Living abroad as a US citizen is a rewarding experience, offering diverse cultures, new opportunities, and a broader perspective on the world. However, amidst the excitement of international living, American expats must stay well-informed about their financial responsibilities, especially their obligation to file US taxes.
At Universal Tax Professionals, we specialize in assisting Americans overseas with their tax obligations. We understand the complexities of filing taxes for US citizens living abroad and are committed to providing personalized tax advice to ensure you meet all necessary regulations. Our comprehensive US expat tax services are designed to make the process straightforward and stress-free, so you can focus on enjoying your life abroad.
KEY SUMMARY: US Taxes for Americans Living Abroad
US citizens living abroad must file a US tax return if income exceeds IRS thresholds, even when all income is earned outside the United States.
All foreign income, including wages, self-employment, rental, investment, pensions, and business income, must be reported to the IRS, regardless of where it is earned.
US expats can reduce or eliminate taxes using the Foreign Earned Income Exclusion ($130,000), Foreign Housing Exclusion or Deduction, and the Foreign Tax Credit (FTC).
The US uses a progressive tax system with marginal tax brackets ranging from 10% to 37%, meaning only portions of income are taxed at higher rates rather than total income.
Double taxation can be minimized using income tax treaties, the Foreign Tax Credit, and IRS exclusions, with strategies varying for high-tax countries, low-tax jurisdictions, or tax haven countries.
Americans living abroad receive extended US tax deadlines, with most expats able to file their 2025 tax return by June 15, 2026, extend filing until October 15, 2026, and still required to pay any tax owed by April 15, 2026.
Do Americans Living Abroad Pay US Taxes?
This is the most common question that people ask when they move abroad. The short answer is, not necessarily, but almost all Americans living abroad must file their US taxes. Filing US taxes is not the same as paying US taxes.
The United States has a unique taxation system that follows its citizens wherever they go, regardless of residency. Even if you have established a life in a foreign country, you must file annual federal income tax returns with the Internal Revenue Service (IRS) and report your worldwide income whenever your income exceeds the IRS filing threshold.
2025 IRS Filing Threshold
The IRS filing threshold refers to the minimum income level at which individuals are required to file a federal income tax return.
(Exact IRS thresholds for 2025 will be published in official IRS inflation adjustments—commonly similar to or slightly higher than 2024.)
Even if your income is below the threshold, you may want to file to claim credits or exclusions. It’s essential to note that these figures encompass all income sources, including wages, self-employment income, rental income, dividends, and other forms of income. Additionally, certain circumstances, such as special deductions or tax credits, can affect the determination of whether a tax return needs to be filed.
It’s crucial to highlight that when determining whether your total gross income surpasses the IRS filing threshold, you should convert your income into US dollars. For precise conversion, it is recommended to utilize the IRS exchange rate.
How Much Tax Do You Pay as a US Expat?
The tax liability for US expats depends on various factors, including income level, filing status, and applicable deductions.
The United States employs a progressive tax system, meaning that individuals with higher incomes face higher tax rates on the portion of income within each tax bracket. There are seven tax brackets with corresponding marginal tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Contrary to a common misconception, your entire income is not taxed at your highest marginal rate. Instead, each portion of your income falls into a specific tax bracket, and you pay the corresponding rate on that portion.
2025 IRS Tax Brackets
Here are the 2025 federal tax brackets for single filers and married couples filing jointly:
| Tax Rate | Single Filers | Married Filing Jointly |
|---|---|---|
| 10% | Up to $11,925 | Up to $23,850 |
| 12% | $11,926 – $48,475 | $23,851 – $96,950 |
| 22% | $48,476 – $103,350 | $96,951 – $206,700 |
| 24% | $103,351 – $197,300 | $206,701 – $394,600 |
| 32% | $197,301 – $250,525 | $394,601 – $501,050 |
| 35% | $250,526 – $626,350 | $501,051 – $751,600 |
| 37% | Over $626,350 | Over $751,600 |
Calculating your tax liability involves applying marginal tax rates to different portions of your income. Here’s a simplified example:
Let’s say your taxable income is $50,000 as a single filer.
The first $11,925 is taxed at 10%.
The income from $11,926 to $48,475 is taxed at 12%.
