Do Green Card Holders Pay Taxes on Foreign Income? 2025 Guide 

Green card holders are considered U.S. tax residents by law, which means you must report your worldwide income to the IRS, regardless of where you live or where the income is earned. 

This reality surprises many green card holders, especially those working abroad temporarily or managing foreign investments while living in the U.S. According to the DHS Office of Homeland Security Statistics, millions of lawful permanent residents currently live in the United States. Here’s everything you need to know about your tax obligations. 

Who This Guide Is For 

You’ll benefit from this guide if: 

• You’re a green card holder temporarily living abroad, earning a salary or running a business in another country 
• You live in the U.S. but receive foreign income from a job, business, rental property, or investments overseas 
• You’re wondering if you can avoid double taxation on income already taxed abroad 

Why a Green Card Means Worldwide Taxation 

From the moment you receive your green card, the IRS treats you the same as a U.S. citizen for tax purposes. 

That means you must: 

• Report all income—U.S. and foreign 
• File a U.S. tax return (Form 1040) every year 
• Disclose foreign bank accounts and assets if you meet certain thresholds 
• Pay taxes on your income unless eligible exclusions or credits apply 

Even if your green card expires or you leave the country, you remain a U.S. tax resident until you formally surrender your status through the proper channels. 

IRS Enforcement and Immigration Risk in 2025 

In 2025, immigration policy changes have made tax compliance more critical than ever. The government now: 

• Cross-references IRS and USCIS records 
• Reviews tax filing history during green card renewals and naturalization (N-400) 
• Allows expedited removal for those out of compliance 

Bottom line: Not filing or filing incorrectly could put your immigration status at risk. 

What Income Green Card Holders Must Report 

You must report all income earned after you become a green card holder, including: 

Taxable Income: 

• Wages or salary (U.S. or foreign) 
• Business or freelance income abroad 
• Investment earnings (interest, dividends, capital gains) 
• Rental income from foreign property 
• Foreign pensions 
• Cryptocurrency gains 
• Foreign social security benefits (with some treaty exceptions) 

Not Taxable: 

• Income earned before you became a green card holder 
• Income earned after formally surrendering your green card (Form I-407) 

Two Common Scenarios: What You Need to Know 

1. Green Card Holders Living Abroad Temporarily 

Even if you live outside the U.S., you’re still considered a U.S. tax resident. That means: 

• You must file Form 1040 annually 
• You may be eligible for:  
• The Foreign Earned Income Exclusion (FEIE) — up to $130,000 for the 2025 tax year 
• The Foreign Tax Credit (FTC) — dollar-for-dollar credit for taxes paid abroad 

You’ll need to report:  

• Foreign bank accounts (FBAR) 
• Foreign assets (Form 8938) 
• Foreign business income or dividends 

Don’t file Form 1040NR—doing so signals to the IRS and USCIS that you’ve abandoned your residency. 

2. Green Card Holders Living in the U.S. with Foreign Income 

If you live in the U.S. and receive income from abroad, you must file a U.S. tax return with all global income.

Reporting requirements:  

• Foreign property rental income 
• Payments from foreign employers or clients 
• Dividends or capital gains from foreign investments 
• Pensions or inheritances from your home country 

The Foreign Tax Credit may help you avoid double taxation if you’ve paid taxes to a foreign country. 

Tools to Reduce Double Taxation 

The U.S. recognizes the unfairness of taxing income already taxed abroad. Two primary mechanisms help prevent double taxation: 

1. Foreign Tax Credit (FTC) 

• Best for high-tax countries like Germany, Canada, or Australia 
• Credit for income taxes paid abroad 
• Use Form 1116 

Example: Maria, a green card holder working in Germany, pays $40,000 in German taxes on $100,000 income. She can claim the full amount as a credit against her U.S. tax liability. 

2. Foreign Earned Income Exclusion (FEIE) 

• Exclude up to $130,000 of foreign earned income in 2025 (filed in 2026)
• Requires passing the Physical Presence Test or Bona Fide Residence Test 
• Use Form 2555 

Example: Ahmad works in the UAE and earns $150,000 with no local tax. He can exclude $130,000 and pay U.S. tax only on $20,000. 

