Residence-Based Taxation for Americans Abroad: How the LaHood Bill Would Change Expat Taxes
TL;DR: The Residence-Based Taxation for Americans Abroad Act, known as the LaHood bill, would let qualifying U.S. citizens abroad elect to be taxed only on U.S.-source income instead of their worldwide income. It is not a law yet. As of mid-2026, it awaits reintroduction and a Joint Committee on Taxation revenue score, and would not take effect before 2027 at the earliest.
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, it 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 Rep. LaHood and Sen. Todd Young (R-IN) are now finalizing an updated version for reintroduction in the 119th Congress.
Until that happens, nothing changes for you. 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. Here is where the bill stands, what it would change, who would qualify, and what to do in the meantime.
The bill still has not been formally reintroduced, and the earlier Q1 2026 target passed without action. Advocacy remains active: on June 17, 2026, American Citizens Abroad submitted comments to the Senate Finance Committee tied to its June 3 hearing on the President’s Fiscal Year 2027 Treasury budget, linking residence-based taxation to the administration’s trade-expansion goals.
The bottleneck is still the JCT revenue score, and the ACA Global Foundation commissioned independent revenue modeling in late 2025 to feed that process while sponsors close potential loopholes.
Why the Bill Exists: The U.S. Taxes Citizens No Matter Where They Live
The United States is one of only two countries in the world (along with Eritrea) that tax their citizens on worldwide income, regardless of where they live. An American working in London or Tokyo files a U.S. return every year reporting all global income, plus FBARs, Form 8938, and other information returns, even after decades abroad with no U.S.-source income.
The Foreign Earned Income Exclusion and Foreign Tax Credit wipe out the tax most expats owe, but they do nothing to reduce the paperwork or the penalty risk. That is the gap RBT is meant to close.
A competitiveness argument has moved to the center of the case for reform. Because the U.S. taxes on citizenship, an American is more expensive to send abroad than a colleague of almost any other nationality, since employers often use tax-equalization arrangements to cover the extra tax and dual-filing costs. Daniel Bunn, president and CEO of the Tax Foundation, has called the double taxation of Americans abroad “a result of bad policy” and called for its repeal. Advocates frame RBT as a means of treating expats as commercial representatives who open foreign markets to U.S. goods, rather than as tax-avoidance risks.
Confused About What You Owe While Living Abroad?
What the LaHood Bill Would Change for You
The bill’s core provision lets qualifying U.S. citizens abroad elect to be treated as nonresident aliens under IRC Section 7701(b), so they file only on U.S.-source income. In practice, that would change your obligations like this:
| 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) |
| File Form 1040 reporting all global income | File Form 1040-NR reporting only U.S.-source income |
| Claim FEIE or FTC to avoid double taxation | No FEIE or FTC needed (foreign income not reported) |
| File FBAR if foreign accounts exceed $10,000 | FBAR requirements significantly reduced |
| File Form 8938, 5471, 8865, 3520 for foreign assets | Information return burden significantly reduced |
Who Would Qualify
Not every American abroad would be eligible. The election would require all of the following:
- Five years of compliance: Filed returns, paid taxes, filed FBARs, and filed all required information returns for the five consecutive years before electing.
- Foreign tax residency: You are a tax resident of a foreign country and subject to its income tax.
- No U.S. abode: You do not maintain a primary home in the United States.
- Certification under penalty of perjury: A formal eligibility statement filed with the IRS.
You would not qualify if you have unfiled returns or FBARs, live in a tax-free country with no foreign tax residency, keep a primary U.S. home, or are under IRS audit or investigation.
The One-Time Departure Tax
To stop wealthy Americans from using the election to escape tax on built-up U.S. gains, the bill adds a one-time departure tax that works much like the existing exit tax for renouncing citizens, with one crucial difference: you keep your citizenship.
| Feature | Exit Tax (Renunciation) | Departure Tax (LaHood Bill) |
|---|---|---|
| Triggers when | You renounce citizenship or surrender a 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 |
The bill would exempt two groups: long-term expats who have been compliant and abroad for five-plus years, and accidental Americans (born abroad to U.S. parents, with little U.S. connection). This is significant because, under current law, even accidental Americans who renounce face the exit tax. The LaHood bill would give them a way out without that penalty.
Reduced FBAR and FATCA Reporting
For Americans who elect nonresident status, the bill would sharply reduce foreign-account reporting requirements. Today, these forms carry penalties of $10,000 to $25,000+ each for late or missed filing, even when no tax is owed, which is what drives many expats to professional preparers in the first place. The election would reduce or eliminate most of them, including FBAR, Form 8938, Form 3520, Form 5471, and Form 8865, thereby aligning expats’ obligations with those in the rest of the world.