The remaining income, from $48,476 to $50,000, is taxed at 22%.
Your total tax liability is calculated by applying each tax rate only to the portion of income within each bracket and then adding those amounts together.
2025 US Tax Deductions and Credits
In addition to understanding tax brackets, American expats should also be aware of the deductions and credits available on their US tax returns. These provisions can significantly reduce taxable income or lower the total tax owed.
2025 Standard Deduction
The standard deduction is a fixed amount that reduces your adjusted gross income (AGI), which in turn lowers your taxable income. For the 2025 tax year, the IRS increased the standard deduction to account for inflation:
Single filers: $15,000
Married filing jointly: $30,000
Head of household: $22,500
Most taxpayers claim the standard deduction because it is simple and often results in a larger reduction than itemizing expenses.
Itemized Deductions
Instead of taking the standard deduction, taxpayers may choose to itemize qualifying expenses if the total exceeds the standard deduction amount. Common itemized deductions include:
Mortgage interest
Medical expenses above the IRS threshold
State and local taxes paid (subject to the SALT cap)
Charitable contributions
Itemizing can be beneficial for taxpayers with significant deductible expenses, though many expats still find the standard deduction more advantageous.
Child Tax Credit (CTC)
The Child Tax Credit remains a valuable benefit for families. For the 2025 tax year:
The credit is worth up to $2,000 per qualifying child under age 17
You must have at least $2,500 in earned income to qualify
The credit begins to phase out if your modified adjusted gross income (MAGI) exceeds:
$200,000 for single filers
$400,000 for married couples filing jointly
The credit is reduced by $50 for every $1,000 of income above these thresholds.
If you owe little or no US tax, you may still qualify for a partial refund through the Additional Child Tax Credit, which allows up to $1,700 per child to be refundable for 2025. However, if you exclude all of your foreign earned income using the Foreign Earned Income Exclusion (FEIE), this refundable portion generally cannot be claimed.
Education Credits
American expats who are pursuing higher education—or supporting dependents who are—may be eligible for education-related tax credits, including:
American Opportunity Tax Credit (AOTC)
Lifetime Learning Credit (LLC)
These credits can directly reduce your US tax liability when you have qualifying education expenses, even while living abroad, as long as IRS requirements are met.
Foreign Income Rules for US Expats
US expats must declare their foreign income to the IRS, even if their income is solely derived from foreign sources and they have no income in the United States. This obligation is rooted in the concept of citizenship-based taxation. Whether employed or residing outside the US, the requirement persists as long as you maintain US citizenship.
Types of Foreign Income that Need to be Declared
- Employment Income: Salaries, wages, bonuses, and any other compensation earned from working abroad must be reported.
- Self-Employment Income: If you are self-employed and generate income from your business activities outside the US, this income must be declared.
- Rental Income: Income earned from renting out properties, whether residential or commercial.
- Investment Income: This includes dividends, interest, and capital gains from investments held outside the US.
- Foreign Pensions: Income received from foreign pension plans or retirement accounts must be declared.
- Foreign Social Security Benefits: If you receive social security benefits from a foreign country, this income needs to be reported.
- Business Income: Income generated from any business activities conducted outside the US must be declared.
- Other Income Sources: Any other foreign sources of income received, such as royalties, alimony, or any miscellaneous income, must be reported.
IRS Forms for Reporting Foreign Income Abroad
US citizens living abroad must report foreign income to the IRS using specific tax forms. The forms required depend on the type of income, account holdings, and foreign financial assets.
- Form 1040 (US Individual Income Tax Return) – All US citizens, including expatriates, must file Form 1040 as their individual income tax return. This form includes sections for reporting various types of income.
- Schedule C (Profit or Loss from Business) – Schedule C reports income or loss from a business or profession, and it is a key form for self-employed individuals, freelancers, and small business owners.
- Schedule E (Supplemental Income and Loss) – Schedule E reports supplemental income and loss, including income from rental property, royalties, partnerships, S corporations, estates, and trusts.
- Form 8938 (Statement of Specified Foreign Financial Assets) –Form 8938 is used for FATCA reporting and requires US taxpayers to disclose specified foreign financial assets when their total value exceeds IRS reporting thresholds. These assets may include foreign bank accounts, investment and brokerage accounts, foreign pensions, and certain other financial instruments held outside the US. The purpose of FATCA reporting is to ensure transparency of offshore assets and compliance with US tax laws.
