U.S. Expat Taxes: The 2026 Guide for Americans Living Abroad
- Who Must File U.S. Expat Taxes?
- How Do I Avoid Paying Taxes Twice on the Same Income?
- What Else Do I Need to Report Beyond My Income Tax Return?
- U.S. Expat Taxes by Situation
- How Much Do U.S. Expat Taxes Cost?
- Standard U.S. Expat Tax Forms
- Key Deadlines for the 2025 Tax Year (Filed in 2026)
- Do I Still Pay State Taxes if I Move Abroad?
- What OBBB Tax Law Changes Affect Expats?
- Get Your U.S. Expat Taxes Done Right
- Frequently Asked Questions
U.S. citizens and green card holders living abroad must file U.S. tax returns annually, reporting worldwide income regardless of where they live or work. While filing is required, you can reduce or eliminate your U.S. tax bill using the Foreign Earned Income Exclusion (FEIE), the Foreign Tax Credit (FTC), or tax treaties. You must file to claim these benefits.
According to the IRS Statistics of Income Bulletin, U.S. taxpayers abroad claimed $28.5 billion in foreign earned income exclusions and nearly $29.5 billion in foreign tax credits in a recent study year. Here is what you need to know for the 2025 tax year (filed in 2026):
- Filing thresholds (2025): Single filers ($15,750), Married Filing Jointly ($31,500), Self-employed ($400)
- Foreign Earned Income Exclusion: Exclude up to $130,000 of foreign earned income if you meet the Bona Fide Residence or Physical Presence Test (330 days abroad in 12 months)
- Foreign Tax Credit: Dollar-for-dollar credit for income taxes paid to a foreign government
- FBAR (FinCEN Form 114): Required if total foreign account balances exceed $10,000 at any point during the year
- Self-employment tax: 15.3% on net business income, which cannot be excluded via FEIE
- State taxes: Rules vary by state; some “sticky” states (CA, NM, VA) continue taxing worldwide income after you move
Ready to Get Your U.S. Expat Taxes Handled the Right Way?
Here is everything you need to know to file correctly and claim every protection available.
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 tax year.
| Filing Status | 2025 Filing Threshold |
|---|---|
| Single | $15,750 |
| Married Filing Jointly | $31,500 |
| Head of Household | $23,625 |
| Married Filing Separately | $5 (if spouse itemizes) |
| Self-Employed (any filing status) | $400 in net earnings |
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 three countries that taxes based on citizenship rather than residency (along with Eritrea and North Korea). 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.
All foreign-source income must be converted to U.S. dollars using the Treasury’s annual average exchange rate for the year.
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.
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.
- Bona Fide Residence Test: Lived abroad as a genuine resident for at least one full calendar year.
Compare both tests side by side to determine which works for your situation.
If you receive employer-provided housing abroad, you may qualify for additional savings through the Foreign Housing Exclusion. For 2025, the base housing amount limitation is $39,000, though it varies by location.
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 $130,000 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 $130,000 abroad | Both | Exclude the first $130,000, then use FTC for the rest |
| Self-employed abroad | FEIE + FTC | FEIE reduces income tax, but self-employment tax still applies |
Once you elect the FEIE, revoking it means you cannot re-elect for five years. This is one of the most consequential decisions in your return, and getting it wrong can cost you thousands. For a detailed comparison, see FEIE vs. FTC: Which strategy is best?
Real-World Examples
- 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 FEIE threshold (Both): David earns $175,000 in the UAE, which has no income tax. The FEIE excludes his first $130,000, but the remaining $45,000 is taxed at higher marginal rates due to “stacking.” U.S. tax owed: ~$7,500.
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. Missing these can trigger steep penalties, even when you owe no taxes.
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.
- Filed separately from your tax return through FinCEN’s BSA E-Filing System
- Deadline: April 15, with an automatic extension to October 15 (no form required)
- Penalties for non-compliance: Up to $16,536 per report for non-willful violations
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.
Have Over $10,000 in Foreign Accounts?
