U.S. Expat Taxes for Americans Overseas

Why do I have to pay U.S. taxes if I live abroad?

As a U.S. citizen or green card holder, you are required to pay U.S. taxes on your worldwide income, even while living abroad. The United States operates under a citizenship-based taxation system, meaning your tax obligations are based on your legal status, not your residency. Under the Internal Revenue Code, U.S. citizens must report and pay taxes on all income earned globally, including foreign income, investments, and other sources of income.

If your income exceeds the minimum filing thresholds for the entire tax year, you must file a U.S. federal tax return. Living overseas does not exempt you from your U.S. tax liability, though available credits and deductions can often reduce or eliminate the taxes you owe.

Failure to file your U.S. tax return can result in significant penalties and interest. Additionally, if you hold foreign financial assets, non-compliance with FATCA reporting requirements may trigger further fines.

At 1040 Abroad, we exclusively focus on taxes for expats. We offer flat fees for tax preparation and free tax advice to all U.S. expats. Contact us today to simplify your U.S. expat taxes and stay compliant — without the stress.

What are the main tax obligations for U.S. citizens overseas?

U.S. citizens and green card holders living abroad are still required to comply with a range of U.S. tax obligations under the IRS. These requirements apply whether or not you owe taxes after claiming exclusions or credits:

• File a U.S. federal tax return annually, reporting your worldwide income from both U.S. and foreign sources.

• Report foreign financial assets by submitting an FBAR (FinCEN Form 114) if the aggregate value exceeds $10,000 at any point during the year.

• File Form 8938 under FATCA if you hold foreign assets above certain thresholds.

• Determine your correct filing status and verify if you have any ongoing state tax filing obligations.

• Claim available tax benefits, such as the FEIE, FTC (IRC § 901), and potentially the Child Tax Credit, to reduce double taxation.

Depending on your specific situation, you may have additional filing obligations. For example, citizens abroad who own foreign corporations may need to file Form 5471 or Form 8858.

At 1040 Abroad, we offer free tax advice to all U.S. expats, helping you navigate complex filing requirements confidently. Get in touch with our experienced tax advisors today to see how we can simplify your expat tax situation.

Which tax forms do expats need to file?

U.S. expats must often file several IRS forms to remain compliant with U.S. tax obligations:

• Form 1040 – The standard U.S. federal tax return, reporting worldwide income.
• Form 2555 – To claim the Foreign Earned Income Exclusion (FEIE) for qualifying foreign income.
• Form 1116 – To claim the Foreign Tax Credit and avoid double taxation.
• FinCEN Form 114 – To report foreign financial accounts via FBAR.
• Form 8938 – To disclose significant foreign assets under FATCA.

If you are self-employed, you must also file Schedule C and pay self-employment taxes. Depending on your situation, other filings like claiming the Child Tax Credit or applying tax benefits under tax treaties may also apply.

Our expat tax services feature transparent pricing, with a clear base price and full disclosure of any additional fees upfront.

When are tax deadlines for Americans living abroad?

Americans living abroad must follow specific U.S. tax filing deadlines:

• April 15 – Regular deadline to file your tax return and pay taxes owed to avoid late payment penalties and interest.
• June 15 – Automatic two-month extension for U.S. citizens and resident aliens abroad to file taxes.
• October 15 – Final deadline if you request an additional extension using Form 4868.

Even if you qualify for extra time to file taxes, any taxes due must still be paid by April 15. E-filed returns are strongly encouraged by the IRS because they offer greater accuracy, faster processing, and quicker tax refunds.

Filing early can help you secure your expected refund amount sooner and avoid issues with compliance. For a full breakdown of filing dates, extensions, and important rules for expats, visit our complete guide here: Expat Tax Deadlines.

Do U.S. expats need to file state taxes?

Whether a U.S. expat must file state taxes depends on their prior state of residency. States like California maintain aggressive tax rules and may continue taxing expats even after they move abroad. California, for example, does not recognize the Foreign Earned Income Exclusion or the Foreign Tax Credit and considers many individuals as residents until they formally change ties.

To end state tax obligations, expats should change their mailing address, register to vote, and obtain a driver’s license in a state without income tax before moving overseas. Without taking these steps, Americans living abroad may still owe state income tax, face penalties, or pay interest on a remaining balance.

Because rules vary widely, using experienced expat tax services or tax advisors helps ensure compliance when filing an expat tax return across different jurisdictions.

For full details on how to properly break residency and avoid unnecessary filings, see our guide: Understanding Your State Tax Obligations.

How can expats avoid double taxation on foreign income?

