US taxes for expats in 2026: Guide for American expats

Moving abroad usually brings unexpected situations and a lot of figuring things out. One thing that American expats can expect NOT to change is their tax obligations. If you’re a US citizen living abroad, taxes are still part of the picture. The IRS still expects to hear from you.

IRS Publication 54¹, the Tax Guide for US Citizens and Resident Aliens Abroad, makes this clear: US citizens and resident aliens owe tax on their worldwide income no matter where they live², and they're required to report it. Unlike most countries, which tax people based on where they live, the US taxes based on citizenship instead, even if they live abroad. This blindsides many Americans who move overseas expecting a clean break.

This guide walks through who needs to file, what you might owe, and how to handle US taxes for expats without losing a weekend to paperwork. We'll cover US expat tax basics, the exclusions that can bring your bill to zero, and the reporting rules that catch many people by surprise. Think of it as the guide you wish someone had handed you before you packed your bags.

Who has to file US taxes while living abroad?

Three groups are generally required to file US taxes while living abroad: US citizens, green card holders, and resident aliens. If you hold a US passport, you’re typically subject to US tax filing requirements no matter where you live. Green card holders follow the same rules until they formally give up that status, even if they left the US a decade ago and never plan to go back. Resident aliens, meaning non-citizens who meet the green card test or the substantial presence test, fall under the same rules.⁴

Filing comes down to your income and filing status. For the 2025 tax year (the return most US citizens living abroad are filing in 2026), here's when you're required to file as per IRS Publication 501⁵:

That $5 filing threshold for married taxpayers filing separately is easy to overlook. If you married someone who isn't a US taxpayer and you file separately, you may be required to file a return even if you earned very little income.

Do you have to pay US taxes if you live abroad?

Not always. Filing a return and owing money are two different things, and confusing the two is where a lot of the dread around US expat taxes comes from.

Here's vital information: you can only claim these benefits by filing. If you don’t file because you assume you don’t owe any tax, you may miss out on these valuable tax benefits. Publication 54 states that eligible Americans abroad qualify for the Foreign Earned Income Exclusion and Foreign Tax Credit, but they can only get them by filing a return.¹

Why do Americans living abroad still file US taxes?

The US uses a system called citizenship-based taxation. Most other countries base tax obligations on residency, so people who leave typically stop being subject to that country's tax system once they've settled somewhere else⁸. The US continues to tax its citizens regardless of where they moved.

That difference is backed by law and by a century-old Supreme Court ruling. The Sixteenth Amendment⁹ gives Congress the power to tax incomes “from whatever source derived,” without exempting income earned outside the country. In 1924¹⁰, a US citizen living in Mexico argued he shouldn't owe US tax on income from property he owned there. The Supreme Court disagreed. In Cook v. Tait, the Court held that Congress has the power to tax the income a US citizen receives even when that citizen is domiciled abroad and the income comes from property located outside the country.

Foreign Earned Income Exclusion (FEIE)

The FEIE lets you reduce or eliminate US tax on a portion of what you earn abroad¹¹, up to $130,000 (2025 tax year) and $132,900 (2026 tax year). If you’re married and both of you work overseas, you can each claim it separately, effectively doubling the amount your household can exclude.¹²

It's available to US citizens and resident aliens who have a tax home in a foreign country and who earn income from personal services performed there. Here are a few things to know before claiming it:

• Only earned income qualifies: wages, salaries, self-employment income⁶
• Dividends, rental income, and capital gains don't qualify, no matter where they're generated
• You claim it by filing Form 2555 with your regular return
• You must meet one of two tests to claim it¹³

The physical presence test is straightforward and simply requires counting the days you spend abroad. You need 330 full days in a foreign country or countries during any 12-month period. “Full” means a full 24-hour stretch, midnight to midnight, so a flight that touches down in the US partway through a travel day can prevent that day from counting toward the 330-day requirement.¹⁴

The bona fide residence test works differently. Instead of counting days, the IRS looks at whether you've genuinely made a foreign country your home for an entire uninterrupted tax year, based on evidence like¹⁵:

• Local ties and community involvement
• A lease or property ownership
• Registration with local tax authorities¹³

You just have to prove you actually live there¹⁶, not that you're passing through on an extended visa run. Take a US citizen teaching English in South Korea who earns $70,000 a year and has no other income. Meeting either test lets that person exclude their whole salary, so they wouldn’t owe US federal income tax on that income. That's common for expats in lower-tax or no-tax countries: the FEIE alone may eliminate their US federal income tax liability.

