Special income types (self-employments, RSUs, gambling) abroad

Restricted stock units (RSUs) are taxed as ordinary income at the full fair market value on the date they vest, not when they're granted or sold. The vested value is added to your wages, and if you worked in more than one country between grant and vesting, only the portion of the RSU income tied to work performed abroad may qualify for foreign tax relief — the rest is US-source. Because employer withholding on RSUs (typically 22% federal, jumping to 37% above $1 million) often falls short of your actual liability, it's worth reading TFX's guide to foreign RSU taxation before your next vesting date.

RSU income is reported in the tax year the shares vest, regardless of when you were granted the award or when you eventually sell the shares. Vesting is the taxable event because that's the moment you gain unrestricted ownership of the stock; any gain or loss after that point is a separate capital gain or loss event tied to the sale, calculated from the vesting-date value as your cost basis. See TFX's RSU tax guide for how this plays out across multiple vesting tranches.

The Foreign Earned Income Exclusion can shelter part of your RSU income, but only the portion tied to work actually performed while living and working abroad, and only up to the annual FEIE cap ($130,000 for 2025, combined with your other foreign earned income). Multi-country vesting is sourced using a workday-fraction formula — the days you worked in each location between grant and vest determine what share of the RSU value counts as foreign earned income eligible for exclusion, with the remainder taxed as US-source income. TFX's RSU taxation guide walks through this sourcing calculation in detail.

When RSUs vest while you're living overseas, the full fair market value is added to your taxable wages that year, your employer withholds US tax at standard supplemental rates, and you'll typically need the Foreign Tax Credit to offset any tax your host country also charges on the same income. Because standard 22%/37% withholding rarely covers what's actually owed once foreign-earned-income sourcing and host-country tax are factored in, expats often face a balance due at filing — planning ahead for this with a review of TFX's RSU tax planning guide and Form 1116 foreign tax credit rules can prevent a surprise bill.

Yes — gambling winnings are fully taxable worldwide ordinary income for US citizens and green card holders, no matter where the wager was placed or won, and the Foreign Earned Income Exclusion cannot shelter this income. Winnings are reported as "other income" on Schedule 1, Line 8b, and taxed at your regular marginal rate rather than a special gambling rate. TFX covers the full picture in its guide to US tax on casino, lottery, and gambling winnings.

Winnings from online casinos and gambling platforms — foreign or US-based — go on Schedule 1, Line 8b as other income, added to your Form 1040 total, regardless of whether the platform issues any tax paperwork. Because most offshore and online gambling sites don't issue US tax forms, the reporting obligation falls on you to track and total your winnings yourself; TFX's gambling winnings guide explains how to document this correctly.

Yes — winning a foreign lottery doesn't exempt the prize from US tax; it's fully taxable to US citizens and green card holders even if the money never touches a US bank account. It makes no difference that the lottery is run by a foreign government or that the source country already withheld its own tax on the payout — the US taxes worldwide income, and any foreign tax withheld is instead handled separately through the Foreign Tax Credit. See TFX's gambling and lottery winnings guide for how foreign lottery income specifically gets reported.

Gambling losses can only offset gambling winnings as an itemized deduction, and starting with tax year 2026, a new OBBBA rule caps that deduction at 90% of your allowable losses — down from the dollar-for-dollar offset (still capped at winnings) that applied through 2025. This means that even with losses equal to or greater than your winnings, you can no longer fully zero out the tax; you must also itemize on Schedule A to claim any of it, so gamblers who take the standard deduction get no loss offset at all. TFX breaks down the mechanics, old and new, in its gambling tax guide.

Form W-2G is issued only by US-based casinos, racetracks, lotteries, and other US payers to report certain gambling winnings above IRS thresholds — foreign casinos and gambling operators never issue this form, so expats winning abroad must self-report even without one. Receiving no W-2G doesn't mean the winnings are tax-free; it simply reflects that the payer wasn't a US entity subject to US information-reporting rules. TFX's gambling winnings guide explains when a W-2G is triggered and what to do without one.

Yes — if a foreign country withholds tax on your gambling or lottery winnings, that tax generally qualifies for the Foreign Tax Credit, filed under the general income category on Form 1116. This prevents the same winnings from being taxed twice, though the credit is capped by the US tax attributable to that income, so it may not offset the full foreign tax paid. TFX's Form 1116 foreign tax credit guide covers how to claim it correctly.