Expats can avoid double taxation by either:

• Claiming the FEIE using Form 2555, which allows you to exclude up to $126,500 (for 2024 tax year) of foreign earned income from your U.S. tax return.
• Claiming the Foreign Tax Credit using Form 1116, which offsets U.S. taxes with amounts paid to a foreign government.

Choosing the right option depends on factors like your filing status, income level, self-employed status, and the country where you earn foreign income. You cannot use both benefits on the same income source. Careful tax planning ensures that Americans living abroad qualify for maximum relief while staying compliant throughout the tax year.

What is the Foreign Earned Income Exclusion (FEIE)?

The Foreign Earned Income Exclusion allows qualifying expats to exclude up to $126,500 of foreign earned income from their U.S. tax return for 2024. This exclusion helps reduce taxable income and avoid double taxation on income earned while living abroad.

To qualify, you must meet the eligibility criteria by passing either:

• The Physical Presence Test (330 full days outside the U.S. in a 12-month period), or
• The Bona Fide Resident Test (establishing residency in a foreign country for an entire calendar year).

Proper expat tax preparation and accurate filing of Form 2555 are critical. Expats may also benefit from the FTC if additional foreign taxes are paid.

For a complete guide on qualifying, calculating, and filing for the FEIE, visit: Foreign Earned Income Exclusion for US Expats.

What is the Foreign Tax Credit and how does it work for expats?

The Foreign Tax Credit is a key tool for Americans living abroad to reduce their U.S. tax liability. It allows expats to claim a dollar-for-dollar credit for foreign income taxes paid to another country, helping to lower their U.S. tax return balance during the tax year.

Expats can claim the FTC by filing Form 1116 alongside their tax return. The credit applies only to eligible taxes paid on foreign earned income that is not excluded under the FEIE. Understanding the eligibility criteria is important, as expats cannot use the FTC and FEIE on the same income.

Self-employed expats may also need to coordinate FTC claims with other reporting requirements. Filing correctly can maximize your tax refund or minimize unpaid taxes, avoiding IRS penalties.

Because tax topics like the FTC are complex, working with tax professionals specializing in expat tax services ensures compliance.

Do I need to file an FBAR for foreign bank accounts?

Yes. If the maximum account value of your combined foreign financial accounts exceeds $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114). Filing is required even if the accounts generate no taxable income and regardless of whether you already file a U.S. tax return.

The FBAR must be electronically filed separately from your tax return. Penalties for failing to file can be severe, including significant fines. Accurate FBAR and tax return filing is critical for compliance. Work with an experienced expat tax professional to avoid penalties and reporting mistakes.

For a complete guide on FBAR compliance, including filing requirements and tips for submitting properly, visit: FBAR: From Requirements to Submission.

What is FATCA and does it apply to me as an expat?

Yes, FATCA (Foreign Account Tax Compliance Act) applies to many U.S. expats who meet certain foreign financial asset thresholds. If you are a U.S. citizen living abroad and your assets exceed:

• $200,000 on the last day of the tax year (single filers), or
• $400,000 for married couples filing jointly, you must file Form 8938 along with your U.S. tax return.

FATCA reporting is separate from FBAR requirements, and both may apply depending on your accounts. For full FATCA rules, thresholds, and filing guidance, see our article: The FATCA Requirements for US Expats.

How can I stay IRS compliant if I haven’t filed taxes abroad?

If you missed filing taxes while living abroad, the IRS offers several amnesty programs to help expats return to compliance. The most common option is the Streamlined Filing Compliance Procedures, which allows eligible individuals to file overdue tax returns and FBARs with no or reduced penalties, provided the noncompliance was non-willful.

Other options may include the Delinquent FBAR Submission Procedures, depending on your specific tax situation. For expert help in addressing your unique situation, contact the tax experts at 1040 Abroad today.

Why should expats work with tax professionals when filing abroad?

Taxes for expats involve unique challenges not typically covered in standard CPA or Enrolled Agent training. U.S. expats must deal with foreign financial accounts, rental income from foreign properties, foreign corporations, foreign pensions, and foreign trusts, each governed by specialized IRS reporting requirements, including additional forms like Form 5471, Form 3520, or Form 8621.

These areas follow different tax rules than domestic U.S. income, and most accountants without expatriate specialization may be unfamiliar with the detailed filing obligations. Errors in handling these forms can trigger severe penalties or unnecessary audits.

At 1040 Abroad, our tax professionals and tax preparers are specifically trained and highly educated in expat tax preparation. We ensure your tax situation is handled correctly, maximizing deductions and credits, helping you electronically file your return properly, and securing a larger refund whenever possible.