Knowledge Center Tax Advice for Specific Needs

How Is Working Remotely Abroad for a U.S. Company Taxed?

You still owe U.S. taxes if you work remotely abroad for a U.S. company. The U.S. taxes citizens and green card holders on worldwide income regardless of where the work is performed. The key is that where you physically perform the work determines how your income is classified for tax purposes, not where your employer is based.

U.S. citizen or green card holder working remotely abroad for a U.S. company: You file a U.S. return and can use the Foreign Earned Income Exclusion (up to $130,000 for the 2025 tax year) or the Foreign Tax Credit to reduce or eliminate your U.S. tax
Non-U.S. citizen working remotely from another country for a U.S. company: You may not owe U.S. tax at all if you perform all work outside the U.S., but your employer may still have withholding and reporting obligations
Anyone working remotely abroad: You may owe taxes to the country where you are physically working

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Here is how the tax obligations break down for both U.S. and non-U.S. remote workers, what your employer needs to know, and how to avoid paying taxes twice on the same income.

Do Americans Have to Pay U.S. Taxes When Working Abroad?

Yes. U.S. citizens and green card holders must file a federal tax return and report worldwide income every year, even if they live and work entirely outside the United States. This applies whether your employer is a U.S. company or a foreign one.

The good news is that two protections prevent most remote workers abroad from owing anything:

Foreign Earned Income Exclusion (FEIE): Exclude up to $130,000 of foreign earned income from U.S. federal tax for the 2025 tax year. To qualify, you must have a tax home in a foreign country and meet either the physical presence test (330 full days abroad in any 12-month period) or the bona fide residence test (genuine resident of a foreign country for a full tax year). Claim this on Form 2555.
Foreign Tax Credit (FTC): If you pay income tax to the country where you work, you can claim a dollar-for-dollar credit against your U.S. tax using Form 1116. This is especially valuable in high-tax countries like the UK, Germany, or France, where your foreign tax rate may exceed the U.S. rate.

Your Situation	Best Protection	Likely U.S. Tax Owed
Earning under $130,000 in a low-tax country (e.g., UAE, Thailand)	FEIE	$0
Earning under $130,000 in a high-tax country (e.g., UK, Germany)	FTC (often better) or FEIE	$0
Earning over $130,000 in a high-tax country	FEIE + FTC combined	Usually $0 (FTC covers the excess)
Earning over $130,000 in a low-tax country	FEIE + partial tax on the excess	Some U.S. tax on income above $130,000

Example: Rachel, a U.S. citizen, works remotely from Berlin for a San Francisco tech company, earning $120,000. She pays approximately $30,000 in German income tax. She can either exclude her entire salary using the FEIE (owing $0 to the U.S.) or use the Foreign Tax Credit ($30,000 credit against roughly $18,000 in U.S. tax, also owing $0). Her Greenback accountant helps her determine which option provides the best long-term benefit.

Can a Non-U.S. Citizen Work Remotely for a U.S. Company From Another Country?

Yes, a non-U.S. citizen can work remotely for a U.S. company from another country. The tax implications depend on where the work is performed and whether the worker has any U.S. tax obligations.

If the non-U.S. citizen performs all work outside the United States:

The income is generally not subject to U.S. federal income tax because it is not U.S.-source income
The worker is not required to file a U.S. tax return (unless other U.S.-source income exists)
The worker owes taxes to the country where they physically perform the work, based on that country’s tax rules

If the non-U.S. citizen occasionally works from within the United States:

Any income earned while physically in the U.S. becomes U.S.-source income
The worker may need to file Form 1040-NR (U.S. Nonresident Alien Income Tax Return)
U.S. tax treaties with their home country may reduce or eliminate withholding on U.S.-source income
The substantial presence test determines whether extended U.S. visits trigger resident alien status and worldwide income reporting

What the U.S. employer needs to consider:

Employer Obligation	Details
Tax withholding	Generally, no U.S. federal income tax withholding is required if the foreign worker performs all services outside the U.S. and provides a valid Form W-8BEN
FICA taxes	Social Security and Medicare taxes may still apply if the worker is a U.S. company employee, unless a totalization agreement with the worker’s country eliminates dual coverage
Permanent establishment risk	Having an employee working in a foreign country can create a taxable presence (permanent establishment) for the company in that country
Local employment law	Many countries require employers to register, withhold local taxes, and provide benefits once a worker spends significant time there

Hiring non-U.S. citizens as remote workers is common and legal, but the employer’s obligations vary significantly by country. Many U.S. companies use employer-of-record (EOR) services to manage foreign payroll compliance.

Confused About Payroll While Working Abroad?

We’ll confirm whether to file Form 673, whether FICA still applies, and how to coordinate with your U.S. employer properly.

Where Do I Pay Taxes If I Work Remotely in Another Country?

You may owe taxes to multiple jurisdictions. Here is the general framework:

U.S. federal taxes: If you are a U.S. citizen or green card holder, you owe U.S. taxes on worldwide income regardless of where you work. Use the FEIE or FTC to avoid double taxation.

Country where you work: Most countries tax income earned within their borders. If you spend more than 183 days in a country, you will almost certainly become a tax resident there and owe local income tax. Some countries with digital nomad visa programs (such as Portugal, Costa Rica, or Thailand) may offer exemptions or reduced rates for remote workers earning foreign-source income.

State taxes: This is where many remote workers get caught off guard. Moving abroad does not automatically end your state tax obligations. Some states are particularly aggressive about maintaining tax jurisdiction over former residents.