- FinCEN Form 114 (Report of Foreign Bank and Financial Accounts – FBAR) – If you have foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year, you must file an FBAR.
How Much Foreign Income is Tax-Free in the US?
At the beginning of this article, we discussed how filing taxes in the US and paying taxes are two different things. Usually, Americans living abroad still have to file US taxes, but only a few have to pay them. Why is that? Well, even though the US tax system is connected to citizenship, there are available exclusions and agreements with other countries that can help Americans living abroad handle their US taxes without having to pay a lot.
One of the provisions in the US tax code that allow individual taxpayers to exclude a certain amount of their foreign-earned income from US taxation is called the Foreign Earned Income Exclusion (FEIE).
Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion allows qualifying US taxpayers to exclude a portion of their foreign-earned income from US taxation.
For the 2025 tax year, the maximum FEIE amount is $130,000 per qualifying individual. This means that if you meet the eligibility requirements, you can exclude up to $130,000 of your foreign-earned income from your US taxable income.
If you are married and filing jointly, and both spouses qualify, you may be able to exclude up to $260,000 of combined foreign-earned income on your 2025 US tax return.
The FEIE amount is adjusted annually for inflation, which is why it increases over time.
Foreign Housing Exclusion and Deduction
In addition to the FEIE, eligible expats may also benefit from the Foreign Housing Exclusion or Foreign Housing Deduction, which can further reduce taxable income by accounting for high housing costs abroad.
The Foreign Housing Exclusion is designed to offset the higher cost of living in many foreign countries. It allows qualifying employees to exclude certain housing expenses—such as rent and utilities—from their US taxable income.
For the 2025 tax year, the calculation works as follows:
The maximum housing expense limit is generally 30% of the FEIE, or $39,000
The base housing amount is 16% of the FEIE, or $20,800
This results in a maximum standard housing exclusion of $18,200, unless you live in a high-cost location approved by the IRS for higher limits
Self-employed expats cannot claim the Foreign Housing Exclusion, but they may instead qualify for the Foreign Housing Deduction, which is calculated using the same limits and rules.
It’s important to note that the Foreign Housing Exclusion or Deduction is claimed separately from the FEIE, and eligible taxpayers may use both on the same return to further reduce their US tax liability.
Eligibility Criteria for FEIE and Housing Exclusion
Qualifying for the Foreign Earned Income Exclusion (FEIE) and the Foreign Housing Exclusion involves meeting specific Internal Revenue Service (IRS) criteria.
Physical Presence Test
- To meet this test, an individual must be physically present in a foreign country or countries for at least 330 full days during any consecutive 12-month period.
- The 330 days do not need to be consecutive, but must add up to 330 within a 12-month period.
- The 12-month period can start at any time, as long as it consists of consecutive months.
Bona Fide Residence Test
- To meet this test, an individual must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.
- Bona fide residence is determined by factors such as the length and nature of stay, intention to make the foreign country home, and the establishment of personal and economic ties.
- Individuals who are bona fide residents can qualify for the FEIE even if they do not meet the Physical Presence Test.
Keep in mind that the foreign-earned income must be from a legitimate job or self-employment. Income derived from investments, interest, or dividends does not qualify for the FEIE.
The Foreign Housing Exclusion is connected to the FEIE, and to be eligible, you must also meet either the Physical Presence Test or the Bona Fide Residence Test. Additionally, you need to have qualifying expenses, such as rent, utilities, real and personal property insurance, nonrefundable property taxes, and fees for securing a lease.
Both the FEIE and the Foreign Housing Exclusion are reported on Form 2555 and must be attached to your 2023 Form 1040 when you submit your tax return to the IRS.
Get Expert US Tax Help While Living Abroad
Not sure how US tax rules apply to you overseas? Schedule a 15-minute free tax consult with a US expat tax specialist and get clear answers.
Do US Citizens Living Abroad Pay Double Taxes?
US citizens living abroad are potentially subject to double taxation because they may have to pay taxes on their income both in the country where they earn it and in the United States. Nevertheless, due to various mechanisms in place, US citizens can avoid paying double taxes.
