Expat & International Tax Guides

Yes. The United States taxes its citizens and green-card holders on worldwide income, no matter where they live or where the money is earned. Moving to Lisbon or Singapore does not end your filing duty. You still file a Form 1040 each year, reporting wages, self-employment income, interest, dividends, rental income, and gains from anywhere on the globe. Expat taxes start from this simple idea, that your passport, not your address, sets your obligation to the IRS.

The filing thresholds are the same as for people at home and depend on your filing status and age. For a single filer under 65, the threshold tracks the standard deduction, and for self-employed people the bar is far lower, since net self-employment earnings of 400 dollars or more trigger a return. Because so many Americans abroad freelance or run a small business, most of them cross that 400 dollar line and must file even in a year with modest income.

Green-card holders deserve special mention. Even if you spend the whole year outside the country, holding a green card generally keeps you a U.S. tax resident, taxed the same way as a citizen. Giving up the card has its own tax steps, so people who move away and let a card lapse informally can still carry filing duties they did not expect.

A worked example shows how the worldwide rule plays out. Suppose you live in Germany and earn the equivalent of 90,000 dollars in salary, plus 3,000 dollars of interest from a local bank and 1,500 dollars from a rental back in the States. All of it goes on your Form 1040 in U.S. dollars, converted at the proper exchange rate. The salary of 90,000 dollars appears there, and so do the 3,000 dollars of interest and the 1,500 dollars of rental income. You may owe little or nothing after the relief described below, but you still have to report the full picture.

The common mistake is assuming that paying tax in your host country cancels the U.S. return, or that a foreign employer with no U.S. presence means nothing needs filing. Neither is true. The return is still due, and skipping it can forfeit the very benefits that erase most or all of the U.S. tax. Late filers also lose the chance to make certain elections on time, which can raise the final bill.

There is relief, and it is large, which is why few Americans abroad pay full U.S. tax on top of foreign tax. Two main tools, the foreign earned income exclusion and the foreign tax credit, work to prevent double taxation, and a later question walks through how they differ. For now, the point is that the relief is not automatic. You claim it by filing, and you lose it by staying silent.

Currency conversion trips up many first-time filers. Income earned in euros or yen must be reported in dollars, and using a consistent, defensible exchange rate for the year matters. Keeping monthly records of what you earned and what you paid in foreign tax makes the conversion far less painful at filing time.

Deadlines shift a little for people overseas. Americans living abroad receive an automatic extension to June 15 to file, though any tax owed still accrues interest from the regular April date. A further extension to October is available on request. Our individual tax return service prepares these returns every year for clients in dozens of countries, so the currency conversions and elections are handled correctly. Filing on time and claiming the right relief from your first year abroad keeps your record clean and your future moves simpler.

The foreign earned income exclusion lets qualifying Americans abroad leave a large slice of foreign wage or self-employment income off their U.S. taxable income. For 2025 the exclusion is indexed for inflation and sits at 130,000 dollars per person. To claim it you must have foreign earned income and meet either the bona fide residence test or the physical presence test, which asks whether you were physically in foreign countries for at least 330 full days in a 12-month window. You elect this on your Form 1040, and expat taxes often improve a great deal once it is in place.

The exclusion also has a housing piece. On top of the income exclusion, qualifying people can exclude or deduct part of their foreign housing costs above a base amount, which helps in expensive cities like Hong Kong or Zurich. The housing figures have their own caps that vary by location, so two people earning the same salary can see different results depending on where they rent.

The foreign tax credit works differently. Instead of removing income, it gives you a dollar-for-dollar credit against your U.S. tax for income tax you already paid to a foreign government. If you live in a high-tax country, this credit alone can wipe out your U.S. tax on the same income, and unused credit can carry to other years. The credit applies to many kinds of income, not only wages, which makes it useful for investment and rental income that the exclusion cannot touch.

A worked example shows why the choice matters. Suppose you earn 150,000 dollars of salary in a country with a 35 percent income tax, so you paid about 52,500 dollars in foreign tax. The exclusion would remove roughly the first 130,000 dollars from U.S. tax, leaving 20,000 dollars still exposed, but the foreign tax credit might erase your entire U.S. bill and still leave carryover credit for the future. In a high-tax country, the credit frequently beats the exclusion. In a low-tax or no-tax country, the exclusion usually wins, because there is little foreign tax to credit.

Timing of the presence test matters too. The 330 days do not have to match the calendar year, so a mid-year move can still qualify by choosing the right 12-month window. Planning the count around travel back to the States can be the difference between meeting the test and missing it by a few days.

You can sometimes use both, applying the exclusion first and the credit to income above the excluded amount, but the interaction has traps. Once you revoke the exclusion, you generally cannot claim it again for five years without permission. That is why the choice is not a coin flip. It sets your position for years, and switching back and forth is restricted by design.

The common mistake is grabbing the exclusion by reflex because it is famous, without running the credit side by side. Someone in Denmark or France who excludes income can throw away thousands of dollars of foreign tax credit that would have covered the whole U.S. bill and built a carryover. Another frequent error is claiming the exclusion while forgetting that it does not reduce self-employment tax, so a freelancer can still owe that even with zero income tax.

Because the math depends on your host country and the makeup of your income, and on whether you plan to move or come home, this is worth modeling before you file. Our tax strategy service runs both paths and shows which one leaves you better off this year and over the next several. Choosing the right relief early, and documenting the days that support it, keeps your position steady as your income and your address change in the years to come.

