Moving to a new country is a major life milestone, but for Americans the IRS remains a permanent travel companion. The United States is one of the few nations that taxes based on citizenship rather than residency, which means that if you are a U.S. citizen or green card holder, your tax obligations follow you across every border.
Do U.S. citizens living abroad still have to file U.S. taxes?
Yes. The U.S. taxes citizens and green card holders on their worldwide income no matter where they reside. Whether you earn a salary in London, dividends in Canada, or rental income in Mexico City, the IRS requires you to report it.
Most countries only tax income earned within their borders, but the U.S. takes the citizenship-based approach. You must file if your income exceeds the threshold for your filing status, even when exclusions and credits ultimately reduce your tax to zero. Most expats handle this through specialized international tax preparation.
Your essential filing requirements
Form 1040
Varies by filing statusYour standard annual income tax return. Every U.S. citizen and resident alien must file if they meet the income threshold for their filing status, regardless of where they live.
FBAR (FinCEN 114)
$10,000+ aggregateA report of all foreign bank and financial accounts. Required if the total of all your foreign accounts exceeds $10,000 at any point during the year, even briefly.
FATCA (Form 8938)
Usually $200k+ for expatsDisclosure of specific foreign financial assets. The threshold varies based on residency and marital status, but for most expats it kicks in at $200,000 in foreign financial assets.
How can expats avoid double taxation?
The U.S. does not intend for you to pay tax twice on the same dollar, and three main tools lower or eliminate your U.S. bill: the Foreign Earned Income Exclusion, the Foreign Tax Credit, and the Foreign Housing Exclusion. Which one is best depends primarily on whether you live in a high-tax or low-tax country.
1. Foreign Earned Income Exclusion (FEIE)
The FEIE lets you exclude a significant portion of foreign earned income from U.S. taxation, up to $130,000 for the 2025 tax year, claimed on Form 2555. To qualify, you must pass either the Physical Presence Test (330 full days outside the U.S. within a 12-month period) or the Bona Fide Residence Test.
2. Foreign Tax Credit (FTC)
If you live in a high-tax country (much of Europe, for example), the FTC is often the stronger choice. Claimed on Form 1116, it provides a dollar-for-dollar credit on your U.S. return for income taxes paid to your host country, which frequently eliminates U.S. tax on the same income entirely.
3. Foreign Housing Exclusion
Living in an expensive city has a tax offset. This provision lets you exclude certain housing-related expenses, such as rent and utilities, from taxable income, provided they exceed a specified base amount. It is claimed alongside the FEIE on Form 2555.
What trips up Americans abroad?
The concepts seem straightforward, but execution gets complicated. The recurring problems are currency conversion, lingering state residency, self-employment tax, and foreign investment funds:
- Currency Conversion: You cannot report your income in Euros or Canadian dollars. Every transaction must be converted to U.S. dollars using an acceptable exchange rate, which requires meticulous record-keeping.
- State Taxes: Some states are "sticky." Even if you have been gone for years, states like California, Virginia, or South Carolina might still consider you a resident for tax purposes unless you formally sever ties.
- Self-Employment Taxes: Working for yourself abroad is great until you realize you might still owe Social Security and Medicare taxes to the U.S. This is where Totalization Agreements come into play, helping you avoid paying into two different social security systems at once.
- Foreign Mutual Funds (PFICs): The local index fund or ETF your foreign bank sold you is almost certainly a Passive Foreign Investment Company. Each one needs its own Form 8621 and is taxed under a punitive regime unless you elect out early, so this is one of the most expensive surprises expats face.
What are the expat tax deadlines and extensions?
U.S. persons living abroad receive an automatic two-month extension to June 15, with a further extension to October 15 available on request. While the rest of the country files by April 15, expats get this built-in breathing room, though interest still accrues on unpaid tax from April.
- June 15: The automatic deadline for expats to file and pay (though interest may accrue on unpaid tax from April).
- October 15: The final deadline if you file an additional extension request (Form 4868).
- FBAR Deadline: This technically follows the April 15 date but has an automatic extension to October 15 for everyone.
Pro Tip: Even if you do not owe any money because of exclusions and credits, you are still legally required to file a return if you meet the income thresholds.
What if you are already behind on FBAR or FATCA filings?
If you have years of unfiled returns or FBARs, the IRS offers structured amnesty paths for non-willful filers, and choosing the right one up front matters more than catching up quickly. U.S. residents typically use the Streamlined Domestic Offshore Procedures (SDOP), which replace the full FBAR penalty stack with a single 5% offshore penalty on the highest aggregate balance.
Expats who meet the 330-day non-residency test usually qualify for the no-penalty Streamlined Foreign Offshore Procedures (SFOP). The penalties for missing an FBAR or failing to report a foreign asset on Form 8938 can start at $10,000 per violation, so getting into the correct program is the priority. For a deeper walkthrough, see our SDOP 2026 guide.
Have questions about expat taxes, the FEIE, or your FBAR and FATCA obligations? Contact TS CPA for a free consultation. We respond within the same day.