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You moved to London for work or retired to Portugal. You're living your dream abroad. Then tax season arrives and you wonder: Do I still have to file US taxes?
The answer surprises most expats: Yes. The United States is one of only two countries in the world that taxes citizens based on citizenship, not residence. It doesn't matter if you haven't lived in America for years. It doesn't matter if all your income comes from abroad. If you're a US citizen or green card holder, you likely need to file.
About 4.4 million Americans live outside the United States. Many don't realize they still have US tax obligations. They think living abroad exempts them. They assume their foreign taxes cover everything. They're wrong. And this mistake can cost thousands in penalties.
Most Americans abroad may owe zero US tax after using available exclusions and credits. The Foreign Earned Income Exclusion lets you exclude up to $130,000 of foreign income for 2025. The Foreign Tax Credit prevents double taxation. These tools, used correctly, eliminate most tax bills when working with qualified expat tax services.
Here's everything you need to know about US tax filing requirements for Americans living abroad in 2025. Who must file. What forms you need. How to avoid double taxation. When to file. And how to stay compliant without overpaying.
What are the filing requirements?
If you're a US citizen or resident alien (green card holder), you must file US taxes on your worldwide income regardless of where you live. The US taxes are based on citizenship, not residence, making it one of only two countries with this policy. Your filing requirement depends on your income, filing status, and age:
|
Filing Status |
2025 Income Threshold |
|
Single (under 65) |
$15,000 |
|
Single (65 or older) |
$16,850 |
|
Married Filing Jointly (both under 65) |
$30,000 |
|
Married Filing Jointly (one 65+) |
$31,550 |
|
Married Filing Separately |
$5 |
|
Head of Household (under 65) |
$22,500 |
|
Self-Employment Income |
$400 |
Important 2025 updates:
- The standard deduction increased to $15,000 for single filers (up from $14,600 in 2024) and $30,000 for married filing jointly (up from $29,200 in 2024).
- The Foreign Earned Income Exclusion maximum increased to $130,000 for 2025, up from $126,500 in 2024.
Even if you expect to owe $0 after applying exclusions and credits, you must file if your worldwide income exceeds these thresholds. Filing requirements are based on gross income before deductions, which is why many Americans abroad consult an expat tax advisor to ensure compliance.
When are US expat tax returns due for 2025?
Americans abroad receive automatic filing extensions, but payment deadlines remain the same.
- Standard deadline: April 15, 2026 for tax year 2025. This is when any taxes owed must be paid, even if you live abroad.
- FBAR deadline: April 15, 2026, with automatic extension to October 15, 2026 (no form required).
- Automatic extension for expats: June 16, 2026 (June 15 falls on Sunday). If you live outside the US and Puerto Rico on April 15, you automatically get a two-month extension to file. You don't need to file any forms—just attach a statement to your return indicating you qualified.
This extension applies only to filing, not payment. If you owe taxes, interest accrues from April 15, not June 16. Best practice: estimate your tax liability and pay by April 15 to avoid interest charges, or work with professional expat tax services to calculate accurate estimates.
If you need more time beyond June 16, file Form 4868 by June 16 to extend your deadline to October 15, 2026.
What forms do I need to file as an American abroad?
Most expats need these essential forms for proper expatriate tax filing:
Form 1040 - US Individual Income Tax Return: The main tax return that every American must file. Reports all worldwide income from all sources and calculates your total tax liability.
Form 2555 - Foreign Earned Income: Allows you to exclude up to $130,000 of foreign-earned income for 2025. Required if you want to claim the Foreign Earned Income Exclusion (FEIE). You must qualify under either the Physical Presence Test or Bona Fide Residence Test.
Form 1116 - Foreign Tax Credit: Allows you to claim a dollar-for-dollar credit for income taxes paid to foreign governments. Prevents double taxation if you paid taxes in your country of residence.
FinCEN Form 114 (FBAR): Reports foreign bank accounts if the aggregate value exceeds $10,000 at any time during the year. This is filed separately through FinCEN, not with your tax return. Critical: Penalties for non-compliance start at $10,000 per unreported account.
Form 8938 - FATCA Reporting: Reports specified foreign financial assets exceeding $200,000 (single) or $400,000 (married) on the last day of year, OR $300,000 (single) or $600,000 (married) at any time during the year. Files with your Form 1040.
