Yes. US citizens living abroad still pay US taxes, because the United States taxes its citizens and green card holders on worldwide income no matter where they live. An American working in London, retired in Costa Rica, or running a business in Singapore files a federal return every year the same as someone in Ohio. What changes abroad is the math: several provisions can reduce the actual tax owed to zero, but the filing obligation itself never disappears while you hold citizenship or permanent residency.
Why the Obligation Follows You
Federal tax law ties your filing duty to legal status, not physical location. If you carry a US passport or a green card, the IRS treats income from every global source as reportable, whether that’s a foreign salary, rental income from an overseas property, or gains in a foreign brokerage account.1Internal Revenue Service. Frequently Asked Questions About International Individual Tax Matters Five years abroad or fifty makes no difference. The obligation ends only when you formally give up citizenship or abandon your green card, and even then a separate exit tax may apply.
When You Have to File
Expats face the same income thresholds as domestic filers, keyed to filing status and age. For 2026, a single filer under 65 generally must file once gross income reaches $16,100, which tracks the 2026 standard deduction.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill Foreign earnings count toward gross income even if you plan to exclude them later, so many expats whose income falls below the exclusion still need to file a return in order to claim it.
The standard due date is April 15. If your home and main place of work are outside the United States and Puerto Rico on that date, you automatically get a two-month extension to June 15.3Internal Revenue Service. U.S. Citizens and Resident Aliens Abroad – Automatic 6 Month Extension of Time to File Filing Form 4868 pushes that to October 15. One catch: those extensions cover paperwork, not payment. Interest on any unpaid balance runs from April 15 no matter which extension you use.4Internal Revenue Service. U.S. Taxpayers Living Abroad Must File and Pay Taxes by June 16
How Expats Actually Avoid Double Taxation
Two tools do most of the work. Choosing between them, or combining them, is where real tax planning lives.
The Foreign Earned Income Exclusion
Under IRC Section 911, you can exclude up to $132,900 of foreign earned income from your 2026 return, a figure that adjusts each year for inflation.5Internal Revenue Service. Figuring the Foreign Earned Income Exclusion The exclusion covers earned income only. Wages and self-employment profits qualify; investment income, pensions, and Social Security benefits do not.
To use it, you need to pass one of two tests:
- The physical presence test asks whether you were in a foreign country for at least 330 full days during any 12-consecutive-month period. A full day runs midnight to midnight, and travel days between countries count against you.
- The bona fide residence test asks whether you established genuine residence in a foreign country for an entire, uninterrupted tax year. The IRS looks at factors like a permanent home, ties to local organizations, and intent to stay indefinitely. This test is available only to US citizens, not green card holders.
Either test also requires that your tax home be in a foreign country, meaning your regular place of business is abroad.6Office of the Law Revision Counsel. 26 USC 911 – Citizens or Residents of the United States Living Abroad Working remotely for a US employer from Portugal generally makes Portugal your tax home. If you have no regular place of business, the IRS looks at where you regularly live.
Section 911 also lets you exclude or deduct certain housing costs above a base amount. For 2026, the general cap on qualifying housing expenses is $39,870, with higher limits for particularly expensive cities.5Internal Revenue Service. Figuring the Foreign Earned Income Exclusion Rent, utilities, and insurance qualify; mortgage payments, furniture, and anything the IRS considers lavish do not.7Internal Revenue Service. Foreign Housing Exclusion or Deduction Employees take a housing exclusion; the self-employed take a housing deduction. Either requires that you already qualify for the earned income exclusion.
The Foreign Tax Credit
The foreign tax credit under IRC Section 901 takes a different approach. Rather than removing income from your return, it hands you a dollar-for-dollar credit against your US tax bill for income taxes you already paid to a foreign government.8Office of the Law Revision Counsel. 26 USC 901 – Taxes of Foreign Countries and of Possessions of United States It covers foreign income taxes, including wage and business income taxes, but not sales taxes, VAT, or property taxes. The practical effect is that you never pay more than the higher of the two countries’ rates. Live somewhere with a 35% income tax rate while your US effective rate would be 24%, and the credit wipes out the US liability on that income, with excess credits available to carry forward.
Choosing Between Them
You cannot apply both the exclusion and the credit to the same dollars. Exclude $132,900 under the FEIE and you cannot also claim a credit for foreign taxes paid on that same $132,900.9Internal Revenue Service. Choosing the Foreign Earned Income Exclusion You can layer them: exclusion on the first $132,900 and credit on anything above.
Which path saves more depends on where you live. In high-tax countries like France or Japan, the credit often eliminates the US bill by itself and may leave carryover credits. In low-tax or no-tax jurisdictions like the UAE or Panama, the exclusion is usually the better play because there are minimal foreign taxes to credit against. Revoking an FEIE election locks you out of re-electing it for five years, so treat the choice seriously.
The Self-Employment Tax Trap
Here is where many expats get blindsided. The foreign earned income exclusion does not reduce self-employment tax. Even if your entire income falls under the $132,900 exclusion and your federal income tax comes to zero, you still owe the 15.3% self-employment tax: 12.4% for Social Security up to $184,500 in earnings, plus 2.9% for Medicare with no cap.10Internal Revenue Service. Foreign Earned Income Exclusion11Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security An additional 0.9% Medicare surtax applies to self-employment income above $200,000.
