As Archie, who does not have a royal title, grows older and his financial situation gets more complicated, he could face additional costs.
If he sells his primary home in the U.K., that is not taxed in that country. But that same transaction would be subject to levies by the U.S.
One thing that could work in his favor is foreign tax credits, which give you credit for the foreign taxes paid on worldwide income.
If the taxes in the U.K. are higher, that could offset what he owes to the United States. “Assuming the U.S. rate is lower, it’s just going to be an exercise in shuffling paper,” Hedeker said.
But he will face a lifelong commitment to filing with the IRS. And the penalties can be steep if you neglect to file.
If those requirements become too cumbersome or the tax costs too expensive, Archie could decide to renounce his citizenship, like more Americans living abroad are doing.
He will have to be at least 16 to make that decision, according to the State Department.
If he does renounce, he will pay a fee, which is currently $2,350.
He will also face an exit tax on all of the assets he owns on the day of expatriation.
“The value of [his] U.S. passport would have to be such that it’s more valuable than the trouble it takes to remain compliant,” said attorney Doug Andre, partner at Phillips & Barker.
For the royal baby, dual citizenship may be just an inconvenience. But for ordinary individuals living overseas, the financial consequences can be severe.
“Keeping a U.S. passport has a cost, especially if you don’t live here and travel frequently,” Andre said. “The cost may be prohibitive for some people.”
That has some expatriates hoping that this high-profile birth will help prompt change to the onerous tax rules for Americans living abroad, McKeegan said.
“It’s unlikely that U.K. government wants the person who’s seventh in line from the throne to be hit with taxes from the IRS,” McKeegan said.