Residence-Based Taxation for Americans Abroad: How the LaHood Bill Would Change Expat Taxes
The Residence-Based Taxation for Americans Abroad Act, introduced by Rep. Darin LaHood (R-IL) in December 2024 as H.R. 10468, would allow qualifying Americans living overseas to elect nonresident status for U.S. tax purposes and pay federal taxes only on their U.S.-source income. If enacted, this would be the most fundamental change to U.S. expat taxation since the modern income tax began. The bill expired when the 118th Congress ended in January 2025 and must be reintroduced in the 119th Congress to move forward.
As of early 2026, Rep. LaHood and Sen. Todd Young (R-IN) are finalizing an updated version that addresses technical issues identified during the Joint Committee on Taxation (JCT) review. The American Citizens Abroad anticipates reintroduction in Q1 2026, once the JCT produces a revenue score. President Trump has publicly stated his support for ending double taxation on Americans abroad, giving the bill unprecedented executive backing.
This bill is not a law. All Americans abroad must continue filing U.S. tax returns, FBARs, and FATCA reports under current rules. Do not delay filing or change your compliance approach in response to proposed legislation. For the OBBB tax changes already in effect, see our comprehensive guide. Here’s what the LaHood bill would change, who would qualify, how the departure tax works, and how it compares to the current system.
Not Sure How the New Law Affects You?
Why Does This Bill Exist?
The United States is one of only two countries in the world (along with Eritrea) that taxes its citizens on worldwide income regardless of where they live. Every other major economy uses residence-based taxation, meaning you pay taxes where you live, not based on your passport.
Under the current system, an American living and working in London, Tokyo, or Sydney must file a U.S. tax return every year reporting all worldwide income, even if they’ve lived abroad for decades and have no U.S.-source income. They must also file FBARs for foreign bank accounts, Form 8938 for foreign financial assets, and potentially Form 5471, 8865, 3520, and other information returns depending on their situation.
While the Foreign Earned Income Exclusion ($130,000 for 2025) and Foreign Tax Credit reduce or eliminate the actual tax owed for most expats, they do not reduce the compliance burden. Americans abroad must still prepare complex returns, track foreign accounts, and risk severe penalties for missed information returns, even when they owe $0.
The LaHood bill would eliminate this burden for qualifying expats by treating them as nonresident aliens for U.S. tax purposes, as every other country treats its citizens who live abroad.
What Would the Bill Change?
The Nonresident Election
The core provision: qualifying U.S. citizens living abroad could elect to be treated as nonresident aliens under IRC Section 7701(b). This would mean:
| Current System | Under the LaHood Bill |
|---|---|
| Taxed on worldwide income regardless of where you live | Taxed only on U.S.-source income (same as a nonresident alien) |
| Must file Form 1040 reporting all global income | Would file Form 1040-NR reporting only U.S.-source income |
| Must claim FEIE or FTC to avoid double taxation | No need for FEIE or FTC (foreign income not reported) |
| Must file FBAR if foreign accounts exceed $10,000 | FBAR requirements significantly reduced |
| Must file Form 8938 if foreign assets exceed thresholds | FATCA requirements significantly reduced |
| Must file Form 5471, 8865, 3520 for foreign entities | Information return burden reduced for qualifying individuals |
Who Would Qualify
The bill establishes specific criteria for the nonresident election. Not every American abroad would be eligible:
- Tax compliance required: You must have been fully compliant with U.S. tax obligations for the five consecutive years before making the election. This means filed returns, paid taxes, filed FBARs, and filed all required information returns.
- Foreign tax residency: You must be a tax resident of a foreign country and subject to that country’s income tax.
- No U.S. abode: You cannot maintain a U.S. home or have a primary place of abode in the United States.
- Certification under penalty of perjury: You must certify compliance and eligibility on a formal statement filed with the IRS.
Who would NOT qualify:
- Americans who are not tax compliant (unfiled returns, unfiled FBARs)
- Americans living in tax-free jurisdictions (no foreign tax residency to demonstrate)
- Americans who maintain a primary home in the U.S.