Income Tax Treaties
Income tax treaties are important in mitigating the risk of double taxation for Americans living abroad.
A fundamental aspect of income tax treaties is allocating taxing rights over specific types of income. These treaties define which country has the primary right to tax certain income categories, such as dividends, interest, royalties, and capital gains.
The agreed-upon rules help ensure that income is taxed only once, and in the country where it is most appropriately attributed.
Here are some countries that have income tax treaties with the US. Please visit the IRS website for the full list.
| Countries | ||
|---|---|---|
| Australia | Denmark | Israel |
| Belgium | Finland | Japan |
| Canada | France | Luxembourg |
| China | Germany | Mexico |
| Ireland | Italy | New Zealand |
| Norway | Poland | Portugal |
| South Korea | Spain | Sweden |
| Switzerland | Thailand | United Kingdom |
Foreign Tax Credits (FTC)
The Foreign Tax Credit (FTC) is a tax provision that helps reduce or eliminate double taxation on income earned abroad by allowing a dollar-for-dollar credit for foreign income taxes paid on income that is also taxable in the US. It is available to individuals, businesses, and other entities with foreign income.
2026 US Tax Deadlines and Extensions
Understanding the US tax deadlines is essential for Americans living abroad. Below are the key dates to keep in mind when preparing and filing your 2025 US tax return and FBAR to ensure you stay compliant and avoid unnecessary penalties.
March 15, 2026
- Filing Deadline for US Corporations: Corporate tax returns (Form 1120, 1120-A, 1120-S) and Partnership tax returns (Form 1065) must be filed by March 15, 2026.
- Filing Deadline for Form 3520-A for US Owners of Foreign Trusts: US owners of foreign trusts must also file Form 3520-A by March 15, 2026.
April 15, 2026
- Filing Deadline for Individual US Tax Returns and FBARs: The primary deadline for most individual US taxpayers to file their 2025 tax returns falls on April 15, 2026. This date also marks the deadline for filing Foreign Bank Account Reports (FBARs), for those with financial interests in foreign accounts.
- Deadline for Paying US Taxes: Any taxes owed to the US government must be paid by April 15, 2026, to avoid the imposition of penalties and interest by the IRS.
June 15, 2026
- Filing Deadline for Americans Living Abroad: Americans living abroad have an extended deadline of June 15, 2026, to file their tax returns.
- Last Day for Expats to File an Extension: June 15 is also the final day for American expats to file an extension, if additional time is needed to complete their tax filings.
October 15, 2026
- Filing Deadline with Extension: Individuals who filed for an extension have until October 15, 2026, to file their completed tax returns and FBARs.
What if I’m behind on my US Taxes?
There’s a widespread misconception that Americans living abroad no longer need to file their US taxes, especially if they have no income from US sources. However, as previously explained, American expats must still file their US tax return once they exceed the IRS filing threshold.
Unfortunately, due to this misunderstanding, numerous American expats have overlooked filing their US taxes for an extended period or since relocating overseas. If you discover yourself in this situation, it’s crucial to take action to rectify the matter promptly.
IRS Streamlined Amnesty Program
The IRS Streamlined Filing Compliance Procedures offer a helpful avenue for catching up on your US taxes without facing excessive penalties. This program is designed to assist taxpayers who have not willfully neglected their tax obligations but have fallen behind due to oversight or misunderstanding of the filing requirements.
Under these procedures, eligible taxpayers can file delinquent tax returns for the past three years, along with the required Foreign Bank and Financial Accounts (FBAR) reports for the past six years. One notable benefit of the Streamlined Program is the elimination of penalties.
It’s crucial to note that to qualify for the Streamlined Filing Compliance Procedures, taxpayers must certify that their failure to report income, pay taxes, and submit required information returns was not willful. Additionally, individuals must demonstrate their eligibility by meeting specific non-residency requirements for the Streamlined Foreign Offshore Procedures.
2026 US Tax Help for Americans Living Abroad
Universal Tax Professionals is here to assist you if you need additional information about US taxes or need help preparing your 2025 US tax return. Our team of accountants are experts in international taxation and have successfully helped clients with diverse tax scenarios worldwide.