Key schedules you must know about
Schedule B: Reports interest and dividend income over $1,500. Part III asks about foreign accounts—you must answer "Yes" if you have foreign accounts.
Schedule D: Reports capital gains and losses from selling stocks, bonds, property, cryptocurrency, or other investments from any country.
Schedule C: Reports self-employment income if you're a freelancer, consultant, or sole proprietor.
Schedule SE: Calculates self-employment tax (15.3%) for self-employed expats. Important: The Foreign Earned Income Exclusion doesn't eliminate self-employment tax.
How much foreign income is tax-free in the USA?
The IRS provides several mechanisms to offset potential double taxation through the Foreign Earned Income Exclusion and Foreign Tax Credit. Professional expat tax services can help optimize these benefits for your situation.
Foreign Earned Income Exclusion (FEIE)
If you qualify, you can exclude up to $130,000 of foreign-earned income for 2025 from US taxation. This applies only to earned income (wages, salary, self-employment from services performed abroad), not passive income like interest, dividends, capital gains, or rental income.
Qualifying for FEIE: You must meet three requirements:
- Have foreign earned income
- Have your tax home in a foreign country (your main place of business is outside the US)
- Meet either the Physical Presence Test OR Bona Fide Residence Test
Physical Presence Test: Be physically present in foreign country(ies) for at least 330 full days (24-hour periods) during any 12-consecutive-month period. You can spend a maximum of 35 days in the US during this period.
Bona Fide Residence Test: Be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year (January 1 - December 31). This test is more flexible—you can visit the US for unlimited time as long as you maintain foreign residence and intend to reside abroad indefinitely.
Married couples: Each spouse can claim FEIE separately if both qualify, potentially excluding $260,000 combined for 2025.
Critical limitation: FEIE doesn't eliminate self-employment tax. Even if you exclude $130,000 under FEIE, you still owe 15.3% self-employment tax on net self-employment income (approximately $18,000 on $130,000).
Foreign Tax Credit (FTC)
The Foreign Tax Credit allows you to claim a dollar-for-dollar credit against US taxes for income taxes paid to foreign governments. If you paid $5,000 in French income tax, you can credit $5,000 against your US tax liability. An experienced expat tax advisor can determine the optimal credit strategy for your circumstances.
When to use FTC vs. FEIE:
- Use FEIE if: You live in a low-tax country (UAE, Singapore, etc.), your income is under $130,000, or you want the simplest filing.
- Use FTC if: You live in a high-tax country (UK, France, Germany, Canada), your income exceeds $130,000, you have significant passive income, or you want to preserve IRA contribution eligibility.
- Use both if: Your income exceeds $130,000—exclude the first $130,000 with FEIE, then claim FTC on remaining income.
Example:
Expat in the UK earns $180,000, pays $54,000 UK tax (30% rate). Exclude first $130,000 with FEIE, leaving $50,000 taxable in the US. US tax on $50,000 is approximately $7,500. Allocate UK taxes: approximately $15,000 applies to the $50,000 included income. Credit $7,500 against US tax. Result: $0 US tax owed, with excess credit carried forward.
The credit is limited to US tax on foreign income. Excess credits can carry forward 10 years to future tax years.
Do I need to report foreign bank accounts?
Yes, and this is where many expats face severe penalties for non-compliance. There are two separate reporting requirements: FBAR and FATCA. Professional expat tax filing assistance ensures both requirements are met correctly.
FBAR (Foreign Bank Account Report)
You must file FBAR if the aggregate value of all your foreign financial accounts exceeds $10,000 at any time during 2025.
What counts as foreign accounts:
- Foreign bank accounts (checking, savings)
- Foreign brokerage and securities accounts
- Foreign mutual funds
- Foreign retirement accounts (even if not accessible)
- Foreign life insurance policies with cash value
- Joint accounts with non-US persons
- Accounts where you have signature authority only
Threshold calculation example: UK checking with £5,000 maximum value ($6,500 USD), UK savings with £3,000 maximum ($3,900), Germany investment with €500 maximum ($550). Total: $10,950 exceeds $10,000 threshold—you must file FBAR for all three accounts.
How to file: FBAR files electronically through FinCEN's BSA E-Filing System (bsaefiling.fincen.treas.gov), completely separate from your tax return. Deadline is April 15, 2026, with automatic extension to October 15, 2026.
