If you’ve recently moved abroad, your first year as an American expat comes with new experiences, and new tax responsibilities. Even though you now live outside the US, you are still required to file a US tax return and possibly other forms with the IRS. Understanding these filing rules in your first year abroad is key to staying compliant and avoiding penalties.
Do Americans Still Have to File US Taxes After Moving Abroad?
Yes. The United States taxes based on citizenship, not residency. That means if you are a US citizen or Green Card holder, you are still required to file a US tax return no matter where in the world you live.
Even if you didn’t earn US-sourced income, you still have to report your worldwide income if you meet the minimum income threshold. For example, if you’re single and earn at least $14,600 in 2024 (adjusted annually), you must file.
Common IRS Filing Requirements in Your First Year Abroad
Here are the key IRS requirements Americans face after they move abroad
1. Form 1040 (US Individual Income Tax Return)
You’ll still need to file Form 1040 each year. This includes reporting your global income, even if it’s earned abroad. The good news is that there are credits and exclusions that can help reduce or even eliminate your U.S. tax bill.
2. Foreign Earned Income Exclusion (Form 2555)
If you qualify, you may be able to exclude up to $126,500 (for tax year 2024) of foreign earned income using Form 2555. To qualify, you generally must either:
- Be physically present in a foreign country for at least 330 full days in a 12-month period, or
- Be a bona fide resident of a foreign country for an entire calendar year
Note: In your first year abroad, you might not meet the physical presence or bona fide residence test by April 15. In that case, you may need to request an extension to qualify for the exclusion later in the year.
3. Foreign Tax Credit (Form 1116)
If you pay income taxes to your new country, you may be eligible for the Foreign Tax Credit. This can help offset your US tax bill and prevent double taxation.
This is especially useful if your income doesn’t qualify for the full exclusion or if you’re taxed at higher rates abroad.
4. FBAR (FinCEN Form 114)
If you have foreign financial accounts (including bank accounts, pension funds, and certain investment accounts) and the total value exceeded $10,000 at any point during the year, you are required to file an FBAR.
This is filed separately from your tax return, and the penalties for failing to file are steep.
5. FATCA (Form 8938)
Under the Foreign Account Tax Compliance Act, you may also need to file Form 8938 if your foreign assets exceed certain thresholds. For single filers abroad, the threshold is $200,000 at year-end (or $300,000 at any point during the year).
First-Year Abroad Challenges: Timing and Transition
In your first year living abroad, timing can make things tricky. If you moved mid-year, you may not qualify yet for the Foreign Earned Income Exclusion, and you may owe US taxes on your entire foreign income.
Many expats solve this by filing an extension (Form 4868), which gives you time to meet the 330-day requirement. The automatic extension for Americans living abroad is until June 15, but you can request a further extension to October 15 if needed.
It’s also important to determine your residency status in your new country, since that may affect your foreign tax liability and your eligibility for tax credits or exclusions.
The Importance of Filing Even If You Owe Nothing
Many expats believe that if no US taxes are due, they don’t need to file. That’s incorrect. Even when your foreign income is completely offset by exclusions or tax credits, you must still file to claim those benefits. If you skip filing, you’re not protected—and the IRS may assume you owe taxes.
Additionally, benefits like the Foreign Tax Credit (FTC) or FEIE are not automatic. These require properly submitted forms such as Form 1116 or Form 2555.
State Tax Considerations After Moving Abroad
While many expats focus only on their federal taxes, state taxes can also remain an issue, especially if you maintain ties to your former US state. In your first year abroad, states like California, New York, and Virginia may still consider you a resident for tax purposes if you haven’t taken formal steps to sever ties.
This could mean additional tax filings and potentially owing state taxes on your worldwide income. It’s important to consult a tax professional familiar with state residency rules for expats, so you don’t get caught off guard.
Why You Should Work with an Expat Tax Accountant
Tax rules for Americans abroad can be complex, especially in your first year. An expat tax accountant specializes in the unique issues US citizens face when living overseas. They can:
- Help you qualify for the Foreign Earned Income Exclusion or Foreign Tax Credit
- Ensure you properly report your foreign accounts and investments
- Advise on tax treaty benefits and avoid double taxation
- File extensions if needed while planning around the 330-day rule
- Review your foreign residency to plan for future filings
Getting it wrong can lead to missed exclusions, IRS penalties, or double taxation. Working with a tax professional who understands US expat tax rules is one of the best investments you can make during your first year abroad.
Your first year abroad brings big changes and new tax filing responsibilities. Even though you’ve moved outside the US, you’re still required to file with the IRS and possibly report your foreign accounts. With the right planning and help from an expat tax accountant, you can stay compliant, reduce your US tax liability, and avoid penalties.
If you’re unsure what to file, have questions about FBAR, or don’t know whether to claim the Foreign Tax Credit or the Foreign Earned Income Exclusion, feel free to contact us.