Foreign Tax Credit (FTC)

The Foreign Tax Credit gives you a dollar-for-dollar reduction in US tax for income tax you've already paid to a foreign government¹⁷. You claim it on Form 1116¹⁸. Unlike the FEIE, it isn't limited to earned income. Dividends, interest, and other foreign-source income can qualify, too, as long as the tax was actually imposed on you and you were legally liable to pay it.

One catch is that you can't apply the FTC to income you've already excluded under the FEIE¹⁹. You can’t claim both benefits on the same income.
Which one saves you more comes down to where you live:

FBAR and FATCA: Reporting foreign bank accounts

Two separate reporting rules apply once you're banking abroad. They’re designed to give the US government visibility into foreign accounts.

FBAR is short for Report of Foreign Bank and Financial Accounts. You’ll need to file an FBAR if the combined value across all your foreign accounts exceeds $10,000 at any point during the calendar year²⁰. You don't attach it to your tax return. It goes straight to FinCEN through the BSA E-Filing System. April 15 is the deadline, though there's an automatic extension to October 15 if you miss it.²¹

FATCA works differently. Instead of one flat threshold, the reporting thresholds depend on your filing status and where you live:

FATCA is reported on Form 8938, which you can attach to your Form 1040. Unlike the FBAR, there’s no separate filing with FinCEN required.²³

People often don’t realize which assets count toward these thresholds. Checking and savings accounts count. So do brokerage accounts, foreign pensions, and mutual funds²⁴. Say you've got $4,000 sitting in one account and $7,000 in another. Neither exceeds the $10,000 FBAR threshold on its own, but together they do, triggering an FBAR filing requirement.

None of this means you're under suspicion. Millions of Americans²⁵ abroad file both forms every year as routine paperwork. The penalties exist for people who don't report, not for having money in a foreign bank.

How to file US taxes from abroad

The process of filing US taxes from abroad is largely the same as filing domestically. The details just shift a little at each step.

1. Collect your documents. Most foreign employers don't issue a W-2²⁶, so start with whatever income statement or final pay summary your employer does provide. Add proof of any foreign tax²⁷ you paid since that documentation is what supports a Foreign Tax Credit claim later. If you have foreign bank or investment accounts, pull statements for those, too. They’ll help you determine whether you need to file an FBAR or Form 8938 for FATCA.
2. Report your foreign income. Every dollar goes on the return, converted to US dollars, even the portion you plan to exclude later. The IRS wants your full worldwide income reported first. Exclusions and credits get applied afterward.²⁸
3. Claim your exclusions and credits. This is where Form 2555 (FEIE) or Form 1116 (FTC) come in. Pick whichever fits your situation, or use both if part of your income falls under the FEIE cap and the rest doesn't.
4. Submit your return. Taxpayers with a foreign address can e-file their returns⁴. The IRS says so directly, and e-filing is generally faster and more reliable than mailing a paper return internationally. If you're living abroad on the regular due date, you get an automatic two-month extension to June 15. That extension covers filing only. Interest on any unpaid balance still starts accruing on April 15.⁴
5. Keep your records. The IRS generally recommends holding onto records for three years from when you file since that's the standard audit window. If you underreport income by more than 25% of what's on your return, that window stretches to six years. If you never file at all, there's no time limit on how far back the IRS can look.²⁹

That's how to file US taxes from abroad, start to finish: gather, report, claim, submit, keep.

Common mistakes US expats make

Most of the trouble people run into with expat tax filing isn't complicated tax strategy gone wrong. It's a handful of assumptions that turn out to be false.

