As the Duke and Duchess of Sussex await the coming of their child which will be anytime from now, the US tax inspectors are set to launch into scrutinisation of the royal accounts.
Since the royal couple announced their pregnancy last October, all eyes have been on Meghan and her emerging bump — and it seems even the palace accountants are taking interest.
That’s because as a US citizen, both Meghan and her baby — who will be seventh in line to the British throne — will be liable to pay US taxes, which could potentially open up the notoriously private royal accounts to the Internal Revenue Service (IRS).
“The United States has — unique among nations — a citizenship-based taxation (system), so as long as Meghan is a citizen of the United States she is taxed,” explained David Treitel, the founder of American Tax Returns Ltd., which provides taxation advice to US expats.
The law means US tax inspectors could scrutinize Harry and Meghan’s royal wealth, and the income of their newborn child.
“The baby is being born to a United States citizen and that baby, little boy or girl, who comes along in the next few weeks, will automatically be a citizen of the United States simply because her mother is,” Treitel told CNN. “There is no other precedent of anybody else in the Royal Family who’s been American. So nobody else has ever faced this circumstance before.”
As a US citizen, regardless of where she lives, Meghan will be obliged to file a US tax return and to report any foreign accounts, assets over $200,000 and gifts valued more than $15,797″regardless of whether it is actually in your possession,” according to the US Internal Revenue Service (IRS).
Meghan may have to declare items like the wedding ring gifted by the Queen from a nugget of Welsh gold from the Royal Collection, the priceless diamond in her engagement ring taken from Princess Diana’s world famous jewelry collection, wedding presents from international royalty and A-list friends. Then there’s the biggest gift of all — the multi-million-dollar newly renovated home, Frogmore Cottage, in Windsor where the couple got married.
“The Queen has got to sit there and her advisers have to sit there thinking: well if I lend Meghan a tiara, if I have the baby use a beautiful silver rattle that was used by Queen Victoria, how much is that worth? What’s the value of it? How much is to be reported to the States? It’s a tough question, it’s not easy,” Treitel said.
Not only will Meghan have to declare gifts but if she considers selling any of them, she would be taxed on any rise in their value — and with her name attached to them, the jump in value is likely to be great.
While all of this could create a big tax headache for the royal couple, it won’t have come as a surprise. Treitel believes Harry and Meghan will have been considering potential tax troubles, “long before they were married, when they were dating, just in case a baby came along because they knew if they had a child that the baby would be American.”