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Tax Rules for U.S. Citizens Living Abroad: Filing, FEIE, Reporting, and Exit Tax

U.S. citizens and green card holders owe U.S. tax on worldwide income wherever they live. Exclusions, credits, and reporting rules shape what's due.

Tax Rules for U.S. Citizens Living Abroad: Filing, FEIE, Reporting, and Exit Tax

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Do U.S. citizens living abroad have to file U.S. taxes?

  • Yes. U.S. citizens and resident aliens, including green card holders, are taxed on worldwide income regardless of where they live.
  • Filing thresholds are the same as for people living in the U.S., based on gross income and filing status.
  • Taxpayers abroad on the regular due date get an automatic two-month extension to June 15 to file, but interest runs from April 15.
  • Relief comes through exclusions, credits, and treaties rather than an exemption from filing.
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Full Guide

Do U.S. citizens living abroad have to file U.S. taxes?

  • Yes. U.S. citizens and resident aliens, including green card holders, are taxed on worldwide income regardless of where they live.
  • Filing thresholds are the same as for people living in the U.S., based on gross income and filing status.
  • Taxpayers abroad on the regular due date get an automatic two-month extension to June 15 to file, but interest runs from April 15.
  • Relief comes through exclusions, credits, and treaties rather than an exemption from filing.

How does the foreign earned income exclusion work?

  • Qualifying individuals can exclude up to $132,900 of foreign earned income in 2026, claimed on Form 2555.
  • Qualifying requires a foreign tax home plus the bona fide residence test or the 330-day physical presence test.
  • Excluded income still counts in figuring the tax rate on remaining income under the stacking rule.
  • The exclusion does not cover investment income, pensions, or U.S. government wages.

What is the foreign housing exclusion?

  • It excludes or deducts reasonable housing costs above a base amount, which equals 16% of the FEIE limit.
  • Qualifying costs include rent, utilities other than phone and TV, and insurance, but not mortgage principal or purchase price.
  • The amount is generally capped at 30% of the FEIE limit, with higher caps for certain high-cost cities listed by the IRS.
  • Self-employed individuals claim a housing deduction instead of an exclusion.

What reporting do foreign accounts require?

  • An FBAR (FinCEN Form 114) is required when the combined value of foreign financial accounts exceeds $10,000 at any time in the year.
  • Form 8938 is required for taxpayers living abroad when specified foreign assets exceed $200,000 at year-end single, or $400,000 joint, or higher amounts during the year.
  • The two filings overlap but go to different agencies and carry separate penalties.
  • Owning foreign funds, trusts, or corporations can require additional forms such as 8621, 3520, or 5471.

What is the exit tax?

  • Renouncing citizenship, or ending long-term green card status, can make someone a covered expatriate under Section 877A.
  • Covered status applies if net worth is $2 million or more, average annual net income tax for the prior five years exceeds $211,000 (2026), or the five-year compliance certification is not made.
  • Covered expatriates are generally taxed as if they sold their worldwide assets the day before expatriating, with $910,000 of gain excluded in 2026.
  • Deferred compensation, certain retirement accounts, and non-grantor trust interests have separate withholding or tax rules.

What mistakes are common for Americans abroad?

  • Not filing because foreign tax was paid, even though a U.S. return may still be required.
  • Holding foreign mutual funds without understanding PFIC reporting and taxation.
  • Choosing the FEIE by default without comparing the foreign tax credit.
  • Assuming a former home state no longer considers you a resident after moving abroad.

Key takeaways

  • Citizenship, not residence, drives U.S. tax filing obligations.
  • The FEIE, housing exclusion, and foreign tax credit reduce double taxation but each has limits.
  • FBAR, Form 8938, and exit-tax rules carry steep penalties for mistakes.
  • Confirm details with a CPA or attorney experienced in cross-border tax.
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