FATCA: Foreign Account Tax Compliance Act (Form 8938)
If your foreign financial assets exceed higher thresholds, you must also report them on Form 8938 as part of your tax return:
| Filing Status | Year-End Threshold | Any-Time-During-Year Threshold |
|---|---|---|
| Single, living abroad | $200,000 | $300,000 |
| Married filing jointly, living abroad | $400,000 | $600,000 |
| Single, living in the U.S. | $50,000 | $75,000 |
| Married filing jointly, living in the U.S. | $100,000 | $150,000 |
Many expats need to file both FBAR and Form 8938. Learn the differences between FBAR and Form 8938.
U.S. Expat Taxes by Situation
Your filing requirements and the best tax strategy depend on how you earn your income and where you live.
1. Self-Employed Expats and Freelancers
The FEIE does not eliminate self-employment tax. You will still owe 15.3% on net business income (up to the Social Security wage base of $176,100 for 2025) for Social Security and Medicare, regardless of how much income you exclude. However, if your host country has a Totalization Agreement with the U.S. and you are paying into that country’s social security system, you may be exempt from U.S. self-employment tax.
You will need Schedule C for business income and expenses, Schedule SE for self-employment tax, and Form 2555 for the FEIE. Properly structuring business expense deductions can significantly reduce your overall tax burden. Learn more about self-employed expat taxes.
2. Foreign Business Owners
If you own 10% or more of a foreign corporation, the IRS classifies it as a Controlled Foreign Corporation (CFC). The core filing requirement is Form 5471, which carries a $10,000 penalty per year for non-filing.
Under the OBBB, the former “GILTI” tax was replaced on January 1, 2026, by the Net CFC Tested Income (NCTI) regime, which increased the effective tax rate from 10.5% to 12.6% and eliminated the prior QBAI exclusion. For the 2025 return you are filing now, the prior GILTI rules still apply. Most expats can still eliminate this tax through the High-Tax Exception if their foreign corporation pays a local rate of at least 14%. Learn more about taxes for foreign business owners.
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.
4. Corporate Expats
If your company relocated you abroad, your tax situation often involves housing allowances, tax equalization agreements, stock compensation (RSUs and stock options), and treaty benefits. Learn more about taxes for corporate expats.
5. Retirees Abroad
If you retired overseas, your tax picture involves foreign pension taxation, Social Security benefits, and distributions from retirement accounts. Foreign pensions are often treated differently from U.S. retirement accounts, and tax treaty benefits can significantly reduce your tax bill. Some foreign pensions may trigger Form 3520 reporting if classified as foreign trusts.
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. You would use the Foreign Tax Credit instead. Foreign residential property must also be depreciated over 30 years under the Alternative Depreciation System, compared to 27.5 years for U.S. property.
7. Accidental Americans and Dual Citizens
If you are an accidental American who recently discovered U.S. citizenship, or a dual citizen who has not been filing, the IRS offers the Streamlined Filing Compliance Procedures to help you get current without severe penalties.
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.
How Much Do U.S. Expat Taxes Cost?
Most expats spend between $530 and $700 per year on professional tax preparation, depending on the complexity of the return. When you factor in that proper filing prevents penalties (FBAR violations alone can reach $16,536 per report) and ensures you claim every available exclusion and credit, professional preparation typically pays for itself.
Wondering What Your Expat Tax Filing Will Cost?
Standard U.S. Expat Tax Forms
Beyond your Form 1040, here are the most common forms for expats:
| Form | Purpose | Who Needs It |
|---|---|---|
| Form 2555 | Claim Foreign Earned Income Exclusion | Expats using the FEIE |
| Form 1116 | Claim Foreign Tax Credit | Anyone paying foreign income taxes |
| Schedule C | Report self-employment income | Self-employed taxpayers |
| Schedule SE | Calculate self-employment tax | Self-employed with net earnings over $400 |
| Form 8938 | FATCA reporting of foreign financial assets | Taxpayers meeting FATCA thresholds |
| FinCEN Form 114 | Report foreign bank and financial accounts | Anyone with $10,000+ in foreign accounts |
| Form 5471 | Foreign corporation information return | 10%+ owners of foreign corporations |
| Form 8621 | PFIC reporting | Holders of foreign mutual funds |
| Form 8833 | Treaty-based return position | Taxpayers claiming tax treaty benefits |
Key Deadlines for the 2025 Tax Year (Filed in 2026)
| Deadline | What is Due | Who It Applies To |
|---|---|---|
| April 15, 2026 | Tax return or extension + payment of any taxes owed | All U.S. taxpayers |
| April 15, 2026 | FBAR filing deadline (auto-extends to Oct 15) | Anyone with $10,000+ in foreign accounts |
| June 15, 2026 | Automatic filing extension (no form needed) | U.S. citizens and residents living abroad |
| October 15, 2026 | Extended filing deadline | Taxpayers who file Form 4868 by their applicable deadline |
The automatic two-month extension to June 15 applies only to filing, not payment. If you owe taxes, interest begins accruing on April 15, regardless of when you file. View the full expat tax deadline calendar.