- Americans currently under IRS audit or investigation
The Departure Tax
The bill includes a one-time departure tax designed to prevent wealthy Americans from using the election to escape taxes on built-up U.S. gains. This functions similarly to the existing exit tax for renouncing citizens, but with important differences:
| Feature | Exit Tax (Current Renunciation) | Departure Tax (LaHood Bill) |
|---|---|---|
| Triggers when | You renounce citizenship or surrender green card | You elect nonresident status (keep citizenship) |
| Applies to | Covered expatriates (net worth $2M+ or average tax $206K+) | Similar wealth thresholds |
| Exemption | $890,000 gain excluded (2025) | Similar exemption expected |
| Retirement accounts | Taxed as lump-sum distribution | Expected similar treatment |
| Key difference | You lose U.S. citizenship | You keep U.S. citizenship |
Exemptions from the departure tax:
- Long-term expats who have been tax compliant and living abroad for an extended period (five consecutive years of compliance)
- Accidental Americans (born abroad to U.S. citizen parents, never lived in the U.S., limited connection to the U.S.)
These exemptions are one of the most significant features of the bill. Under current law, even accidental Americans who renounce face the exit tax. The LaHood bill would provide a pathway for these individuals to opt out of U.S. taxation without punitive consequences.
FBAR and FATCA Relief
For Americans who elect nonresident status, the bill would significantly reduce foreign account and asset reporting obligations. Under the current system, Americans abroad must file:
- FBAR annually if combined foreign accounts exceed $10,000 at any point
- Form 8938 if foreign financial assets exceed $200,000 (single, end of year) or $400,000 (at any point)
- Form 3520 for transactions with foreign trusts or large foreign gifts
- Form 5471 for ownership in foreign corporations
- Form 8865 for interests in foreign partnerships
These forms carry penalties of $10,000 to $25,000+ per form for late or missed filing, even if no tax is owed. The compliance cost alone drives many expats to professional preparers. The LaHood bill would reduce or eliminate most of these reporting requirements for Americans who elect nonresident status, aligning their obligations with how every other country treats its overseas citizens.
How Does the Bill Compare to the Current FEIE/FTC System?
| Factor | Current System (FEIE/FTC) | LaHood Bill (If Enacted) |
|---|---|---|
| Annual filing | Required (Form 1040 + schedules) | Reduced (Form 1040-NR, U.S.-source only) |
| Tax on foreign income | Excluded (FEIE) or credited (FTC) | Not taxed at all |
| Income above FEIE limit | Taxed (unless FTC covers it) | Not taxed (foreign income not reportable) |
| Self-employment tax | Still owed (FEIE does not eliminate SE tax) | Not owed on foreign self-employment income |
| FBAR/FATCA | Required | Significantly reduced |
| Information returns | Required (5471, 8865, 3520, etc.) | Reduced |
| Compliance cost | High (professional prep often $1,000-$5,000+) | Significantly lower |
| Keeps U.S. citizenship | Yes | Yes |
| Can vote in U.S. elections | Yes | Yes |
| U.S. Social Security credits | Continue earning if paying FICA/SE tax | Under review (Byrd Rule complication) |
The self-employment tax point is particularly significant. Under current law, the FEIE excludes foreign earned income from federal income tax but does NOT eliminate self-employment tax (15.3%). Americans who freelance or run businesses abroad still owe SE tax even if their income tax is $0. The LaHood bill would treat foreign self-employment income as foreign-source, potentially eliminating SE tax for qualifying expats.
How Is This Different From the Tax Fairness for Americans Abroad Act?
