Does Guam Pay Federal Taxes?

Guam is an island--the southernmost and largest of the Mariana Islands--located in the western Pacific Ocean. Guam is one of five territories of the United States. The island has been a territory since 1950. It is part of the U.S. and, as such, its nearly 180,000 residents must pay federal taxes.

Though Guam pays federal taxes, it doesn't use the United States tax code. The island has its own tax system, which is based on the U.S. laws. The Guam tax system is managed by the Guam Department of Revenue and Taxation.

Residents of Guam are subject to special U.S. tax rules. Also, unlike residents of the 50 states who must file federal, state and, sometimes, local returns, residents of Guam will file only one return to either Guam (if you have resided on the island for the full year) or the United States.

One of the special rules that applies to paying taxes in Guam involves couples who file joint returns. In this situation, the return must be filed with the appropriate tax agency for the spouse with the greater adjusted gross income. For example, one spouse did not reside on the island for the entire tax year (and is not considered a bona fide citizen of Guam) and the other spouse did. If the spouse who is a bona fide citizen of Guam had the higher AGI, taxes are filed with Guam. If the spouse who only resided part of the year on the island had the greater AGI, taxes are filed in the United States.

Things get even more confused if you are serving in the U.S. Armed Forces. If you qualified as a bona fide resident of Guam in the prior tax year, then you qualify in the current tax year whether or not you were stationed in Guam the entire year. Conversely, if you did not qualify as a bona fide resident the previous year, even if you are stationed in Guam for the entire year, you are still not considered a bona fide resident.