Mike Wallace, CEO at Greenback Expat Tax Services, has extensive experience in finance, operations, and strategic leadership. Mike has worked in numerous C-Level roles, including at large financial institutions. Mike holds a Master's in Business Administration (MBA) from the University of Chicago's Booth School of Business.
Allen Pfeister
MBA, CPA
Allen Pfeister is a Partner at Tax Uncomplicated, collaborating with Greenback Expat Tax Services and Klemsen Consulting. Allen holds an MBA from the University of New Orleans and a BS in Accounting and Finance from Louisiana State University.
Updated on September 15, 2026
13 minute read
Wallace, M. (2026, September 15). U.S. Expat Taxes: The Filing Guide for Americans and Green Card Holders Abroad. GreenbackTaxServices.com. Retrieved , from https://www.greenbacktaxservices.com/knowledge-center/us-expat-taxes/
U.S. expat taxes are the same federal return you would file in the States, plus the reports that come with income or accounts abroad. You report your worldwide income on Form 1040, claim the Foreign Earned Income Exclusion (FEIE) on Form 2555 or the Foreign Tax Credit (FTC) on Form 1116, and report your foreign accounts separately.
The exclusion removes up to $130,000 of foreign-earned income for the 2025 tax year and $132,900 for the 2026 tax year. The credit offsets your U.S. tax with the income tax you already paid where you live. Which one fits depends on how much that country taxes you.
You file if your worldwide income exceeds the standard deduction for your filing status. For 2025, that is $15,750 for single filers and $31,500 for married filers filing jointly, rising to $16,100 and $32,200 for 2026. Self-employment income has its own $400 threshold in both years. The return is due April 15, extended automatically to June 15 because you live abroad, and to October 15 on request, so the 2025 return is due in 2026 and the 2026 return in 2027. State deadlines often do not move with it.
Foreign accounts are reported separately from your income tax return. A combined balance over $10,000 at any point in the year triggers an FBAR, filed with FinCEN rather than the IRS. Higher balances add Form 8938, which attaches to your return.
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“Expatriate tax” and “expatriation tax” are not the same thing. This guide covers the first: the returns and provisions that apply while you live abroad. If you are weighing giving up citizenship or a long-term green card, that is the U.S. exit tax, read more about the distinction.
Who Must File U.S. Expat Taxes?
As a U.S. citizen or green card holder, you must file a U.S. federal income tax return if your worldwide income exceeds the standard deduction for your filing status. The One, Big, Beautiful Bill Act (OBBB), signed into law on July 4, 2025, increased the standard deduction amounts for the 2025/2026 tax year.
Filing Status
2025 Threshold
2026 Threshold
Single
$15,750
$16,100
Married Filing Jointly
$31,500
$32,200
Head of Household
$23,625
$24,150
Married Filing Separately
$5
$5
Self-Employed (any filing status)
$400 in net earnings
$400 in net earnings
Take Note
If you are married to a non-U.S. citizen and file separately, your filing threshold drops to just $5. This catches many expats off guard and is one of the most common reasons Americans abroad fall out of compliance.
The United States is one of only two countries that taxes based on citizenship rather than residency (along with Eritrea). This means your filing obligation follows your passport, not your address. For a deeper look at why this system exists, see our guide on why U.S. citizens living abroad pay U.S. taxes.
What Counts as Worldwide Income?
“Worldwide income” means every dollar (or foreign currency equivalent) you earn, regardless of source. This includes wages and bonuses from a foreign employer, self-employment and freelance earnings, investment income (dividends, interest, capital gains), rental income from property owned anywhere in the world, and foreign pension distributions or government benefits.
How Do I Avoid Paying Taxes Twice on the Same Income?
The U.S. tax code provides two primary protections to prevent double taxation. Which one you use (or whether you use both) depends on where you live, how much you earn, and whether you pay taxes in your host country.
Protection #1: The Foreign Earned Income Exclusion (FEIE)
For the 2025 tax year, you can exclude up to $130,000 of foreign earned income from U.S. taxation. This amount rises to $132,900 for the 2026 tax year. If both spouses work abroad, each can claim the exclusion separately, for a combined maximum of $260,000. The FEIE was made permanent by the One, Big, Beautiful Bill Act, signed 4 July 2025. It had previously been subject to periodic legislative renewal.
You claim the FEIE using Form 2555. To qualify, you must have a tax home in a foreign country and meet one of two tests:
Physical Presence Test: Physically present in a foreign country for 330 full days during any 12-month period.
If you receive employer-provided housing abroad, you may qualify for additional savings through the Foreign Housing Exclusion. The housing expense limit is 30% of the FEIE, which puts it at $39,000 for 2025, and it rises in high-cost locations.
Protection #2: The Foreign Tax Credit (FTC)
The Foreign Tax Credit gives you a dollar-for-dollar credit against your U.S. tax liability for income taxes paid to a foreign government. If you live in a country with tax rates equal to or higher than U.S. rates, this credit often eliminates your U.S. tax bill entirely. You claim it using Form 1116.