Do I Still Pay State Taxes if I Move Abroad?
Moving abroad does not automatically end your state tax obligations. States like California, New York, Virginia, and New Mexico may continue to tax your worldwide income even after you leave. Most states also do not recognize the FEIE, meaning income you excluded at the federal level may still be subject to state tax.
Properly changing your state residency before you leave can save thousands.
Still Tied to a High-Tax State?
What OBBB Tax Law Changes Affect Expats?
The One, Big, Beautiful Bill Act (OBBB), signed July 4, 2025, introduced several changes relevant to the 2025 tax year:
- Higher standard deduction: Increased to $15,750 (single) and $31,500 (married filing jointly), up from $15,000 and $30,000, respectively.
- New senior deduction: Taxpayers age 65+ can claim an additional $6,000 deduction ($12,000 for married couples where both qualify), on top of the standard or itemized deduction. Phases out for modified AGI above $75,000 (single) or $150,000 (joint).
- FEIE made permanent: Previously subject to periodic legislative renewal, the FEIE is now a permanent provision.
- NCTI replaces GILTI (effective 2026): The Net CFC Tested Income regime replaces GILTI with an increased effective rate of 12.6% and eliminates the QBAI exclusion. For the 2025 return, the prior GILTI rules still apply.
Get Your U.S. Expat Taxes Done Right
If you realize you are in over your head and worried that you will mess it up, let us help. Greenback has been preparing taxes for Americans abroad since 2009. Our CPAs and Enrolled Agents work exclusively on expat returns, live in 14 time zones, and have filed over 71,000 returns for clients in 190+ countries.
Make 2026 the Year You Get Fully Compliant
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.
Frequently Asked Questions
Yes. U.S. citizens and green card holders must file a federal tax return and report worldwide income regardless of where they live. However, most expats owe $0 after applying the Foreign Earned Income Exclusion ($130,000 for 2025) or the Foreign Tax Credit. Filing is required to claim these protections. Learn more about why U.S. citizens abroad pay taxes.
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.
The U.S. exit tax applies only to “covered expatriates” who renounce citizenship or abandon a green card held for 8+ of the last 15 years. You can avoid covered expatriate status by keeping your net worth below $2 million, ensuring your average annual net income tax liability stays below the IRS threshold (~$211,000 for 2026), and certifying five years of full tax compliance on Form 8854. Green card holders who file Form I-407 before the 8-year mark bypass the exit tax entirely.
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.
U.S. expat tax relief comes primarily through two mechanisms: the Foreign Earned Income Exclusion, which removes up to $130,000 of foreign earned income from taxation, and the Foreign Tax Credit, which gives you a credit for every dollar of foreign income tax you pay. Expats who are behind on filing can also use the Streamlined Filing Compliance Procedures to catch up with no penalties. For a full breakdown of available benefits, see U.S. expat tax deductions and credits.
The 90% rule is a European tax concept (used in countries like the Netherlands and Germany) that allows non-residents to claim resident-level deductions if 90% or more of their worldwide income is earned in that country. This is not a U.S. tax rule. For Americans abroad, the relevant residency tests are the Physical Presence Test (330 days abroad) and the Bona Fide Residence Test (full calendar year as a foreign resident), both of which determine eligibility for the FEIE. U.S. residents who spend time abroad may also need to evaluate the Substantial Presence Test.