The main way out is a totalization agreement. The United States has bilateral Social Security agreements with roughly 30 countries. If you live and work in one of them, the agreement typically assigns your Social Security coverage to your country of residence, eliminating the US self-employment tax. You need a certificate of coverage from the foreign country’s social security agency and must attach a copy to your US return each year.12Social Security Administration. U.S. International Social Security Agreements Live somewhere without a totalization agreement and you may owe social security taxes to both countries on the same earnings.
Reporting Your Foreign Accounts
Two separate reporting rules apply beyond the tax return itself. Missing either can trigger penalties larger than any tax you’d have owed.
FBAR (FinCEN Form 114)
Under the Bank Secrecy Act, you must file a Report of Foreign Bank and Financial Accounts if the combined value of your foreign financial accounts exceeds $10,000 at any point during the year. That covers bank accounts, brokerage accounts, mutual funds, and any other account held at a foreign financial institution.13Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) The FBAR is filed electronically through FinCEN’s BSA E-Filing system, not with your tax return, and is due April 15 with an automatic October 15 extension that requires no separate request.
Civil penalties for non-willful FBAR violations are set by statute at $10,000 per account per violation, adjusted upward for inflation. Willful violations carry penalties up to the greater of $100,000 or 50% of the account balance and can lead to criminal prosecution. These are information penalties, so the IRS can assess them even if you owe no tax.
FATCA (Form 8938)
The Foreign Account Tax Compliance Act requires separate disclosure of specified foreign financial assets on Form 8938, which you attach to your tax return. Thresholds are higher for expats than for domestic filers. Single filers abroad must file when foreign assets exceed $200,000 on the last day of the year or $300,000 at any point during the year. For married couples filing jointly abroad, the figures are $400,000 and $600,000.14Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets Form 8938 reaches a broader range of assets than the FBAR, including foreign stock and securities held outside a financial account, interests in foreign entities, and certain foreign financial instruments. Some accounts trigger both forms because the definitions overlap without matching, and filing one does not satisfy the other.15Internal Revenue Service. Summary of FATCA Reporting for U.S. Taxpayers
Tax Treaties Won’t Save You
Expats sometimes assume a US tax treaty with their new country cuts off the US filing obligation. It usually won’t. Nearly every US tax treaty contains a saving clause preserving the US right to tax its own citizens and residents as if the treaty weren’t there.16Internal Revenue Service. United States Income Tax Treaties – A to Z Treaties are more useful in the other direction, reducing or eliminating foreign tax on certain US-source income you receive while abroad, and they can help with specific issues like pension taxation or cross-border employment. They are not a general exemption from US filing.
Don’t Forget State Taxes
Zeroing out federal tax doesn’t automatically free you from state tax. Many states tax residents based on domicile rather than physical presence, and domicile is sticky. It’s the place you intend to return to as your permanent home, and it doesn’t shift just because you moved. States with income taxes often look at whether you kept a home, held onto a driver’s license, stayed registered to vote, or left family behind, and some are notably aggressive about hanging on to former residents.
If you lived in a state with no income tax before moving abroad, this is a non-issue. If you left a state that taxes income, formally severing ties before departure makes the cleanest break: surrender the driver’s license, change your voter registration, and if possible sell or lease out any property you owned. The longer you keep connections, the stronger that state’s argument that you never truly left.
Catching Up If You Never Filed
If you’ve been living abroad and only just learned you were supposed to file US returns, you’re not alone, and the IRS has a program built for this situation. The Streamlined Foreign Offshore Procedures let qualifying expats come into compliance without failure-to-file penalties, accuracy penalties, or FBAR penalties.17Internal Revenue Service. U.S. Taxpayers Residing Outside the United States
To qualify, you must certify that your failure to file was non-willful, meaning it resulted from negligence, honest mistake, or a good-faith misunderstanding of the law.18Internal Revenue Service. Streamlined Filing Compliance Procedures You also cannot already be under IRS examination or criminal investigation. The program requires three years of delinquent tax returns and six years of delinquent FBARs, and for qualifying expats the penalty waiver is complete. A separate domestic version carries a 5% penalty on unreported foreign assets. Quietly filing old returns on your own does not offer the same protection, so if you’re years behind, the streamlined path is generally the most favorable one available.
Giving Up Citizenship and the Exit Tax
Some Americans abroad eventually consider renouncing to end the filing burden. It works, but the IRS collects on the way out. Under IRC 877A, you become a “covered expatriate” if any of the following apply: your net worth is $2 million or more; your average annual net income tax for the five years before expatriation exceeds a threshold ($206,000 for 2025, adjusted annually for inflation); or you fail to certify full tax compliance for the prior five years.19Internal Revenue Service. Expatriation Tax
Covered expatriates face a deemed sale of all worldwide assets on the day before expatriation. You’re taxed on the unrealized gain as if you sold everything, with an exclusion amount ($890,000 for 2025) offsetting the first chunk of gain. Deferred compensation and retirement accounts run under separate rules that can trigger immediate withholding. For anyone with significant assets, the bill can be substantial, which is why the exit-tax analysis usually happens well before the paperwork does.