Living abroad doesn't change how lottery winnings are taxed — US expats owe the same worldwide-income tax on lottery prizes as they would if living in the US, with no reduction, deferral, or special expat treatment. A common misconception is that income earned or won entirely outside the US, or paid in a foreign currency, escapes US tax; it doesn't, and the Foreign Earned Income Exclusion specifically does not apply to lottery or gambling winnings since they aren't earned income. TFX's lottery and gambling tax guide addresses this expat-specific misconception directly.

Yes — prizes and awards of any kind, whether cash, merchandise, or a trip, are taxable at their fair market value and reported as other income, following the same worldwide-income rule that applies to gambling and lottery winnings. This covers a broader category than gambling specifically — contest prizes, sweepstakes, raffle winnings, and game-show prizes are all included, and non-cash prizes must be valued and reported even though no money changed hands. TFX's guide to gambling, lottery, and prize income covers this broader category.

There's no special federal tax rate for lottery winnings — they're taxed at your regular marginal income tax rate, which can run anywhere from 10% to 37% (2025 brackets) depending on your total taxable income. US payers typically withhold 24% upfront on larger prizes, but that withholding is just a prepayment, not the final tax — if your marginal rate is higher than 24%, you'll owe more at filing, and if it's lower, you may get a refund. See TFX's gambling and lottery tax guide for the full rate breakdown.

Yes — the obligation to report 1099 income applies regardless of where you live; US citizens and green card holders must report worldwide income on their US return whether they receive a 1099 or not. The legal duty to report income comes from earning it, not from receiving a form — the IRS receives its own copy of every 1099 issued, so unreported income is easy to flag even years later. TFX's Form 1099-MISC guide explains what triggers a 1099 and how to report the income it represents.

Form 1099-C reports cancellation of debt income when a creditor forgives $600 or more, and forgiven debt is taxable income by default unless a specific exclusion applies — the tax event happens at the moment of discharge, whether or not you actually receive the form. The most common exclusions are insolvency (your liabilities exceeded your assets right before the cancellation) and Qualified Principal Residence Indebtedness for forgiven mortgage debt up to $750,000, generally for discharges before January 1, 2026; claiming either requires filing Form 982. TFX's Form 1099-C guide covers these exclusions in full.

A 1099 from a US company (typically 1099-NEC) means you were paid as an independent contractor, not an employee, so that income goes on Schedule C and is subject to self-employment tax — regardless of where you were physically living when you did the work. Crucially, the Foreign Earned Income Exclusion does not reduce self-employment tax; even after excluding $130,000 of income for 2025, you still owe the full 15.3% SE tax on net profit, unless you're covered by a Totalization Agreement that assigns your social security coverage to your country of residence instead. TFX's guide to filing as an independent contractor abroad walks through Schedule C, SE tax, and quarterly estimated payments.

If a 1099 shows the wrong amount, name, address, or taxpayer ID, contact the payer directly and ask them to file a corrected version with the IRS — don't just ignore the error or try to fix it yourself on your return. Until a correction is issued, keep your own records showing the actual amount you were paid, since the IRS will match what it received against what you report and discrepancies can trigger a notice. See TFX's Form 1099-MISC guide for more on handling reporting errors.

Foreign brokers generally don't issue Form 1099-DIV at all — it's a US information-reporting form issued by US payers — but that doesn't change your obligation to report foreign dividend income on Schedule B; if a US brokerage holding foreign stocks does send you one, it's reported the same way as any other 1099-DIV. The absence of a 1099 from an overseas account is one of the most common reasons expats under-report investment income by mistake, since there's no form prompting them to include it. TFX's Schedule B guide explains how ordinary and qualified dividends are reported, 1099 or not.

Receiving a 1099 doesn't automatically mean the income qualifies for the Foreign Earned Income Exclusion — a 1099 just reports that a US payer sent you money; whether it's eligible for FEIE or foreign tax credit relief depends on the type of income and where the underlying work or activity actually took place. Self-employment income for work genuinely performed abroad can qualify as foreign earned income even when paid by a US client on a 1099-NEC, but passive income like 1099-DIV or 1099-INT never qualifies for FEIE no matter where you live. TFX's contractor-abroad guide explains how to determine whether 1099 income counts as foreign earned.