How RBT Compares to the FEIE and FTC You Use Now
The FEIE and FTC cut the tax you owe; RBT would cut both the tax and the filing burden by removing foreign income from your U.S. return entirely.
| 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 |
| Self-employment tax | Still owed (FEIE does not remove SE tax) | Not owed on foreign self-employment income |
| FBAR/FATCA | Required | Significantly reduced |
| Compliance cost | High (prep often $1,000-$5,000+) | Significantly lower |
| Keeps U.S. citizenship | Yes | Yes |
The self-employment tax line matters most for freelancers and business owners. The FEIE excludes foreign income from income tax but does not touch the 15.3% self-employment tax, so many expats still owe SE tax even when their income tax is $0. By treating foreign self-employment income as foreign-source, the LaHood bill could eliminate it for qualifying expats.
Where the Bill Stands and Why It Is Taking So Long
Two obstacles prevent the LaHood bill from being reintroduced.
- The JCT revenue score: The Joint Committee on Taxation must estimate the bill’s revenue impact before it can be formally reintroduced, and this has been the main holdup. JCT spent most of 2025 consumed by the OBBB. Scoring is now underway, and advocates have commissioned independent revenue modeling to support a revenue-neutral result.
- The legislative vehicle: The bill cannot move through budget reconciliation, because the Senate’s Byrd Rule bars Social Security changes in reconciliation bills and the bill’s treatment of FICA/SE tax trips that rule. It would instead need to pass through regular order with bipartisan support or ride a year-end tax package.
The momentum is real even if the timeline is long. The bill has bicameral sponsors, presidential endorsement of the concept, 92.7% support among more than 4,300 respondents in a 2025 Democrats Abroad survey, and mainstream attention from the Pope Leo XIV citizenship-tax story in May 2025. Even in the best case, the law would not take effect before 2027, and most advocates expect a multi-year process.
What Expats Should Do Right Now
The election will require five years of tax compliance, so the most important thing you can do is stay current. Three steps matter most.
1. File your taxes, even if you are behind
If you have missed returns, 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 starts the five-year clock that RBT would require.
2. Do not renounce your citizenship while waiting for RBT
If you are weighing renouncing U.S. citizenship, the bill, if it passes, would remove the main reason many people renounce without the loss of citizenship. But it is not guaranteed to pass, so base that decision on the current law, not a proposal.
3. Keep using the protections you already have
The FEIE ($130,000 for 2025, $132,900 for 2026) and FTC already bring most expats to $0 federal income tax. A Greenback accountant can determine which strategy saves you the most while the bill works its way through Congress.
How RBT Got Here: A Short History
Residence-based taxation has been proposed across four Congresses. The 2024 LaHood bill is the direct successor to Rep. George Holding’s 2018 Tax Fairness for Americans Abroad Act, but it goes much further: it adds departure-tax exemptions for long-term and accidental Americans, explicit FBAR and FATCA relief, detailed trust provisions, a Senate companion (Sen. Young), and presidential support, none of which the 2018 version had. A separate 2023 bill from Rep. Don Beyer (D-VA) took a lighter approach, simplifying filing rather than ending citizenship-based taxation.
| Year | Bill | Sponsor | Status |
|---|---|---|---|
| 2018 | Tax Fairness for Americans Abroad Act (H.R. 7358) | Rep. George Holding (R-NC) | Introduced, no committee action |
| 2023 | Tax Simplification for Americans Abroad Act (H.R. 5432) | Rep. Don Beyer (D-VA) | Introduced (118th Congress), 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) | Pope Leo XIV exemption; raised RBT visibility |
| 2026 | Commission on Americans Living Abroad Act (H.R. 8561) | Rep. Dina Titus (D-NV) | Introduced Apr 28; would create a federal commission on issues facing Americans abroad |
H.R. 8561 is not an RBT bill, but its introduction by the chair of the bipartisan Americans Abroad Caucus signals that the broader issue is gaining ground in Congress.
At Greenback, we have tracked residence-based taxation proposals since the original 2018 bill, and our accountants regularly help clients weighing whether to renounce or wait for reform make that call based on current law. We will update our clients as soon as the new version is introduced.
File With Confidence While the Bill Moves Through Congress
Frequently Asked Questions
No. The original bill (H.R. 10468) expired in January 2025. An updated version is expected to be reintroduced in the 119th Congress by Rep. LaHood and Sen. Young once the JCT completes its revenue score. Neither chamber has voted on it.
There is no set date. As of mid-2026, the updated bill has not been reintroduced and awaits a JCT revenue score. Even in the best case, advocates expect it would not take effect before 2027, and most describe it as a multi-year process.
No. Qualifying expats would still owe U.S. tax on U.S.-source income, such as dividends from U.S. stocks, rent from U.S. property, and U.S. pension distributions. Only foreign-source income would be excluded.
No. Unlike renunciation, the nonresident election lets you keep your citizenship while opting out of worldwide income taxation. You could still vote, hold a U.S. passport, and return at any time.
Not immediately. The bill requires five consecutive years of compliance before the election. Getting current through Streamlined Filing now starts that clock.
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 resolved. The bill’s treatment of FICA/SE tax is one of the technical issues behind the Byrd Rule problem. The current expectation is that qualifying expats would stop earning U.S. Social Security credits on foreign income but keep the credits they have already earned.
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.