State Category	Examples	What Happens
“Sticky” states	California, New York, Virginia, South Carolina, New Mexico	May continue taxing your worldwide income unless you formally sever all ties (sell property, close accounts, surrender driver’s license)
States with no income tax	Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming	No state income tax obligation, regardless
Other states	Most remaining states	Typically stop being taxed once you establish a genuine residence abroad

Many remote workers establish residency in a no-income-tax state before moving abroad to create a clean break. If you left California or New York without properly severing ties, you may still owe state taxes on the salary your U.S. employer pays you, even though you live and work overseas.

Most states do not recognize the FEIE. Even if you exclude $130,000 from federal tax, your former state may still tax that full amount if it considers you a resident.

How Does My Employer Handle Payroll When I Work From Abroad?

Your employer’s payroll obligations change when you work from another country, and this affects your tax situation directly.

U.S. payroll taxes (Social Security and Medicare): As a U.S. employee of a U.S. company, you generally continue to owe FICA taxes (6.2% Social Security + 1.45% Medicare) regardless of where you work. Your employer also pays their matching share. The FEIE does not eliminate these taxes. However, if you work in one of the 30+ countries that have a totalization agreement with the United States (including the UK, Canada, Germany, France, Australia, Japan, and South Korea), you may be exempt from U.S. Social Security taxes if you are covered under the foreign country’s social security system. Your employer files a certificate of coverage to claim this exemption.
Federal income tax withholding: Your employer can stop withholding federal income tax if you expect to qualify for the FEIE. You submit Form 673 to your employer to claim the FEIE withholding exemption. This keeps more money in your paycheck throughout the year rather than waiting for a refund at tax time.
State income tax withholding: Whether your employer must continue withholding state taxes depends on whether you have properly severed state residency. If you still have ties to a “sticky” state, your employer may continue withholding state taxes until you provide documentation of non-residency.
Foreign country taxes: Your U.S. employer is generally not set up to withhold taxes for a foreign country. You may need to make estimated tax payments directly to the foreign tax authority, or your employer may need to register with the local tax authority and set up local withholding. This is one of the most operationally complex parts of working remotely abroad for a U.S. company.

Do U.S. Citizens Living Abroad Pay Taxes Twice?

Not in most cases. The U.S. tax system is designed to prevent double taxation through the FEIE, the FTC, and tax treaties with over 60 countries.

Here is how it works in practice for a remote worker:

Scenario: James, a U.S. citizen, works remotely from the UK for his employer in Boston. He earns $100,000 and pays approximately $25,000 in UK income tax.

Step 1: James reports $100,000 on his U.S. tax return (worldwide income reporting requirement)
Step 2: He claims the Foreign Tax Credit of $25,000 on Form 1116
Step 3: His U.S. tax on $100,000 would be approximately $15,000
Step 4: The $25,000 FTC exceeds his $15,000 U.S. liability, so he owes $0 to the U.S. (The $10,000 excess credit can carry forward for up to 10 years.)
Result: James pays tax only to the UK. No double taxation.

The FEIE and FTC cannot be used on the same dollar of income, but you can apply each to different types of income. For example, you might use the FEIE on your first $130,000 of salary and the FTC on investment income or salary above the exclusion limit.

What Forms Do I File as a Remote Worker Abroad?

Form	Who Files	Purpose
Form 1040	All U.S. citizens and residents	Annual income tax return reporting worldwide income
Form 2555	Workers claiming the FEIE	Calculates and claims the Foreign Earned Income Exclusion
Form 1116	Workers claiming the Foreign Tax Credit	Calculates credit for foreign taxes paid
FBAR (FinCEN 114)	Anyone with foreign accounts exceeding $10,000 aggregate at any point during the year	Reports foreign bank and financial accounts to FinCEN (filed separately from your tax return)
Form 8938	Taxpayers abroad with foreign assets above $200,000 (single) at year-end	FATCA reporting of specified foreign financial assets
Form 673	Employees requesting FEIE withholding exemption	Submitted to the employer to stop federal income tax withholding

Filing deadlines for Americans abroad:

April 15: Taxes owed are due (interest begins on unpaid balances)
June 15: Automatic two-month filing extension for Americans living abroad (no form required)
October 15: Extended deadline if you file Form 4868 by June 15
FBAR deadline: April 15, with automatic extension to October 15

How Greenback Can Help

Working remotely abroad for a U.S. company involves coordinating U.S. federal taxes, potential state taxes, foreign country obligations, and employer payroll considerations. Your Greenback accountant handles all of it.

Greenback helps remote workers abroad with determining whether the FEIE or FTC (or a combination) provides the best tax outcome, filing Form 2555 and Form 1116 correctly, evaluating state tax obligations and documenting non-residency, coordinating with your employer on Form 673 withholding exemptions, and filing FBAR and FATCA reports for foreign financial accounts.

If you are a digital nomad or work remotely for a U.S. company from abroad, we specialize in your exact situation. Learn more about how we help digital nomads.

If you are ready to be matched with a Greenback accountant, click the get started button below. For general questions about remote work taxes or working with Greenback, contact us, and one of our Customer Champions will be happy to help.

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This article is for informational purposes only and does not constitute tax, legal, or accounting advice. Tax obligations for remote workers abroad depend on citizenship, residency, the country where work is performed, and your specific employment arrangement. For guidance on your situation, contact Greenback to speak with a tax specialist.