Do US citizens living abroad pay taxes?
Living abroad doesn’t exempt you from US tax obligations. American citizens and permanent residents must report worldwide income, even if they haven’t set foot in the States for years. That might come as a surprise, especially if you’re already paying taxes where you live.
Understanding how US citizens living abroad handle taxes is key to staying compliant. This guide covers everything you need to know about filing US taxes from overseas: which forms to file, key deadlines, and how to reduce or eliminate double taxation.
This article is brought to you by Taxes for Expats (TFX) – a top-rated tax firm for US citizens and permanent residents at home and overseas. Need expert help with your US taxes? Learn more about the expat tax services we offer.
Do US citizens have to pay taxes if they live abroad?
If you're a US citizen or permanent resident, you're required to report your worldwide income – no matter where you live or where that income is earned.
Unlike most countries that tax based on residency, the US follows a citizenship-based taxation system. That means Americans and green card holders are taxed by the US regardless of where they live.
Whether you're working for a foreign employer, freelancing, running a business, retired, or earning investment or rental income abroad – you're still subject to US tax rules.
Filing thresholds for Americans living abroad
Filing requirements for US citizens depend on your income level and filing status. For the 2024 tax year (filed in 2025), you generally must file a federal return if your gross income meets the following:
- Single filers: $14,600
- Married filing jointly: $29,200
- Married filing separately: $5
- Head of household: $21,900
These thresholds apply to your total worldwide income – including wages, business income, dividends, rental earnings, etc.
Self-employed? If you earn $400 or more in net earnings, you’re required to file – even if your total income is low or entirely foreign-sourced.
State and local taxes
Even when living in another country, you may still have to file and pay taxes to your last state of residence in the US.
If you don’t want to have a state tax obligation once you move abroad, you should cut all ties with your state before moving. You can do this by establishing residency in a no-tax state, closing bank accounts, selling property, updating addresses, etc.
Otherwise your former state may still consider you a tax resident and require you to file and pay state income taxes. Some states, like California, Virginia, and New Jersey, are known for aggressively asserting tax residency. Others, like New York, Connecticut, and Massachusetts, are less strict.
Are resident aliens living abroad taxed the same way?
Yes. Green card holders and resident aliens are subject to the same US tax rules as citizens – including filing on worldwide income, even while living abroad.
If you don’t have a green card but meet the substantial presence test – for example, after extended time in the US on a work or student visa – you're also classified as a resident alien for tax purposes. In both cases, worldwide income must be reported.
If you qualify as a nonresident alien, your US tax liability is limited to US-sourced income only.
What forms and information must expats report?
If you're a US citizen or resident living abroad, filing your annual income tax return is just the start. You may also need to report foreign bank accounts, assets, investments, and business interests – even if you don’t owe any tax.
US income tax return (Form 1040)
All US citizens must file Form 1040 annually if they meet the income threshold. Expats can also claim exclusions and credits using:
- Form 2555 to exclude foreign earned income
- Form 1116 to claim a foreign tax credit
- Schedules B, C, E for interest, self-employment, and rental income
FBAR (FinCEN Form 114)
If your foreign financial accounts total more than $10,000 at any point in the year, you must file a Foreign Bank Account Report (FBAR). This includes checking accounts, investment portfolios, retirement plans, and joint accounts even if they don’t generate income.
FATCA (Form 8938)
If your foreign financial assets exceed $200,000 (single) or $400,000 (married filing jointly) while abroad, you must file Form 8938, Statement of Specified Foreign Financial Assets, (FATCA). This covers a wider range of assets than the FBAR, including foreign stocks, mutual funds, pensions, and business interests.
Also read. FATCA reporting & filing requirements
Foreign property reporting
US citizens don’t need to report personally owned foreign real estate on FBAR or FATCA. That includes property held in your name only, such as a second home or vacation property abroad.
If the property is owned through a foreign entity, such as a corporation, partnership, or trust, reporting is required. You might need Form 5471, Form 8865, or Form 3520.
You must report rental income from any foreign property on Schedule E of your Form 1040, regardless of ownership structure. Depreciation, maintenance costs, and property taxes can be deducted.
What happens if you don’t file your US taxes?
Failing to file your US taxes or foreign account reports while living abroad can lead to serious consequences. The Internal Revenue Service (IRS) distinguishes between non-willful (unintentional) and willful (deliberate) non-compliance but both can be costly.
Penalties and interest
Late filing penalties for unpaid taxes can reach up to 25% of the tax due.
Filing your FBAR late can result in penalties of up to $10,000 per unreported account for non-willful violations. For willful non-compliance, penalties can go as high as $100,000 or 50% of your account balances whichever is greater. In extreme cases, criminal charges may also apply.
Streamlined filing compliance procedure
If your non-compliance was non-willful, the IRS offers a way to catch up without harsh penalties. Streamlined filing compliance procedures are designed for US expats and accidental Americans who didn’t know they had to file. This program eliminates all penalties, including failure-to-file and FBAR penalties.
