Do US citizens living abroad still have to pay US taxes?
They have to file. Whether they pay is another matter. The US taxes citizens and green-card holders on their worldwide income wherever they live (it's one of only two countries that tax by citizenship), so a Form 1040 goes in every year you're over the threshold. Most of the people we work with owe the IRS little or nothing once the exclusion or credit is on the return.
Those breaks only exist on a filed return, though, and the money that does get lost is usually elsewhere: a missed FBAR, a local index fund that turns out to be a PFIC, a state that never agreed you'd left. Figures below are for tax year 2025, the return you file in 2026, unless we say otherwise.
Who must file a US tax return from abroad?
US citizens (dual citizens and "accidental Americans" included), green-card holders whose card hasn't been formally abandoned or revoked, and anyone else who's a US tax resident for the year file once gross worldwide income reaches the threshold below. Income you'll later exclude under the FEIE still counts.
| Filing status | Age at end of 2025 | Must file if gross income is at least |
|---|---|---|
| Single | Under 65 | $15,750 |
| Single | 65 or older | $17,750 |
| Married filing jointly | Both under 65 | $31,500 |
| Married filing jointly | One spouse 65+ | $33,100 |
| Married filing jointly | Both 65+ | $34,700 |
| Married filing separately | Any age | $5 |
| Head of household | Under 65 | $23,625 |
| Head of household | 65 or older | $25,625 |
Two rows catch expats out. If you're married to a non-US spouse and don't elect to treat them as a US resident, you usually file married filing separately, where the threshold is $5. And if you freelance, you file once net self-employment earnings hit $400, whatever your total income.
When are US expat taxes due in 2026 (tax year 2025)?
Americans abroad get more time to file, not more time to pay. Interest on unpaid tax runs from April 15, so if you think you'll owe, pay by then and file later.
- 1
April 15, 2026: tax is due
The regular due date for 2025 returns and the date any tax owed has to be paid. It's also the FBAR's original due date.
- 2
June 15, 2026: automatic extension for taxpayers abroad
If on April 15 you live outside the US and Puerto Rico and your main place of work is outside the US (or you're in the military on duty abroad), you get two extra months to file. No form needed; attach a statement saying you qualify.
- 3
October 15, 2026: with Form 4868
File Form 4868 by June 15 and the deadline moves to October 15, handy when local tax statements arrive late. The FBAR extends to October 15 automatically.
- 4
December 15, 2026: by request only
If you still can't file by October 15, you can ask the IRS by letter for a further two months. It's discretionary, so we don't plan around it.
Moved abroad partway through 2025? Form 2350, filed by April 15 (or June 15 with the automatic extension), pushes the deadline past the date you expect to pass an FEIE test, so you file once instead of filing and amending.
If you're self-employed, or have income with no US withholding that the FEIE or credit won't fully cover, you may also owe quarterly estimated payments for 2026:
- Q1: April 15, 2026
- Q2: June 15, 2026
- Q3: September 15, 2026
- Q4: January 15, 2027
How does the Foreign Earned Income Exclusion (FEIE, Form 2555) work?
The FEIE takes up to $130,000 of foreign earned income off your US return for 2025 ($132,900 for 2026), claimed on Form 2555. A married couple who both work abroad and qualify each get the full amount. You need a tax home abroad (your main place of work is outside the US) and one of two tests.
The physical presence test wants 330 full days outside the US in any 12-month window, which can straddle two years, so it's the one people use in the year they move. A full day is midnight to midnight; part-days in the US and time over international waters don't count. 329 days is a fail, so keep a travel log.
The bona fide residence test asks whether you genuinely lived abroad for an uninterrupted period covering a whole calendar year: home, job, family, how long you plan to stay. Short US trips don't break it. You can't use it if you've told the local tax authority you're not resident there, and green-card holders only get it if they're citizens of a treaty country.
What income does the FEIE cover?
Only earned income for work done abroad: salary, bonuses, allowances, employer housing, self-employment income, and remote work for a US employer. Not interest, dividends, gains, rent, pensions, Social Security or US government pay (military included).
