Many spouses accompany a primary visa holder to the U.S. on an H-4 (for H-1B holders) or L-2 (for L-1 holders) visa without working, or having only just started to work. In this situation, how you choose to file for the spouse can significantly change the household’s overall tax burden. We cover how to actually obtain an ITIN in a separate article; this one focuses on the framework for deciding which filing approach to use in the first place.
A Spouse’s Tax Residency Isn’t Determined by Whether They Work
The first thing to clarify: whether an H-4 or L-2 spouse is a U.S. “resident” or “nonresident” for tax purposes is determined by the substantial presence test, not by whether they’re employed. This test applies a weighted average of days present over the past three years; once that reaches 183 days, the spouse becomes a U.S. tax resident regardless of employment status. Most accompanying spouses end up satisfying this test after some time on assignment, becoming U.S. tax residents automatically, whether or not they work.
Option 1: File Separately
If the spouse hasn’t yet satisfied the substantial presence test (for example, shortly after arrival), the primary visa holder (H-1B/L-1) can file as Married Filing Separately. However, this filing status tends to fall into less favorable tax brackets and disqualifies you from many credits and deductions (such as education credits), making it generally the most tax-inefficient option.
Option 2: Elect Married Filing Jointly (MFJ) Under Section 6013(g)
Internal Revenue Code Section 6013(g) allows a nonresident spouse to elect to be treated as a U.S. resident for the entire tax year. Making this election allows Married Filing Jointly (MFJ) status, unlocking more favorable tax brackets and the standard deduction. If an ITIN is needed, Form W-7 is filed along with a statement making this election, attached to the first joint return.
The Biggest Overlooked Trap: The Spouse’s Worldwide Income Becomes Taxable
The most commonly overlooked consequence of the Section 6013(g) election is that it makes the spouse’s worldwide income subject to U.S. tax. Concretely, this can mean:
- Bank accounts, NISA accounts, and iDeCo accounts the spouse still holds in Japan may become subject to FBAR (foreign bank account reporting) and Form 8938 (FATCA reporting) obligations
- If a NISA account or Japanese mutual fund qualifies as a “PFIC” (passive foreign investment company), it becomes subject to the very unfavorable excess-distribution tax regime under Section 1291, making the tax filing dramatically more complex
- Once made, this election continues to apply in future years unless explicitly revoked (and generally can’t be re-elected once revoked)
In other words, making this election just for the MFJ tax-bracket benefit, without considering the fuller picture, can unexpectedly pull a spouse’s ongoing NISA or mutual fund holdings in Japan into complex U.S. taxation and reporting obligations. For households where the spouse continues to actively manage investments in Japan, it’s important to weigh the MFJ tax savings against the administrative burden and additional tax risk from PFIC and FBAR compliance before deciding.
A Quick Reference
| Situation | General direction |
|---|---|
| Spouse has little or no Japanese financial assets (NISA, mutual funds, etc.) | MFJ via the 6013(g) election tends to pay off |
| Spouse continues to hold NISA/mutual funds in Japan | Model the PFIC tax risk carefully before electing |
| Assignment is short and return to Japan is imminent | Weigh carefully given the election’s ongoing obligation unless revoked |
Frequently Asked Questions
Q: Does this change if the spouse is working under an H-4 EAD?
A: Having work authorization (an EAD) lets the spouse get an SSN, removing the need for an ITIN application, but the underlying framework — the substantial presence test for residency, and whether to make the 6013(g) election — is the same regardless of employment status.
Q: What happens if I revoke the Section 6013(g) election after making it?
A: You generally cannot make this election again in a later year once revoked. After revocation, you return to the standard resident/nonresident determination based on whether the spouse independently satisfies the substantial presence test.
This article is provided for general informational purposes only and is not a substitute for individualized tax advice. The optimal choice depends heavily on the spouse’s asset situation, so we recommend having a professional model the numbers before making the Section 6013(g) election.
Summary
Choosing how to file for an H-4 or L-2 spouse shouldn’t come down simply to “MFJ has better tax brackets.” The Section 6013(g) election pulls the spouse’s worldwide income into U.S. taxation, and NISA accounts or mutual funds left in Japan can unexpectedly trigger PFIC taxation as a result. Weigh the tax-bracket benefit against the reporting obligations and PFIC risk carefully before deciding.
Related Articles
- The Truth About the ‘183-Day Rule’: A Comprehensive Guide to the U.S. Substantial Presence Test for Tax Residency
- Withdrawing a 401(k) or IRA After Returning to Japan: 30% Withholding and Relief Under the US-Japan Tax Treaty
- The Definitive Guide to Filing US Tax Returns (1040/1040NR) from Japan After Repatriation: Procedures, Payment, and Refund Methods
- Japanese Pensions and US Social Security: How Totalization Under the US-Japan Agreement Can Qualify You for Benefits