Penalties: Non-willful violations carry penalties up to $10,000 per unreported account per year. Willful violations carry penalties up to the greater of $100,000 or 50% of account balance per violation. Criminal penalties can include fines up to $250,000 and up to 5 years imprisonment.
Form 8938 (FATCA Reporting)
You must file Form 8938 with your tax return if your specified foreign financial assets exceed these thresholds for expats living abroad:
|
Filing Status |
Last Day of Year |
Anytime During Year |
|
Single |
$200,000 |
$300,000 |
|
Married Filing Jointly |
$400,000 |
$600,000 |
|
Married Filing Separately |
$200,000 |
$300,000 |
What to report: Form 8938 covers broader assets than FBAR, including foreign bank and brokerage accounts, foreign stock or securities not held in accounts, foreign partnership interests, beneficial interests in foreign trusts, and foreign-issued life insurance or annuities with cash value.
Don't report: Foreign real estate owned directly (though rental income must be reported on Schedule E).
Penalties: Failure to file carries $10,000 initial penalty, plus additional $10,000 for each 30 days of continued failure after IRS notice (up to $50,000 maximum), plus 40% penalty on tax understatement related to unreported assets.
FBAR vs. Form 8938: What's the difference?
Many expats must file both because they meet both thresholds:
- FBAR: $10,000 threshold, files separately through FinCEN, includes financial accounts only, harsher penalties
- Form 8938: $200,000-$600,000 threshold for expats, files with Form 1040, includes broader asset types, includes tax understatement penalties
Common mistake: Thinking that filing one satisfies the requirement for the other. Both are required if you meet both thresholds.
Do I need to pay state taxes if I live abroad?
It depends on whether you maintain ties to a state. Generally, you only need to pay state taxes if you had connections (called "domicile") in the state during the reporting year.
What counts as state ties:
- Property ownership in the state
- Driver's license from that state
- Voter registration in that state
- State as mailing address
- Bank accounts in that state
- Professional licenses in that state
- Family residing in that state
- Intent to return to that state
States with no income tax: If you last lived in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, or Wyoming, you don't need to file state taxes.
Problematic states: California, Virginia, South Carolina, and New Mexico have particularly complex tax residency rules and may continue taxing former residents even after moving abroad. These states often require explicit steps to establish non-residency, making consultation with an expat tax advisor particularly valuable.
File a declaration of non-residency with your former state, update your driver's license to your current location, and cut as many ties as possible to avoid ongoing state tax obligations.
What if I'm self-employed abroad?
Self-employed expats face unique challenges with both US and foreign social security taxes.
Critical issue: FEIE excludes income from income tax but NOT self-employment tax. You still owe 15.3% SE tax (12.4% Social Security + 2.9% Medicare) on net self-employment income, even if you exclude all income under FEIE.
Example: Foreign self-employment income of $100,000, business expenses of $20,000, net self-employment income of $80,000. FEIE excludes $80,000 from income tax (you pay $0 income tax), but you still owe approximately $11,298 in self-employment tax ($80,000 × 92.35% × 15.3%).
Totalization Agreements
The US has totalization agreements with 30+ countries (including UK, France, Germany, Canada, Australia, Spain, Italy, Japan, South Korea) to prevent double social security taxation. Navigating these agreements often requires assistance from qualified expat tax professionals.
How it works: If you're covered by a foreign social security system in a treaty country, you may be exempt from US self-employment tax. File Form 8802 (Application for US Residency Certification), receive Certificate of Coverage from foreign country, and attach to your tax return to claim exemption from US SE tax.
No agreement? You may owe both US self-employment tax AND foreign social security taxes—true double taxation with no credit available.
What happens if I haven't filed taxes in years?
If you've been non-compliant, the IRS offers Streamlined Filing Compliance Procedures allowing you to catch up with reduced penalties if your non-compliance was non-willful. Experienced expat tax services can guide you through this process efficiently.
Requirements:
- File 3 years of tax returns (2022, 2023, 2024 for 2026 filing)
- File 6 years of FBARs (2019-2024)
- Certify that your failure to file was non-willful
- Pay any taxes owed with interest
Benefits:
- No failure-to-file penalties
- No failure-to-pay penalties
- No accuracy penalties
- Significantly reduced FBAR penalties (5% for foreign residents vs. $10,000+ per account normally)
Who qualifies: US taxpayers residing outside the US whose failure to report foreign financial assets and pay all tax due "did not result from willful conduct." This is available for taxpayers who didn't know about their filing obligations or made honest mistakes.