And it has side effects. It doesn't touch self-employment tax, so a freelancer can exclude every dollar and still owe 15.3% unless a totalization agreement applies. What you don't exclude is taxed at the rates you'd pay if the excluded income were still there. It blocks the refundable Additional Child Tax Credit, excluded wages can't fund an IRA, and revoking it generally locks you out for five years without IRS approval.
The foreign housing exclusion
On top of the FEIE you can exclude reasonable housing costs (rent, utilities, insurance) above a base of $20,800 for 2025, up to a default cap of $39,000. The IRS publishes higher caps for expensive cities, and London, Hong Kong, Singapore and Tokyo are all well above the default. Employees take it as an exclusion, the self-employed as a deduction, both on Form 2555.
Example: Omar, an engineer in Dubai
Say Omar is a single US citizen who lived and worked in Dubai for all of 2025. He earned $150,000 in salary and housing allowance, spent $36,000 on rent and utilities, and paid no UAE income tax, because there isn't any.
The FEIE takes off $130,000. The housing exclusion takes off another $15,200 ($36,000 less the $20,800 base, under the cap). That leaves $4,800 of earned income, less than the $15,750 standard deduction, so his US income tax is $0.
With no foreign tax to credit, the FEIE is his only real relief, as it is in Saudi Arabia, Qatar and Bahrain and often in Hong Kong. US dividends or interest would still be taxed. More in our UAE guide.
How does the Foreign Tax Credit (Form 1116) work?
The Foreign Tax Credit gives you a dollar-for-dollar credit against US tax for income tax you paid another country on the same income. It goes on Form 1116 and, unlike the FEIE, it works on every kind of income: wages, dividends, interest, rent, pensions and gains.
It's capped at the US tax on your foreign-source income, category by category (mostly "general" for wages, "passive" for investments), so spare salary credit can't shelter lightly taxed investment income. Unused credit carries back one year and forward ten. There's no credit for tax on income you excluded under the FEIE. If your foreign tax is $300 or less ($600 married filing jointly), all on reported passive income, you may not need Form 1116 at all.
Example: Lukas, a US citizen in Munich
Take Lukas, who earns about $120,000 (roughly €110,000) at a German engineering firm and has two young children. German income tax plus the solidarity surcharge on that salary is more than US tax on the same income.
He's under the FEIE limit, so he could exclude all of it. But he'd give up the refundable Additional Child Tax Credit and the ability to fund an IRA. With the credit instead, his German tax covers his US tax, he owes $0, he keeps the refundable child credit, and the excess German tax carries forward.
That's our default in high-tax countries: Germany, the UK, France, the Nordics, Japan, Canada and Australia. See our guide to US tax in Germany for the German specifics.
FEIE vs Foreign Tax Credit: which should you choose?
It comes down to how your local tax compares with US tax on the same income. Here's where we usually land:
| Your situation | Usually better | Why |
|---|---|---|
| No or low local income tax (UAE, Saudi Arabia, Qatar) | FEIE (+ housing exclusion) | Nothing to credit; the exclusion is the only relief |
| Local tax higher than US tax (Germany, UK, Canada, Australia) | FTC | Credits wipe out US tax, excess carries forward, child tax credit preserved |
| Salary above the FEIE limit in a moderate-tax country | FEIE + FTC | Exclude the first $130,000; credit foreign tax on the rest |
| Investment, rental or pension income | FTC | The FEIE only covers earned income |
| Children, and you want the refundable credit | Often FTC | The FEIE blocks the refundable Additional Child Tax Credit |
| Planning to move somewhere lower-tax later | FTC now | Carryforwards can shelter foreign income for up to ten years |
Example: Mei, a US citizen in Singapore
Say Mei earns $200,000 as a product director in Singapore, where rates are generally lower than US rates at her income, and gets about $5,000 of dividends from a US brokerage account.
She excludes $130,000 of salary plus a housing exclusion (Singapore's cap is well above $39,000), then credits the Singapore tax on the rest of her salary. Because Singapore's rates are lower, that credit only covers part of the US tax on that slice, and her US dividends get no relief at all.
Her bill drops a lot without reaching zero. For higher earners in moderate-tax countries we run it both ways every year. See our Singapore guide.
And tax treaties? They help citizens much less than people assume, because nearly every US treaty has a saving clause letting the US tax its own citizens as if the treaty didn't exist. They still matter for pensions and dividend withholding, and a treaty position that overrides the Code generally goes on Form 8833.