Every one of these traces back to the same root: treating expat tax return obligations as something that fades with distance. It doesn't. The paperwork is manageable once you know what's actually required.

How international money transfers fit into life abroad

Taxes are only one part of managing your finances across two countries. Once you're filing from abroad, you're usually also moving money in both directions: paying the IRS from a foreign bank account, receiving a refund back to that same account, or sending money home to cover a mortgage or family expenses while you're earning in another currency entirely.

The IRS itself doesn't make the payment process particularly simple. Refunds can only be direct deposited into a US bank account³³, and IRS Direct Pay requires a US routing number³⁴. The IRS does offer its own international wire option for paying from a foreign bank account, but it comes with its own paperwork and, by the IRS's own admission, can be costly compared to other payment methods.³⁵

Then there's money flowing the other way. Plenty of expats send money home to support family, pay off a US-based loan, or move savings between accounts in two countries. Every transfer means weighing exchange rates and fees, and those trade-offs don't disappear just because tax season is over.

Knowing your filing obligations is only one side of the equation. For anyone juggling US taxes alongside daily life in another country, having a straightforward way to move money between currencies is another practical concern worth considering alongside the FEIE and FTC calculations.

Sources: all third party information obtained from applicable website as of August 10, 2026

1. https://www.irs.gov/publications/p54
2. https://www.greenbacktaxservices.com/knowledge-center/difference-residency-based-taxation-citizenship-based-taxation/
3. https://www.irs.gov/newsroom/national-taxpayer-advocate-delivers-annual-report-to-congress-finds-taxpayer-service-was-strong-in-2025-but-foresees-challenges-for-taxpayers-who-encounter-problems-in-2026
4. https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad
5. https://www.irs.gov/publications/p501
6. https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
7. https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit
8. https://www.acaglobalfoundation.org/rbt
9. https://www.archives.gov/founding-docs/amendments-11-27
10. https://supreme.justia.com/cases/federal/us/265/47/
11. https://www.investopedia.com/terms/f/foreign-earned-income-exclusion.asp
12. https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion
13. https://www.taxesforexpats.com/articles/tax-saving-strategies/foreign-earned-income-exclusion.html
14. https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-physical-presence-test
15. https://www.irs.gov/instructions/i2555
16. https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-bona-fide-residence-test
17. https://brighttax.com/blog/foreign-tax-credit-calculation/
18. https://www.irs.gov/forms-pubs/about-form-1116
19. https://www.irs.gov/individuals/international-taxpayers/foreign-taxes-that-qualify-for-the-foreign-tax-credit
20. https://www.greenbacktaxservices.com/knowledge-center/fbar/
21. https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar
22. https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-us-taxpayers
23. https://www.irs.gov/businesses/corporations/fatca-information-for-individuals
24. https://brighttax.com/blog/fatca-everything-expats-need-know/
25. https://www.greenbacktaxservices.com/knowledge-center/fbar-vs-8938/
26. https://scltaxlaw.com/filing-us-taxes-foreign-employer-no-w2/
27. https://www.irs.gov/publications/p514
28. https://www.taxesforexpats.com/articles/expat-tax-rules/us-expat-taxes.html
29. https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records
30. https://www.irs.gov/payments/failure-to-file-penalty
31. https://www.federalregister.gov/documents/2025/01/17/2025-01374/financial-crimes-enforcement-network-inflation-adjustment-of-civil-monetary-penalties
32. https://onlinetaxman.com/feie-vs-foreign-tax-credit
33. https://www.irs.gov/refunds/get-your-refund-faster-tell-irs-to-direct-deposit-your-refund-to-one-two-or-three-accounts
34. https://www.irs.gov/payments/direct-pay-help
35. https://www.irs.gov/individuals/international-taxpayers/foreign-electronic-payments-tax-type-codes
36. https://turbotax.intuit.com/tax-tips/tax-refund/last-chance-to-claim-your-tax-refund/L1ySMyA2H

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