Moving abroad can be an exciting and life-changing experience, but it also comes with new responsibilities, particularly when it comes to US taxes. As an American citizen, you are required to file a US tax return every year, no matter where you live. For those planning to move abroad next year, 2025 will mark the beginning of your first US expat tax return. Understanding the basics of expat taxes and how they differ from filing taxes while living in the US is crucial for staying compliant and avoiding penalties. Here’s everything you need to know to get started.
Know your Tax Obligations as a US Expat
As a US citizen, you’re required to file a tax return with the IRS no matter where you live in the world. This includes income from both US and foreign sources. The good news is that the US tax system offers several provisions to help prevent double taxation, allowing you to exclude a portion of your foreign-earned income or claim credits for taxes paid to your new country of residence. However, you’ll still need to follow all filing requirements to stay compliant with US tax laws.
Your first US expat tax return will involve reporting foreign income, claiming exclusions or credits, and understanding forms you may not have encountered before.
2025 Tax Filing Deadlines and Extensions
As an expat, you’ll have extra time to file your US taxes. The standard tax filing deadline for US expats is June 16, 2025, which gives you an additional two months beyond the regular April 15 deadline. However, if you need more time, you can request an extension, giving you until October 15, 2025, to file your return. Remember that an extension only gives you more time to file, not to pay any taxes due. If you owe taxes, you’ll still need to pay by April 15 to avoid interest and penalties.
Reporting your Worldwide Income
One of the first things to understand about filing your first US expat tax return is that the US taxes you on your worldwide income. This means that you’ll need to report all income earned abroad, including wages, dividends, interest, and business income. Fortunately, the US tax system offers two main ways to reduce or eliminate double taxation on foreign income:
Foreign Earned Income Exclusion (FEIE): The FEIE allows you to exclude up to a certain amount of foreign-earned income from US taxation. For the 2024 tax year, the exclusion amount is $126,500 per person, but it can change annually based on inflation. To qualify for the FEIE, you must meet certain requirements, such as the Physical Presence Test or the Bona Fide Residence Test.
Foreign Tax Credit (FTC): If you pay taxes to your new country of residence, you may be able to claim the Foreign Tax Credit to offset the US taxes owed. This can be especially helpful if your host country has higher taxes than the US, reducing your overall tax liability.
For your first tax return, you’ll need to keep detailed records of all income earned abroad and any foreign taxes paid to ensure you claim the correct exclusions or credits.
Understanding Key Forms for Expats
As a US expat, you’ll likely encounter some new forms that are not required for those living in the US. The most common forms you’ll need for your first expat tax return include:
Form 1040: This is the standard individual income tax return form for US citizens. You’ll use it to report your worldwide income, claim deductions or credits, and calculate your tax liability.
Form 2555 (Foreign Earned Income Exclusion): If you’re claiming the Foreign Earned Income Exclusion, you’ll need to fill out this form to report your foreign income and prove your eligibility for the exclusion.
Form 1116 (Foreign Tax Credit): If you’re claiming the Foreign Tax Credit, this form is used to report the foreign taxes you’ve paid and calculate the credit you’re eligible to claim.
Form 8938 (Statement of Specified Foreign Financial Assets): If you have foreign financial assets, such as bank accounts, investments, or retirement accounts, you may need to file this form to report them to the IRS. The filing threshold varies depending on your filing status and where you live.
FBAR (Foreign Bank Account Report): If you have foreign bank accounts with a combined balance over $10,000 at any point during the year, you’ll need to file the FBAR (Form 114) with the Financial Crimes Enforcement Network (FinCEN). This is separate from your tax return but is an important requirement for expats.
State Taxes and Moving Abroad
Even though you’re moving abroad, you may still be required to file state taxes, depending on your state of residence before leaving the US. Some states, like California and New York, impose strict residency rules that may require you to file state taxes if you maintain a domicile in that state, even if you’re living abroad.
Before you leave, it’s important to check with your state’s tax authority to determine whether you need to file a state tax return in addition to your federal US expat tax return.
Planning Ahead for your First Tax Year
Your first year as an expat can be challenging when it comes to taxes, but there are a few steps you can take to make the process smoother:
Keep good records: Maintain organized records of your income, expenses, and any foreign taxes paid. This will make filing your taxes easier and ensure you’re claiming the correct exclusions and credits.
Plan for currency exchange: If you’re paid in a foreign currency, be sure to keep track of exchange rates for the dates you received your income. You’ll need to report your income in US dollars, and the exchange rate can impact your total income reported.
Consult a tax professional: Filing your first US expat tax return can be complicated, so it’s a good idea to consult a tax professional who specializes in expat taxes. They can help you understand your eligibility for exclusions or credits and ensure you comply with all filing requirements. At Universal Tax Professionals, we’ve been assisting Americans living abroad with their US expat taxes for over a decade. Our extensive library of articles provides US expats with valuable insights into their tax obligations, strategies to reduce tax liabilities, and other essential information. We are proud to have been recognized as one of the Top 20 Expat Blogs for 2025.
Moving abroad is an exciting adventure, but it comes with important tax responsibilities. Your first US expat tax return may feel overwhelming, but understanding the basics of your tax obligations, key forms, and available exclusions and credits will help you navigate the process with confidence.
Start planning early, keep good records, and don’t hesitate to seek professional assistance to ensure you’re fully compliant with US tax laws and make the most of the benefits available to expats. By staying organized and informed, you can focus on your new life abroad while staying on top of your tax filing requirements.
