The Complete Guide to US Expat Taxes

Everything Americans Living Abroad Need to Know

Introduction: Why US Expats Still Have Tax Obligations

Many Americans assume that moving abroad means leaving US taxes behind. Unfortunately, that’s not how it works.

The United States is one of the only countries that taxes based on citizenship, not residency. This means most US citizens and green card holders must file a US tax return every year — even if they live and work overseas.

This guide explains how US expat taxes work, which forms you need, how to avoid double taxation legally, and what happens if filings are missed.

Do US Expats Have to File Taxes?

In most cases, yes.

You generally need to file a US tax return if:

• You are a US citizen or green card holder

• Your worldwide income exceeds the IRS filing threshold

This applies even if:

• You pay taxes in another country

• Your income is earned entirely overseas

• Your employer is not US-based

Filing doesn’t automatically mean you owe US tax, but failing to file can trigger penalties.

How US Expat Taxes Are Calculated

US expats report:

• Worldwide income (salary, business income, investments)

• Converted to USD using IRS-approved exchange rates

The IRS allows several mechanisms to reduce or eliminate double taxation:

• The Foreign Earned Income Exclusion (FEIE)

• The Foreign Tax Credit (FTC)

• Housing exclusions

• Tax treaties (in limited cases)

The Foreign Earned Income Exclusion (FEIE)

The FEIE allows qualifying expats to exclude over $120,000 of foreign-earned income from US taxation.

To qualify, you must meet either:

• The Physical Presence Test (330 days abroad)

• The Bona Fide Residence Test

FEIE applies only to earned income, not investment income.

Foreign Tax Credit (FTC)

The Foreign Tax Credit allows you to claim credits for foreign income taxes paid, offsetting US tax dollar-for-dollar.

It’s often better for:

• Expats in high-tax countries

• High-income earners

• Business owners

Choosing between FEIE and FTC is a strategic decision, not automatic.

FBAR: Foreign Bank Account Reporting

If your foreign financial accounts exceed $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114).

Reportable accounts include:

• Bank accounts

• Savings accounts

• Some foreign investment accounts

FBAR is separate from your tax return and penalties for missing it can be severe.

FATCA (Form 8938)

FATCA requires reporting of certain foreign assets if thresholds are exceeded. Unlike FBAR, FATCA is filed with your tax return.

Many expats must file both FBAR and FATCA.

US Expat Tax Deadlines

Expat tax deadlines:

• Automatic extension to June 15

• Interest accrues after April 15 if tax is owed

• You can request an extension to October 15

• FBAR deadlines are separate

Penalties for Not Filing Expat Taxes

Failing to file can result in:

• Late filing penalties

• FBAR penalties ($10,000+ per violation)

• Accruing interest

• Future compliance issues

The IRS does offer amnesty programs for expats who correct mistakes proactively.

Streamlined Filing Compliance Procedures

The Streamlined Program lets qualifying expats:

• File overdue tax returns

• Submit missing FBARs

• Avoid penalties (if non-willful)

It’s often the safest way to catch up — but must be done carefully.

Self-Employed Expats & Business Owners

Self-employed expats face extra complexity:

• Self-employment tax

• Totalization agreements

• Business expense deductions

• Entity structuring

FEIE does not remove self-employment tax in most cases.

Staying Compliant Without Stress

US expat taxes can feel overwhelming, but with the right guidance, staying compliant and minimizing taxes is easier than you might think.

If you’re unsure about FEIE, FTC, or FBAR requirements, our team at Exemplary can review your situation and help create a strategy tailored to your circumstances. [Subscribe and enjoy the 1 year free →]

FAQs

Do US expats always owe taxes?
No — many owe little or nothing after exclusions and credits.

Do I have to file if I make less abroad?
Yes, if you exceed filing thresholds.

Is FBAR required every year?
Only if account balances exceed $10,000 at any point.