Deadline: No specific deadline—file as soon as you become aware of your non-compliance. The longer you wait, the more interest accrues and the higher the risk of IRS discovery.
Can I use tax treaties to reduce my US taxes?
The US has income tax treaties with over 60 countries that can provide specific benefits and prevent double taxation. Each treaty is unique, but all serve the same purpose: to eliminate double taxation and clarify which country has primary taxing rights.
Common treaty benefits:
- Reduced withholding rates on dividends, interest, and royalties
- Clarification on how retirement income will be taxed
- Determination of which country taxes capital gains
- Special provisions for students, teachers, and researchers
- Tie-breaker rules for dual residents
Form 8833: Required to claim treaty benefits that override or modify US tax law provisions.
Critical limitation - The Savings Clause: Most US tax treaties contain a "Savings Clause" that allows the US to tax its citizens as if the treaty did not exist. This means US citizens often cannot use treaty provisions that benefit residents of treaty countries. However, some specific treaty articles are exempt from the Savings Clause (commonly retirement income and social security).
Example: The US-UK treaty may provide that UK pension income is only taxable in the UK, but the Savings Clause allows the US to still tax US citizens on that UK pension. However, the treaty may exempt Social Security equivalents from the Savings Clause.
How NSKT Global Can Help Americans Living Abroad
NSKT Global specializes in US tax preparation for Americans living abroad, helping expats navigate complex filing requirements while minimizing tax liability. We provide complete expat tax preparation including Form 1040 with all required schedules, Form 2555 (FEIE) or Form 1116 (FTC) optimization, multi-country income and currency conversions, and strategic tax planning to minimize your burden.
We manage all foreign reporting requirements including FBAR (FinCEN Form 114) filing, Form 8938 (FATCA) preparation, and foreign trust/gift reporting. We also offer streamlined filing compliance assistance for catching up on unfiled returns, filing 3 years of returns plus 6 years of FBAR, certifying non-willful failure, and navigating IRS procedures with reduced penalties.
We handle tax treaty analysis to determine optimal filing strategies, state tax compliance for problematic states like California and Virginia, self-employment tax planning including totalization agreement analysis, foreign pension and retirement account reporting, and multi-year tax planning to optimize your long-term position.
Whether you're a first-time expat or have lived abroad for decades, our expertise ensures you stay compliant with all US filing requirements while paying the minimum tax legally possible. As dedicated expat tax professionals, we understand the unique challenges Americans abroad face with expatriate tax returns and provide tailored solutions for every situation.
Frequently Asked Questions
Q: Do I really need to file US taxes if I haven't lived in America for 20 years?
Yes. US citizenship-based taxation requires all citizens to file regardless of where they live or how long they've been abroad. Filing is required if worldwide income exceeds thresholds ($15,000 single, $30,000 married for 2025).
Q: What happens if I've never filed US taxes while living abroad?
You should catch up immediately using Streamlined Filing Compliance Procedures. This allows you to file the last 3 years of returns plus 6 years of FBAR with reduced penalties if non-compliance was non-willful. Penalties for willful non-compliance are severe. Most expat tax service providers offer specialized streamlined filing packages.
Q: Can I use both FEIE and Foreign Tax Credit?
Yes. Common strategy is to exclude first $130,000 with FEIE, then claim FTC on remaining income to eliminate double taxation. This works well for high earners in high-tax countries.
Q: Do I owe US taxes if I already pay taxes in my country of residence?
You must still file US returns, but Foreign Tax Credit typically prevents double taxation. If you pay higher taxes abroad than you would owe in the US, you'll generally owe $0 to the US after claiming FTC.
Q: How do I convert foreign currency to US dollars for my tax return?
Use the exchange rate on the date you received income or paid expenses. For salary, use the average exchange rate for the year. IRS publishes annual average exchange rates at irs website.
Q: What if my foreign bank won't let me open an account because I'm American?
This is a common FATCA problem. Options include using banks that accept US clients (they exist in most countries), using online banks, or keeping US accounts and managing from abroad. Consulting the best expat tax service providers can help you navigate these banking challenges.