The FTC also applies to U.S. residents who pay foreign taxes on investment income or rental property abroad.
Which Protection Should I Use?
Your Situation
Best Protection
Why
Earn under the exclusion limit in a low-tax or no-tax country
FEIE
Excludes your entire income; simplest approach
Live in a high-tax country (UK, Germany, France, etc.)
FTC
Dollar-for-dollar credit likely eliminates U.S. tax
Earn over the exclusion limit abroad
Both
Exclude up to the limit, then use the FTC for the rest
Self-employed abroad
FEIE + FTC
FEIE clears the income tax, the credit covers what it leaves, and the self-employment tax sits outside both
Low-tax country (FEIE): Sarah earns $95,000 teaching in Singapore, where she pays minimal income tax. She claims the FEIE and excludes her entire salary. U.S. tax owed: $0.
High-tax country (FTC): Marcus earns $115,000 working in Germany and pays approximately $30,000 in German income taxes. His Foreign Tax Credit of ~$19,000 wipes out his entire U.S. tax liability. U.S. tax owed: $0.
Married couple (FTC): Jennifer and Tom earn a combined $210,000 in the UK and pay approximately $50,000 in UK taxes. Their combined Foreign Tax Credit eliminates their U.S. tax bill. U.S. tax owed: $0.
Above the FEIE limit (Both): David earns $175,000 in Australia and pays roughly $50,000 in Australian income tax. The FEIE excludes his first $130,000. The remaining $45,000 is taxed at higher marginal rates due to stacking, and the Foreign Tax Credit on the unexcluded portion covers the remainder. U.S. tax owed: $0.
What Else Do I Need to Report Beyond My Income Tax Return?
Your Form 1040 is just the starting point. Americans with foreign financial accounts and assets are subject to additional reporting requirements, and those apply whether or not you owe any tax.
FBAR: Foreign Bank Account Reporting
If your foreign financial accounts had a combined value of $10,000 or more at any point during the year, you must file an FBAR (FinCEN Form 114). This covers checking, savings, and investment accounts, as well as certain foreign pension or retirement accounts.
Deadline: April 15, with an automatic extension to October 15 (no form required)
Penalties for non-compliance: A non-willful fbar violation carries a maximum penalty per report, which FinCEN adjusts for inflation each January.
Important
The $10,000 threshold applies to the aggregate total across all foreign accounts. If you have three accounts holding $4,000 each ($12,000 total), you must report all of them. The 2023 Supreme Court decision in Bittner v. United States confirmed that non-willful penalties apply per FBAR report, not per account. Learn more about FBAR filing requirements.
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Your filing requirements and the best expat tax strategy depend on how you earn your income and where you live. Your situation decides your package. Everyone abroad files Form 1040, and nearly everyone attaches either Form 2555 or Form 1116. What changes from one situation to the next is the second layer: the information returns, the depreciation rule, and the certification.
Find yourself below:
1. Self-Employed Expats and Freelancers
You will still owe self-employment tax on net business income regardless of how much income you exclude. The rate is 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. Only the Social Security half stops, at $176,100 of net earnings for 2025 and $184,500 for 2026. The Medicare half has no ceiling, and an extra 0.9% applies above $200,000 of net earnings, or $250,000 if you file jointly.
The item most often left off a self-employed expat return is Schedule SE. Section 1402(a)(11) says the foreign earned income exclusion does not apply when you compute net earnings from self-employment, so Form 2555 can take your income tax to zero and leave the full self-employment tax on the same dollars. The route out is a totalization agreement, not the exclusion.
2. Foreign Business Owners
Form 5471 is the filing most often missed here, because the trigger is ownership and not income, so people wait for a distribution that never comes. The instructions require the schedules even when every amount is zero, and Section 6501(c)(8) holds the assessment window open until the information is filed, so an unfiled year does not age out.
3. Digital Nomads
The biggest challenge for digital nomads is meeting the Physical Presence Test. You need 330 full days in a foreign country (or countries) within a 12-month period. Partial days in the U.S. count against you. Your tax home also matters: if you move frequently without a fixed base, the IRS may determine your tax home is in the U.S., disqualifying you from the FEIE.
The filing nomads most often miss is FinCEN Form 114. The $10,000 is the combined total across every foreign account you hold, not a per-account figure, so four modest balances in four countries clear it without any single account looking reportable. The Physical Presence Test also needs a foreign tax home as well as 330 days.
FinCEN Form 114 is the one assignment packages most often leave out, because it reports to FinCEN rather than the IRS and sits outside the return. Signature authority alone triggers it, which catches assignees who sign on the local subsidiary’s accounts, and a corporate filing does not discharge your individual obligation.
5. Retirees Abroad
If you retired overseas, your tax picture involves foreign pension taxation, Social Security benefits, and distributions from retirement accounts. If you are 65 or older, the OBBB added a $6,000 deduction on top of your standard or itemized deduction, or $12,000 where both spouses qualify. It phases out above $75,000 of modified AGI, or $150,000 filing jointly.