Do I need to file an FBAR (FinCEN 114) for my foreign bank accounts?
Yes, if the combined highest balances of your foreign accounts topped $10,000 at any point in 2025. It's a report, not a tax, filed with FinCEN separately from your return, due April 15 with an automatic extension to October 15.
"Combined" is the word people miss. Say someone in Toronto had a chequing account that peaked at $6,200, a TFSA at $3,100 and an RRSP at $1,400: that's $10,700, so an FBAR is due though no account came close. Add each account's highest balance, even on different days, at the Treasury's December 31 rate.
It's not just bank accounts. Joint accounts with a non-US spouse, brokerage accounts, ISAs and TFSAs, most foreign pensions (SIPPs, RRSPs, Australian super), cash-value life insurance and accounts you can sign on but don't own, like an employer's or a parent's, all count.
FBAR penalties
A non-willful missed or late FBAR can cost up to roughly $16,500 per report (it's adjusted for inflation each year). Since the Supreme Court's 2023 Bittner decision, that's per report, not per account. Willful violations run to the greater of roughly $165,000 or 50% of the account balance. If you're behind for non-willful reasons, the Streamlined procedures below are built to avoid both.
Our FBAR guide goes account by account, and our FBAR filing service handles the FinCEN submission for you.
What are the FATCA Form 8938 thresholds for Americans abroad?
Form 8938 goes in with your return and overlaps heavily with the FBAR, though it also picks up things like shares held directly. Living abroad, a single filer (or married filing separately) files above $200,000 on December 31 or $300,000 at any time; married filing jointly, $400,000 or $600,000. That's four times the thresholds for people living in the US. Missing it costs $10,000, plus up to $50,000 more if it continues after an IRS notice.
Are foreign mutual funds and ETFs a problem (PFICs)?
Yes, and it's where we see the most avoidable damage. Almost any non-US mutual fund, ETF or pooled investment is a Passive Foreign Investment Company, including the index funds local banks sell, even inside an ISA or TFSA (the US ignores both wrappers). Each one generally needs a Form 8621 every year, and without an election, gains are taxed at the top US rate for each year held plus interest. Mark-to-market or QEF elections limit the damage if made correctly and on time.
Our advice from abroad: stick to individual shares and US-domiciled funds, and if you already hold local funds, get them onto Form 8621 before you sell. PFIC reporting is in our Premier return.
How does the IRS treat foreign pensions and retirement accounts?
Only as far as a treaty says so. A Canadian RRSP or RRIF grows tax-deferred under the treaty, generally with no election, and the UK treaty generally defers US tax on growth in workplace pensions and SIPPs. A TFSA or ISA gets no US shelter at all. See our Canada and UK guides.
Australian superannuation is the one most often got wrong. The treaty and totalization agreement cover parts of it, but there's no settled rule on reporting employer contributions, growth or the fund itself, and practitioners disagree. Wages usually end up at $0 US tax through the credit; the super is where the judgment calls are. See our Australia guide.
Do I pay US Social Security tax while living abroad?
The FEIE and credit don't cover it, so without an agreement you could pay US Social Security and Medicare and the local equivalent on the same pay. The US has totalization agreements with a few dozen countries, including the UK, Canada, Germany, France, Australia, Japan and South Korea, that put you in one system. Broadly, someone sent temporarily by a US employer (typically five years or less) stays in US Social Security and everyone else pays locally. A certificate of coverage proves which, and it's how a self-employed American in an agreement country avoids US self-employment tax. Contributions covered by an agreement can't also be credited.
There's no agreement with the UAE, Singapore, Hong Kong or Mexico, among others, so a self-employed American there owes US self-employment tax even when the FEIE clears their income tax.
What do green-card holders living abroad need to know?
A green card keeps you a US tax resident until it's formally abandoned (usually with Form I-407) or revoked, not when it expires in a drawer. Claiming treaty residence abroad on Form 8833 is an option in some treaty countries, but it's treated much like giving the card up.
The long-term resident trap
If you've held a green card in at least 8 of the last 15 years, giving it up, or claiming treaty residence abroad, can make you a long-term resident expatriate, subject to the same exit-tax rules as citizens who renounce. Get advice before you do either.