The “Tax Fairness for Americans Abroad Act” is the name of the original 2018 bill introduced by Rep. George Holding (R-NC) that first proposed residence-based taxation for U.S. citizens overseas. The 2024 “Residence-Based Taxation for Americans Abroad Act,” introduced by Rep. Darin LaHood (R-IL), builds on the same concept but is a substantially different, more comprehensive bill. They are often discussed interchangeably, but the differences matter.
| Feature | Tax Fairness Act (2018, Holding) | RBT Act (2024, LaHood) |
|---|---|---|
| Core concept | Nonresident election for qualifying expats | Same core concept, significantly expanded |
| Departure tax exemptions | Limited | Exemptions for long-term expats and accidental Americans |
| FBAR/FATCA relief | Not specifically addressed | Explicit provisions to reduce reporting burden |
| Trust provisions | Not addressed | Detailed treatment of foreign trusts (refined after community feedback) |
| Anti-abuse safeguards | Basic | Comprehensive loophole-closing provisions developed with JCT input |
| Senate companion | None | Sen. Todd Young (R-IN) developing parallel Senate bill |
| Presidential support | None | Trump publicly endorsed ending double taxation for expats |
| JCT scoring | Never scored | In progress (primary bottleneck as of early 2026) |
| Bipartisan framing | Republican sponsor only | Bipartisan conceptual support (Holding R, Beyer D, LaHood R over the years) |
The 2021 “Tax Simplification for Americans Abroad Act” introduced by Rep. Don Beyer (D-VA) took a different approach, focusing on simplifying existing filing requirements rather than a full shift to residence-based taxation. The LaHood bill is the most ambitious of the three, proposing a structural change to how the U.S. taxes its overseas citizens.
In short: if you’ve been following the “Tax Fairness for Americans Abroad Act” over the years, the LaHood RBT bill is its direct successor, with stronger provisions, broader political support, and a realistic (though uncertain) path forward.
History of RBT Legislation
| Year | Bill | Sponsor | Status |
|---|---|---|---|
| 2018 | Tax Fairness for Americans Abroad Act (H.R. 7358) | Rep. George Holding (R-NC) | Introduced, no committee action |
| 2021 | Tax Simplification for Americans Abroad Act (H.R. 5765) | Rep. Don Beyer (D-VA) | Introduced, no committee action |
| 2024 | Residence-Based Taxation for Americans Abroad Act (H.R. 10468) | Rep. Darin LaHood (R-IL) | Introduced Dec 18, expired Jan 2025 |
| 2025 | Holy Sovereignty Protection Act (H.R. 4501) | Rep. Jeff Hurd (R-CO) | Introduced (Pope Leo XIV exemption), raised RBT visibility |
| Expected 2026 | Updated RBT bill (companion bills) | Rep. LaHood (House) + Sen. Young (Senate) | Awaiting JCT score, expected Q1 2026 reintroduction |
The LaHood bill represents the most comprehensive RBT proposal to date. Unlike the 2018 and 2021 versions, it has both bipartisan conceptual support (bills have been introduced by both Republican and Democratic sponsors over the years) and explicit presidential endorsement.
Where Does the Bill Stand Now?
As of early 2026, the bill faces two primary obstacles:
1. JCT Scoring: The Joint Committee on Taxation must produce a revenue estimate before the bill can be formally reintroduced. This has been the main bottleneck. JCT spent most of 2025 consumed by OBBB analysis and implementation. Tax advocacy groups report that JCT and the bill sponsors are in active discussions, and the scoring process is underway.
2. Legislative Vehicle: The bill cannot pass through budget reconciliation (the mechanism used for the OBBB) because of the Senate’s Byrd Rule, which prohibits Social Security changes in reconciliation bills. The LaHood bill’s treatment of FICA/SE tax for overseas Americans triggers this restriction. Instead, the bill would need to pass through regular order with bipartisan support, or attach to a year-end tax extender package.
Positive signals:
- Bicameral support (House and Senate versions being developed simultaneously)
- Presidential endorsement of the concept
- 92.7% support among 4,300 respondents in a February 2025 Democrats Abroad survey
- The Pope Leo XIV situation (May 2025) created mainstream media attention for the absurdity of citizenship-based taxation
- ACA and Tax Fairness for Americans Abroad continue active Congressional advocacy
Realistic timeline: Even in the best-case scenario, the bill would not take effect until 2027 at the earliest. Most advocates expect a multi-year legislative process.