Key IRS Forms and Filing Deadlines 

Requirement	What to File	Deadline	Who It’s For
U.S. Tax Return	Form 1040	April 15 (or June 15 for US Expats)	All green card holders
Foreign Bank Accounts	FBAR (FinCEN 114)	April 15 (Oct. 15 extension)	$10,000+ in foreign accounts
Foreign Assets	Form 8938 (FATCA)	Same as tax return	$200 K+ for foreign residents
Claiming FTC	Form 1116	With tax return	If you paid foreign taxes
Claiming FEIE	Form 2555	With tax return	If excluding foreign earned income

State Tax Considerations 

Some states—mainly California and New York—may still consider you a resident even if you move abroad. 

Watch out for: 

• You maintain a U.S. home or mailing address 
• You keep a state driver’s license or voter registration card 
• You return frequently or for extended periods 

Green Card Compliance Tips 

Do: 

• File U.S. taxes every year, even if you owe nothing 
• Disclose foreign accounts and income properly 
• Keep U.S. bank accounts and ties if abroad temporarily 
• Work with a tax professional if you’re unsure 

Avoid: 

• Filing as a non-resident (Form 1040NR) 
• Skipping FBAR/8938 filings 
• Claiming foreign tax residence without treaty support 
• Letting your green card expire without filing Form I-407 

What If You Plan to Surrender Your Green Card? 

Surrendering your green card doesn’t eliminate past tax obligations—and may create new ones. 

You’ll need to: 

• File a final U.S. tax return 
• Possibly pay exit tax (if you’re a “covered expatriate”) 
• Understand how future U.S. income (like rental property) will be taxed 

Common Mistakes To Avoid 

• Assuming foreign income is exempt 
• Skipping tax returns while abroad 
• Failing to report foreign accounts 
• Filing the wrong form (like 1040NR) 
• Claiming treaty benefits without supporting documentation 

Travel and Immigration Considerations 

With 2025’s enhanced scrutiny, green card holders must carefully balance foreign residence with U.S. ties: 

Red Flags to Avoid: 

• Absence longer than 6 months without a re-entry permit 
• Claiming “non-resident” on foreign tax returns 
• Closing all U.S. financial accounts 
• Filing Form 1040NR (non-resident return) 

Protective Measures: 

• Maintain U.S. bank accounts and credit cards 
• Keep your U.S. driver’s license current 
• File U.S. tax returns consistently 
• Document the temporary nature of foreign assignments 

Greenback Can Help with Your U.S. Tax Compliance 

Whether you’re temporarily overseas or managing complex foreign income while living in the U.S., Greenback’s team specializes in U.S. tax preparation for green card holders with international income. 

We’ll help you with the tax side: 

• File all required U.S. tax forms accurately (Form 1040, FBAR, Form 8938) 
• Apply exclusions and credits to reduce your tax bill (FEIE, FTC) 
• Ensure proper reporting of all foreign income and assets 
• Navigate complex tax situations involving multiple countries 

Greenback is an American company founded in 2009 by U.S. expats for expats. We focus exclusively on expat taxes and always have. Many of our CPAs and Enrolled Agents are expats themselves, living in 14 time zones and experiencing firsthand the challenges of living abroad. 

We’ve helped over 23,000 expats file over 71,000 returns while maintaining a 4.9-star average on TrustPilot. We have a rigorous hiring process for both our accountants and customer service reps. We only hire the best. Only an excellent CPA or Enrolled Agent will touch your return from start to finish. 

Don’t Let Tax Mistakes Complicate Your Situation 

With 2025’s stricter enforcement, proper tax compliance is essential. If you’re a green card holder with foreign income, now’s the time to ensure you meet all U.S. tax requirements. 

Get expert help with your U.S. taxes today and ensure you comply with all IRS requirements properly. 

• Get started now to be matched with a qualified tax accountant 
• Schedule a consultation to discuss your specific tax situation 
• Contact our team with questions about U.S. tax requirements for green card holders 

We’ll match you with the right accountant based on your unique situation and guide you through an easy onboarding process. You’ll have direct, one-on-one access and pay a flat price, backed by our Make It Right guarantee. 

No matter how complex your green card tax situation may be, we can help with the U.S. tax compliance side. You’ll have peace of mind, knowing that your taxes were done right.