Swedish family), I don’t know, but that would be taxable as well.

  21. aquarius64 says:

    The only Markle taxes that should be scrubbed should be Sam, Tom Sr and Tom Jr. Dollar bet they are not declaring their tabloid blood money to the IRS because it ruins the Daddy needs money scam. Love to see these jerks get rounded up for tax fraud. Meghan’s tax will be okay, this was discussed before the wedding.

  22. EM says:

    Gifts are not taxable to the recipient. The person making the gift can be liable for gift tax. So if Charles gave Meghan a gift, Charles would have to pay the gift tax. Except he doesn’t because he isn’t a US citizen, and doesn’t have to pay US taxes.

    Meghan would have to pay tax on Harry’s income if they lived in a community property state, even if she filed Married Filing Separately. Community property states you share your income with your spouse, regardless of filing status. But they don’t live in a community property state! Harry’s income belongs to Harry, Meghan’s income belongs to Meghan.

    Basically these stories really don’t understand US tax law, and I suspect that is willful ignorance. They would rather just make it up for a better story.

  23. Bettyrose says:

    Any you Brits on here thinking of marrying American should take note. Our tax codes privilege a single earner/dependent spouse dynamic, so if that’s not you, consider long term cohabitation instead.

  24. M.A.F. says:

    This is not as complicated as people want to make it out to be. I’m sure the moment they got engaged, they started looking a the taxes. This why you hire people to do this.

    • MousyB says:

      Right? If anyone thinks Meghan is breaking out her calculator and doing any of this herself theyre dreaming lol. Meghan and the BRF probably dotted their I’s and crossed their T’s as soon as they became engaged. Which was over a year ago at this point.

  25. Magdalin says:

    As someone above said, this honestly could be why the real estate issues are on hold regarding the Queen gifting them a country home. And even if I needed to let most everything fall under my husband for a while until I became a citizen, I would still want to be considered part-owner in the future, in case things don’t work out.

  26. Rosie says:

    This tax stuff is all white noise to me but I must say that picture of her in the teal dress is beautiful. Hate the dress but she looks relaxed and beautiful. Sometimes I think she looks like she’s on a red carpet and is too concerned about the cameras. Sitting there, she just looks so serene. Lovely

  27. Sue Denim says:

    Totally off topic but I like that Harry wears a wedding ring, like he’s proud to be married and honors what may be more of her tradition than his. I don’t know why I guess but I like it.

    • harla says:

      I like it too Sue. Harry’s always struck me as the sentimental type, romantic and passionate about those he loves, so I never thought that he wouldn’t wear a ring upon marrying.

  28. Egla says:

    She is not new to the game. She has lived abroad before and has handled her taxes before. I am sure they have looked all this things up before getting married and will be fine. Harry is untouchable and has people handling him. She is semi untouchable. Also they have a lease in place if I am not mistaken in the country so she has that to declare as her rent. We know because they have made a point about it on the papers in all this months.
    Regarding the queen “gifting” them a home: Even William and Kate don’t own the apartment or the house in the country. They just live there by grace of the queen so they are not really their properties. Even if the queen gives them a place to live it won’t be theirs it would be just a favor.
    Here where I live we pay taxes in a funny way. Everything related to my paycheck is taken automatically and in the end I receive just the money I can spend. Also in my electric bill I have the tv state tax, in my water bill we have the cleaning tax and the propertie tax (if you own the place where you live). Business are a different thing I think. but for us simple mortals not paying asap it’s not an option or else….

  29. notasugarhere says:

    The Monaco royal family manages to deal with this, has for years, and it hasn’t brought those billionaires down. They are dual citizens US/Monaco. American Princess Salwa Aga Khan, formerly Kendra Spears, handles this annually and she’s married to a secretive French billionaire prince.

    In other words, the tabloids are making things up again.

  30. PrincessK says:

    Another nonsense tabloid story.