Filing Jointly With a Nonresident Spouse: How the 6013(g) Election Works, What It Costs, and How It Ends

Short version: Nonresident Spouse Election: Filing Jointly With a Canadian

Section 6013(g) is the door between the two stable states of a mixed marriage. On one side: married filing separately, the Canadian spouse invisible to the IRS. On the other: a joint return, the couple taxed like any American couple — standard deduction, joint brackets, credits that MFS restricts — with the nonresident spouse treated as a US resident for income tax purposes. The election's price is exactly that treatment: the Canadian spouse's worldwide income goes on the joint return every year the election lives (salary, investment income, the TFSA's growth, capital gains — with foreign tax credits for Canadian tax doing most of the neutralizing on earned income), and the information-reporting perimeter expands to match — the Canadian spouse's accounts join the FBAR and Form 8938 picture, their Canadian mutual funds become reportable PFICs, their Canadian corporation raises Form 5471 questions. The election's mechanics reward attention. It is made by statement with a joint return, applies to the whole year (useful in a marriage or arrival year — it overrides dual-status fragmentation), and continues automatically for all future years until it ends. It ends four ways — revocation, death, separation, or IRS termination for inadequate records — and once ended by any of them, the couple can never make it again: one election per lifetime per couple, which turns an annual-looking choice into a strategic one. The arithmetic that decides it: the joint-filing savings (brackets, deduction, credits — often several thousand dollars a year against MFS) versus the US tax on the Canadian spouse's lightly-Canadian-taxed income (the TFSA is the recurring culprit — Canadian-tax-free, fully US-taxable under the election, with no credit to offset) plus the compliance load of the expanded reporting. Couples with a low-income or fully-credited Canadian spouse and clean accounts often win with the election; couples where the Canadian spouse has substantial Canadian-sheltered income, PFIC portfolios, or a private corporation usually keep the door shut.

Key takeaways

• What it buys: joint rates and the full married standard deduction; MFS restrictions lifted (credit phase-outs, IRA deduction limits, the harsher bracket schedule); full-year resident treatment that simplifies arrival and marriage years.
• What it costs: the nonresident spouse's worldwide income on every joint return while the election runs; FBAR and 8938 coverage of their accounts; PFIC treatment of their Canadian funds; 5471 exposure for their corporations; and US taxation of Canadian-sheltered income (TFSA, principal-residence-exempt gains above the US exclusion, FHSA growth) that Canada gives no credit for.
• Mechanics: statement attached to the joint return, both spouses signing; requires a taxpayer identification number for the Canadian spouse (ITIN via W-7 with the first electing return); applies to the entire year and all subsequent years.
• The four endings — and the one-shot rule: revocation (effective for the year revoked forward), death (with a survivor exception year), legal separation, or IRS termination for records failures. Any ending is permanent: no re-election with the same spouse, ever — which makes both entering and exiting the election a decision about all future years, not one.
• The suspension nuance: the election also suspends rather than terminates if neither spouse is a US person for a year — the mechanics deserve professional hands whenever residencies shift mid-marriage.
• The annual discipline while elected: the Canadian spouse's affairs must stay US-legible — no new Canadian funds, TFSA holdings chosen for US taxability, records kept to IRS standards — because the couple has volunteered the Canadian spouse into full compliance and the termination-for-records ending is real.

When it wins and when it doesn't

The election's best customers: one-income households (the Canadian spouse earns little — joint brackets on the American's income are pure savings); high-Canadian-tax earners whose credits fully absorb the US tax on their income; and arrival years, where the full-year joint treatment beats dual-status arithmetic. Its worst customers: the Canadian spouse with a maxed TFSA and Canadian fund portfolio (annual US tax with no credits, plus 8621s); the incorporated professional (5471/GILTI for a spousal election is a spectacular own-goal); and couples who might separate — because the election that ends with the marriage can never serve a reconciliation. Between the poles, it is a spreadsheet: joint savings minus incremental US tax minus compliance cost, projected over years, with the one-shot rule as the tiebreaker toward caution.

Worked example

A Chicago consultant (US$180,000) marries a Hamilton nurse (C$78,000, a C$40,000 TFSA in a savings-style account, no funds, no corporation). MFS baseline: his tax alone runs about US$4,800 higher than joint filing would, every year. Election modeling: her salary enters the joint return but her Canadian tax fully credits (Ontario rates exceed US); her TFSA adds about US$250 of US tax a year at its interest yield; compliance adds her two accounts to his FBAR and an ITIN application up front. They elect: net savings about US$4,300 a year, her side kept deliberately simple — TFSA stays in interest-bearing form, no Canadian funds ever, and the statement, W-7, and first joint return file together. Five years later she inherits C$300,000 and wants a Canadian equity portfolio: the couple's review prices keeping the election (US$-taxable dividends, fine, but only in US-listed form — no PFICs) against revoking (losing US$4,300 a year forever, since re-election is barred); she builds the portfolio US-listed inside the election and the door stays open. The couple that didn't model — his colleague, who elected with a spouse holding six Canadian funds and a CCPC — spent more on Forms 8621 and 5471 than the brackets ever saved, and their revocation is now permanent.

Official sources

"You cannot use the standard deduction allowed on Form 1040, U.S. Individual Income Tax Return. However, you can itemize certain allowable deductions." — Internal Revenue Service, Taxation of Dual-Status Aliens, https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens

"FDAP income is taxed at a flat 30 percent (or lower treaty rate, if qualify) and no deductions are allowed against such income. ... Effectively Connected Income, after allowable deductions, is taxed at graduated rates." — Internal Revenue Service, Taxation of Nonresident Aliens, https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens

Practitioner note

The 6013(g) election is the rare provision where the fine print — one election per couple per lifetime — outweighs the headline, converting a tax computation into a commitment. We model it as three numbers projected forward (joint savings, uncredited US tax on the Canadian spouse's sheltered income, compliance cost) and we re-run it before any life change: the inheritance, the incorporation, the possible separation, because the exit is a one-way door standing next to another one-way door.

See also: Browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the election analysis — multi-year modeling of joint savings against the Canadian spouse's US exposure, the ITIN and election filings, the compliance design while elected, and the revocation decision when circumstances shift. See cross-border pricing or book a call.