Did you know that if you’re a U.S. citizen or resident alien and you move overseas, the IRS still expects to hear from you every year? It’s true! Your tax obligations don’t disappear just because your zip code changes. In today’s post, I’ll explain what expats and digital nomads need to know about federal tax filing, exclusions, credits, and reporting rules when living abroad.

Do I have to file and pay federal U.S. income taxes if I live abroad?

The United States taxes its citizens on worldwide income, no matter where they live. That means that if you earn money freelancing from a beach in Portugal or running an online store from Tokyo, you must still report that income to the IRS.

Because of this, if your total income is above the standard filing threshold, then you’ll need to file a U.S. federal tax return, Form 1040 (remember filing doesn’t necessarily mean you’ll owe!). For reference the standard filing threshold for tax year 2025 for those who are under the age of 65 is $14,600 for single filers and $29,200 for those who are married and filing jointly.

In addition to filing your income taxes, you may also need to file certain reports if you have money in a foreign account or assets in a foreign country. I’ll talk more about those in just a second.

Do I have to pay income taxes to the United States and the country where I’m living?

The IRS has a couple of options you can use to avoid double taxation: the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). 

Expats and digital nomads typically use either the FEIE or the FTC. However, you can use both for the same tax year, just not towards the same income. A CPA can help you decide how to use either or both the FTC and FEIE to get the lowest tax bill in your particular situation.

What is the federal tax filing deadline for U.S. citizens living abroad?

Good news: You get extra time! If you’re a U.S. citizen or resident alien living in another country, you have until June 15 to submit your federal return. But, it’s important to remember that if you owe any tax, the interest on what you owe starts accruing on April 15, so I still recommend filing by then if you can.

If you can’t meet the deadline, you can also request an additional extension to October 15 by submitting Form 4868.

What is the Foreign Earned Income Exclusion (FEIE) and the foreign housing exclusion or deduction?

If you’re a U.S. citizen or resident alien living abroad, you can claim FEIE using Form 2555. If you qualify, this provision allows you to exclude up to a set amount of earned income from U.S. taxation. For instance, for tax year 2025, you can exclude up to $126,500 of foreign-earned income.

To qualify for FEIE, you generally must:

• Live abroad for at least 330 full days during a 12-month period, or
• Be a bona fide (legalese for “real” or “true”) resident of another country for an entire tax year.

An important thing to remember is that this exclusion only applies to earned income, so any income you may have from investments, rental properties, or dividends will still be taxed.

Additionally, if you meet certain requirements, you may also claim the foreign housing exclusion and/or deduction. To claim these, you must have a home in a foreign country and qualify under the bona fide residence test or the physical presence test. You’ll also use Form 2555 to claim this one.

What is the Foreign Tax Credit (FTC)?

The FTC is a nonrefundable tax credit that can be used to lower your tax bill if you paid income tax to a foreign country or U.S. territory. To use this credit, you’ll complete and attach Form 1116 to your Form 1040.

As you can imagine, the tax laws and requirements for claiming the FTC are complicated, so it’s important to contact a CPA to make sure you’re using the credit correctly. A general note to keep in mind is that the amount that may qualify for the FTC is not necessarily equal to the amount that the foreign country withheld in taxes. 

You should also take into account that tax treaties between the U.S. and foreign countries vary greatly and can affect the amount that qualifies for the FTC. 

Additionally, each foreign country will have its own tax laws that will determine whether you can request a refund from that country for any difference between what you paid them and what the U.S. allowed you to recuperate using the FTC.

Do I need to file a Foreign Bank and Financial Accounts Report (FBAR) with the IRS?

If you have foreign financial accounts including checking, savings, business, or investment accounts, and the total value in those accounts was over $10,000 at any point during the year, then you are required to file a Foreign Bank and Financial Accounts Report (FBAR) by April 15 of the following year.

However, although the April 15 due date is the same as the typical due date for your federal income tax return, you don’t file FBAR with the IRS or submit it with your tax return. Instead, your FBAR must be filed electronically through the FinCEN website (Financial Crimes Enforcement Network) using Form 114. 

Additionally, there is an automatic 6-month extension for filing FBAR, meaning you don’t need to apply for the extension in order to use it without penalty. But just because this extension policy seems lax, don’t think that the penalty for not filing is also lax! 

There are severe monetary and criminal penalties the government can exert on its citizens for not filing FBAR and not keeping accurate records of foreign bank accounts.

Do I need to file a Foreign Account Tax Compliance Act (FATCA) report with the IRS?

Separate from the FBAR, the FATCA requires you to report certain foreign financial assets to the IRS if those assets exceed certain amounts. To do this, you’ll attach a Statement of Specified Foreign Financial Assets, Form 8938 to your federal tax return when filing.

The “specified foreign financial assets” the IRS is talking about could include financial accounts, investments, stocks, interest in foreign companies, and even contracts with non-U.S. citizens.

If you’re a U.S. citizen or resident alien living abroad, you need to file Form 8938 when:

• You’re married filing jointly and you have over $400,000 of foreign financial assets on the last day of the tax year or more than $600,000 worth at any time during the tax year (even if only one spouse lives abroad), or
• You’re not married filing jointly and you have over $200,000 of foreign financial assets on the last day of the tax year or more than $200,000 worth at any time during the tax year.

I should note here that this requirement also applies if you live in the U.S., and the thresholds are much lower, so if you think you fall in that category, check with a CPA. There can be a stiff monetary penalty for failing to file Form 8938, so it’s not something you want to overlook.

Do I have to pay state income tax if I live abroad?

This is where things can get really tricky. Whether you’ll need to file and possibly pay state income tax depends on whether you’re still considered a resident of a state.

If you officially moved abroad but you still own property, have a driver’s license, or are registered to vote, you may still be considered a resident of your state for tax purposes. For instance, the states of California, Virginia, New Mexico, and South Carolina all have laws that still require some expats to file and pay state income tax.

You’ll need to speak to an accountant or contact your state’s tax authority to see which state tax laws may apply to you and your situation.

Abridged by Amy

Americans living abroad can avoid double taxation through smart planning and by taking the time to understand the exclusions and credits they can use. If you’re a freelancer, digital nomad, or small business owner living abroad, it’s worth connecting with a CPA who understands expat and small business tax issues. A little proactive guidance can save you from a lot of stress and penalties down the road–no matter where that road takes you!