What Should Expats Do While Waiting?
File your taxes. The single most important thing you can do is stay compliant. Every version of RBT legislation requires five years of tax compliance as a prerequisite for the nonresident election. If the bill passes and you have unfiled returns, you will not qualify.
If you’re behind on filing, the Streamlined Filing Procedures allow you to catch up on three years of returns and six years of FBARs with no penalties for expats abroad. Getting compliant now positions you to take advantage of RBT if and when it becomes law.
Do not renounce based on RBT expectations. Some expats considering renouncing U.S. citizenship have asked whether they should wait for RBT. If the bill passes, it would eliminate the primary reason many expats renounce (the compliance burden) without losing citizenship. However, the bill is not guaranteed to pass. Make renunciation decisions based on current law, not proposed legislation.
Use current protections. The FEIE ($130,000 for 2025, $132,900 for 2026) and FTC remain the primary tools for reducing or eliminating U.S. tax liability. For most expats, these protections already result in $0 federal income tax. A Greenback accountant can determine which strategy saves you the most.
Frequently Asked Questions
No. The original bill (H.R. 10468) expired in January 2025. An updated version is expected to be reintroduced in Q1 2026 by Rep. LaHood and Sen. Young. It has not been voted on by either chamber.
No. Under the LaHood bill, qualifying expats would still owe U.S. tax on U.S.-source income (dividends from U.S. stocks, rental income from U.S. property, U.S. pension distributions, etc.). Only foreign-source income would be excluded.
No. Unlike renunciation, the nonresident election would let you keep your U.S. citizenship while opting out of worldwide income taxation. You could still vote in U.S. elections, hold a U.S. passport, and return to the U.S. at any time.
Not immediately. The bill requires five consecutive years of tax compliance before making the election. If you’re behind, getting compliant through Streamlined Filing now starts the clock on your five-year compliance window.
The 2024 LaHood bill is the direct successor to the 2018 Holding bill and is substantially more comprehensive. It adds departure tax exemptions for long-term expats and accidental Americans, explicit FBAR/FATCA relief, detailed trust provisions, and anti-abuse safeguards developed with JCT input. It also has Senate companion support (Sen. Young) and presidential endorsement, neither of which the 2018 version had.
This is still being worked out. The bill’s treatment of FICA/SE tax is one of the technical issues that triggered the Byrd Rule problem with reconciliation. The sponsors are addressing this in the updated version. Current expectation: Qualifying expats would likely stop earning U.S. Social Security credits on foreign income, but would retain the credits they have already earned.
At Greenback, we’ve been tracking residence-based taxation proposals since the original 2018 bill and will update our clients as soon as the new version is introduced. In the meantime, we help Americans abroad stay compliant and minimize their tax burden using every tool available under current law.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions about RBT, the OBBB, or working with Greenback, contact our Customer Champions.
Make Sure You’re Filing Under the Latest Rules
This article is for informational purposes only and should not be considered tax or legal advice. The Residence-Based Taxation for Americans Abroad Act is proposed legislation that has not been enacted. All Americans abroad remain subject to current U.S. tax law, including worldwide income reporting, FBAR, and FATCA requirements. Always consult with a qualified tax professional regarding your specific situation.
Related Resources
- OBBB Tax Changes for Expats
- Foreign Earned Income Exclusion
- Foreign Tax Credit Guide
- FEIE vs. FTC: Which Strategy Saves You More?
- Citizenship-Based vs. Residence-Based Taxation
- Renouncing U.S. Citizenship: Costs, Tax Implications, and Requirements
- U.S. Exit Tax (Expatriation Tax)
- Streamlined Filing Procedures
- FBAR Filing Requirements
- Form 8938: FATCA Reporting