Expats can qualify for streamlined foreign offshore procedures (SFOP) by:
- living abroad and meeting the non-residency requirement (330+ days outside the US in one of the last three years)
- certifying that your failure to file was non-willful
- filing the last 3 years of tax returns and 6 years of FBARs
- paying all taxes owed plus interest
If you’re an American citizen or resident living abroad and haven’t filed your US income tax returns in years, Taxes for Expats can help you get back on track.
What tax breaks are available for US expats?
US citizens and green card holders living abroad can significantly reduce or even completely eliminate their US tax bill using several key provisions: foreign earned income exclusion (FEIE), foreign housing exclusion, and foreign tax credit (FTC).
Foreign earned income exclusion (FEIE)
The foreign earned income exclusion allows you to exclude up to $126,500 in 2024 increasing to $130,000 in 2025 (adjusted annually) from your US taxable income. To qualify, you must meet one of two tests:
- Physical presence test: You were outside the US for at least 330 full days in a 12-month period.
- Bona fide residence test: You have deep lasting ties to another country for a full tax year
You can’t exclude income like capital gains or pensions only earned income (wages, self-employment) can be excluded under the FEIE.
Foreign housing exclusion
If you qualify for FEIE, you may also exclude reasonable housing costs such as rent, utilities, and insurance. Limits vary by city high-cost locations like London or Tokyo allow higher deductions.
Foreign tax credit (FTC)
If you pay income taxes to a foreign country, you can claim a dollar-for-dollar credit on your US tax return. This reduces or eliminates your US tax liability.
You can’t double-dip: income excluded under FEIE cannot be used for the FTC.
What forms do US expats need to file?
- Form 1040 standard income tax return
- Form 2555 to claim the foreign earned income exclusion (FEIE)
- Form 1116 for the foreign tax credit (FTC)
- Schedule B, C, E for interest, self-employment, and rental income
- FinCEN Form 114 (FBAR) required if your foreign financial accounts exceed $10,000 at any time during the year
- Form 8938 (FATCA) for foreign financial assets over $200,000 (single) or $400,000 (married filing jointly)
US tax filing deadlines
If you're a US citizen living abroad, you automatically receive a two-month extension to file your federal tax return giving you until June 16, 2025, to submit Form 1040. This extension is free and does not require any special paperwork. However, any taxes owed are still due by April 15, 2025.
The deadline to file your FBAR (FinCEN Form 114) is April 15, but there's an automatic extension through October 15 no need to request it. FATCA forms (like Form 8938) are due at the same time as your tax return, including any extensions you’ve filed.
Overseas retirement taxes for US citizens
US citizens living abroad must also report all worldwide retirement income, including foreign pensions and social security benefits from their country of residence.
US tax treaties with many countries help reduce or eliminate double taxation on retirement income. These agreements may allow you to exclude or lower taxes on certain pension distributions, foreign social security, or retirement account earnings.
Visit our expat retirement guide for help with managing your accounts and staying compliant while living overseas.
How can US citizens living abroad file taxes?
To file your US taxes from overseas, start by gathering your documents: income records, foreign tax forms, account balances, and proof of expenses like housing or self-employment costs. You can e-file Form 1040 and most related forms using professional expat tax services.
Foreign taxes don’t cancel your US tax obligations. If your local tax forms aren’t ready by the US deadline, file an extension (Form 4868) or amend later if needed.
Plan your taxes carefully: which country you file with first can affect how credits apply on each side.
Your US taxes, handled by tax professionals – wherever you are
Living abroad doesn’t mean you’re off the hook for US taxes but it doesn’t have to be a hassle. With expert help, you can file with confidence, avoid double taxation, and keep more of what you earn.
At Taxes for Expats (TFX), we help US citizens and green card holders abroad file US taxes with peace of mind. We’ve assisted over 50,000 expats get compliant, claim the right exclusions, and avoid non-compliance penalties.
FAQ
The IRS offers amnesty programs, specifically the streamlined filing procedures, designed to help taxpayers who weren't aware of their filing obligations catch up without facing severe penalties. Visit the IRS Streamlined Procedures page to learn about your options.
While renouncing US citizenship won't eliminate your past tax obligations, it can affect your future tax status. However, be aware that this decision may trigger a significant exit tax based on your assets and income. Consult our guide on citizenship renunciation tax implications before making this major decision.
The IRS requires all income to be reported in US dollars, but the conversion rules vary by transaction type. Use the annual average exchange rate for regular income and wages, while specific transactions like property sales require the spot rate from that date. Check the IRS foreign currency guidelines for details.
While foreign inheritances are generally not subject to US income tax, you must report gifts or inheritances over $100,000 on Form 3520. Failing to report can result in significant penalties, so keep detailed records of inherited foreign assets.