Form 3520 is the filing retirees most often miss. A foreign pension can be a foreign trust for U.S. purposes, which carries its own reporting. Rev. Proc. 2020-17 exempts certain tax-favored foreign retirement plans, but only where the plan meets every condition, and most filers never check whether theirs does.
6. Americans with Foreign Property
If you own rental property abroad, you must report the income on your U.S. return. The FEIE does not apply to rental income because it is classified as passive income, not earned income.
What goes wrong here is usually the depreciation rule rather than a missing form. Section 168(g)(1)(A) puts property used predominantly outside the U.S. on the Alternative Depreciation System, which is 30 years for residential rental placed in service after 2017, not the 27.5 years U.S. tax software defaults to. Skipping depreciation does not preserve your basis either, because basis drops by what you deducted or could have deducted. More on reporting foreign rental income.
Form 8938 is the one most often missed. Filing an FBAR feels like it covers foreign accounts, and it does not. Form 8938 has different thresholds, covers assets an FBAR does not, and goes with your tax return rather than to FinCEN. Many people abroad file both, and the differences are set out here.
8. Behind on Filing?
If you have not filed U.S. taxes for one or more years, do not panic. The Streamlined Filing Compliance Procedures allow you to catch up by filing your last three tax returns and six years of FBARs (if required), and certifying on Form 14653 that your non-compliance was non-willful. For expats living abroad, the streamlined foreign offshore procedures carry a 0% penalty. Learn more about catching up on late taxes.
The document most often left out of a catch-up filing is Form 14653. The back returns are not the amnesty. The certification is what converts a stack of late filings into a protected submission, and the IRS states that without it the returns process in the normal course with none of the favorable terms.
9. You Moved From a State That Still Claims You
Moving abroad does not automatically end your state tax obligations. States tax on domicile, not on where you happen to be living, and leaving the country does not by itself end domicile in the state you left. California, New York, Virginia and New Mexico apply the strictest tests. State rules are also set separately from federal ones, so income you excluded under the FEIE can still be taxable at state level. Terminating state residency properly before you go is what prevents this, and the state-by-state picture is here.
How Much Do U.S. Expat Taxes Cost?
Professional preparation for an expat return ranges from $565 to $700 per year, depending on the return’s complexity. Filing correctly keeps you clear of the FBAR penalty regime and makes sure you claim every exclusion and credit you qualify for, which is usually worth more than the preparation costs.
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Yes. U.S. citizens and green card holders must file a federal tax return and report worldwide income regardless of where they live. The Foreign Earned Income Exclusion removes up to $130,000 of foreign earned income for 2025, and the Foreign Tax Credit offsets your U.S. tax with the income tax you already paid where you live, so between them, the U.S. bill is often covered in full. Filing is what claims either one. Learn more about why U.S. citizens abroad pay taxes.
What taxes do expats pay?
U.S. citizens and green card holders abroad pay the same federal income tax as anyone else, on worldwide income, and often nothing after the exclusions and credits are applied. Self-employment tax at 15.3% is the one that survives the FEIE, because the exclusion does not reduce net earnings from self-employment. You may also owe state tax if you kept domicile in a state that taxes worldwide income, and you will owe tax in your host country under its own rules.
What happens if I have not filed U.S. taxes while living abroad?
You catch up, and in most cases, you owe no penalty for doing so. The Streamlined Filing Compliance Procedures let you file the last three years of returns and six years of FBARs, with Form 14653 certifying that the gap was not willful. For people living abroad, the penalty under those procedures is zero. The program remains open to you until the IRS contacts you first, so act on it rather than wait.
Do U.S. expats get taxed twice?
In most cases, no. The U.S. tax code is specifically designed to prevent double taxation. The FEIE lets you exclude foreign income up to $130,000, and the FTC gives you a dollar-for-dollar credit for taxes paid to a foreign government. If you live in a high-tax country like the UK, Germany, or France, the FTC typically eliminates your entire U.S. tax bill. Compare FEIE vs. FTC to find the right strategy.
How much income is tax-free for U.S. expats?
For the 2025 tax year (filed in 2026), the FEIE allows you to exclude up to $130,000 of foreign earned income from U.S. federal taxes. If both spouses work abroad and qualify, the combined exclusion is $260,000. You may also be able to exclude additional amounts through the Foreign Housing Exclusion (up to $39,000 in standard locations, higher in expensive cities). For 2026, the FEIE increases to $132,900.
Filing Is What Turns the Exclusions Into Money You Keep
Nothing on this page happens by default. The exclusion requires Form 2555; the credit requires Form 1116; and both require a return to be filed. Greenback has provided American expat tax services since 2009. Our CPAs and Enrolled Agents live in 14 time zones and have filed over 71,000 returns for clients in 190+ countries.
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This article provides general information and should not be considered specific tax advice. Tax laws are complex and subject to change. Always consult with a qualified tax professional regarding your specific situation.