Do I still owe state tax after moving abroad?
It shouldn't follow you, but some states make leaving hard. California, New York, Virginia, New Mexico and South Carolina are known for treating former residents as still domiciled if they keep a home, a driver's license, voter registration or other ties. California also ignores the FEIE, so it can tax income that's excluded federally. Break residency on purpose and keep the evidence; our state tax guide for expats covers each state's tests.
Behind on US filing? How do the Streamlined procedures work?
If you found out late and the failure was non-willful, the Streamlined Foreign Offshore Procedures let you catch up by filing:
- the last 3 years of tax returns, with Forms 2555, 1116 and 8938 as needed;
- the last 6 years of FBARs;
- a signed certification on Form 14653 explaining why the failure was non-willful.
If you meet the non-residency test (broadly, you were outside the US for at least 330 full days in at least one of the last three years and had no US home), there's no penalty. You pay any tax and interest due, which for many expats is nothing. Read our Streamlined guide or see how our Streamlined package works.
What are the most common US expat tax mistakes?
The big one is not filing because nothing's owed: the breaks only exist on a filed return, and the IRS's time limit for assessing tax never starts on a return that was never filed. Next is the forgotten FBAR, which preparers who don't do expat work often miss. After that come loose day-counting, defaulting to the FEIE in a high-tax country, local funds, and exchange rates. A yearly average rate is fine for income received through the year, but a one-off like a property sale uses the rate on the day, and FBAR balances use the Treasury's December 31 rate.
How does TaxSQR prepare your US expat tax return?
- 1
A short call
We find out where you live, what you earn and hold, and which forms and package you need, before you commit.
- 2
Your document checklist
You upload local payslips and tax statements in their original format (P60s, T4s, German wage tax certificates, Australian income statements), account statements and last year's US return through our secure portal.
- 3
Preparation and review
An Enrolled Agent prepares your 1040 with the forms you need, runs the FEIE against the credit, and walks you through it before you sign.
- 4
E-filing and your FBAR
We e-file the return with the IRS, submit your FBAR to FinCEN separately, and send you copies of both.
Fees are flat and agreed up front. Most people abroad need our Expat return at $275, which covers the FEIE, the foreign tax credit, the FBAR and Form 8938. Essential ($145) is for simple returns without foreign-income forms, and Premier ($475) adds equity compensation, K-1s and PFICs. The Streamlined package is from $1,500; the rest is on our pricing page. Ready? See US expat tax filing or get in touch.
US expat tax FAQ
I have lived abroad for more than ten years. Do I really still need to file?
Yes. Citizenship-based taxation has no time limit, and if you've fallen behind, the Streamlined procedures were built for exactly this.
Will I be taxed twice, by the US and my country of residence?
Usually not. Between the FEIE, the housing exclusion and the foreign tax credit, most expats on a salary owe little or no US tax. The exceptions are high earners in low-tax countries, US-source investment income, self-employment tax where there's no totalization agreement, and PFICs.
Can I use consumer tax software from abroad?
Some of it handles Form 2555, but it won't file your FBAR, rarely compares the FEIE with the credit, and struggles with PFICs and foreign pensions. Past a simple salary in one country, we'd use a specialist.
Do I have to file if my spouse is not a US citizen?
You do; your spouse doesn't unless they're a US tax resident. You'll usually file separately (the $5 threshold) unless you elect to file jointly, which brings their worldwide income onto your return, so we run it both ways.
Should I renounce my US citizenship to stop filing?
It's permanent, and tax alone is rarely reason enough. You file Form 8854 and may owe exit tax as a "covered expatriate" if your net worth is $2 million or more, your average net income tax over five years tops $206,000 (the 2025 figure), or you can't certify five years of compliance. The State Department fee fell from $2,350 to $450 on April 13, 2026, but filing correctly usually costs far less than it first seems.
Do I need to file a state return too?
Only if you're still a resident of a state or have income sourced there, like US rental property. Extra state returns are $75 each with us; see our state tax guide.
I made a mistake on a return I already filed. Can it be fixed?
Yes, with Form 1040-X, generally within three years of filing. The usual expat fixes are adding a missed Form 2555 or 1116, or switching from the FEIE to the credit, and we do amended returns for $250 per year.