Freelancers and small-business owners abroad face the same self-employment tax as those at home. If you work for yourself, you owe 15.3 percent on net self-employment earnings for Social Security and Medicare, and this tax sits apart from income tax. Notably for people abroad, the foreign earned income exclusion does not reduce self-employment tax. You report business profit on Schedule C and figure the self-employment tax on Schedule SE.

There is an important exception. If you live in a country that has a totalization agreement with the United States, and you pay into that country’s social security system, you can be exempt from U.S. self-employment tax on the same income. Without such an agreement, you generally owe the U.S. self-employment tax even after the exclusion erases your income tax. Checking whether your country has an agreement is one of the first questions to settle.

Paying U.S. self-employment tax is not purely a cost. Those payments build your U.S. Social Security record, which can matter for benefits later in life. People who arrange to pay into a foreign system instead give that up on the excluded income, so the choice has a long tail worth weighing rather than deciding on this year alone.

A worked example makes it real. Suppose you freelance from Thailand and net 80,000 dollars after expenses. You qualify for the exclusion, so your U.S. income tax on that income may be zero. Even so, you owe self-employment tax of roughly 11,304 dollars, because 15.3 percent applies to about 92.35 percent of the 80,000 dollars. Thailand has no totalization agreement with the United States, so there is no exemption to fall back on. That self-employment tax is real cash due with the return.

Estimated taxes come next. Because no one withholds for a freelancer, the IRS expects quarterly payments toward income tax and self-employment tax. The page on estimated taxes lays out the installments, which you send with Form 1040-ES. Even when the exclusion zeros your income tax, you may still owe quarterly amounts for self-employment tax, so do not assume the exclusion frees you from estimates.

The 400 dollar threshold is the key trigger. Net self-employment earnings of 400 dollars or more mean you must file a U.S. return and figure self-employment tax, even in a slow year. Many part-time freelancers abroad cross that line without realizing it, which is how a first notice arrives for someone who thought a small side income did not count.

One relief worth checking is the qualified business income deduction. For a freelancer who still has taxable income after the exclusion, it can trim up to 20 percent off that remaining business profit for income tax purposes. It never lowers self-employment tax, so the 15.3 percent stays in place, but it can soften the income tax that sits on profit above the excluded amount. The rules phase out at higher incomes, which is why it earns a yearly look.

The common mistake is treating the exclusion as a full pass and skipping estimates, then meeting a self-employment tax bill plus a penalty at filing. The example above still owes more than 11,000 dollars, and paying it in four steps through the year avoids the underpayment charge. Clean books are what make quarterly math possible, and our bookkeeping service keeps foreign-currency income and expenses organized so the numbers are ready each quarter.

Foreign currency adds one more wrinkle. You convert business income and expenses to U.S. dollars, and swings in the exchange rate can move your profit between quarters. Building a simple monthly close, where you record earnings and costs in dollars as you go, keeps surprises small. Setting up that rhythm now means your estimates track reality rather than a rushed guess in April.

Living abroad usually means holding foreign bank and financial accounts, and U.S. rules ask you to disclose them once they cross certain sizes. This is a reporting duty, not a tax by itself. You are telling the government what exists, not necessarily paying anything extra. Still, the penalties for skipping these reports can be steep, and this is the part of expat taxes that people most often miss.

Two separate disclosure systems tend to apply. One is an annual foreign bank account report filed with the Treasury when the total of your foreign accounts tops 10,000 dollars at any point in the year, even for a single day. The other is a form filed with your tax return when foreign financial assets pass higher thresholds that depend on your filing status and whether you live abroad. The two have different limits and different forms, and many people must file both.

The dollar thresholds apply after converting foreign balances to U.S. dollars, using year-end rates for the account report. A swing in the exchange rate can push you over a limit even if your balance in local currency never changed. That is why people whose balances hover near the line should check the converted figure every year rather than assume last year’s answer holds.

A worked example shows how easily the first threshold is met. Suppose you keep 6,000 dollars in a checking account and 5,500 dollars in a savings account in your host country. Neither is large, but together they peaked at 11,500 dollars, which is above the 10,000 dollar line. That means the annual account report is due, even though you might owe no extra tax at all on the interest. The test looks at the combined high balance, not the year-end figure.

The common mistake is thinking small or everyday accounts do not count. A local salary account, a joint account with a non-American spouse, a pension, and certain foreign investment holdings can all fall inside these rules. People also forget accounts they merely have signature authority over, such as a business account at work. Missing a required report, even with no tax due, can bring a penalty far larger than any tax would have been.

Ownership shape matters more than people expect. If you jointly hold an account with a spouse who is not American, your reporting can still capture the full balance, not just your half. Adding a family member to an account for convenience can quietly create a reporting duty you never intended, so it pays to think before restructuring accounts abroad.

There is relief for honest mistakes. Taxpayers who genuinely did not know about these duties can often catch up through established procedures that reduce or remove penalties, especially when no tax was owed. The worst path is to keep quiet after learning of the duty, since willful failure carries the harshest penalties. Coming forward through the right channel almost always beats waiting to be found. The sooner you raise your hand, the more options stay open, because some relief paths close once the government contacts you first.

Because these forms sit outside the ordinary return and carry their own deadlines, they are easy to overlook in a busy move abroad. Our tax strategy service folds foreign account reporting into the yearly process and keeps a clear record of balances, and the IRS page on recordkeeping shows the kind of documentation that supports any filing. Getting these disclosures right, and keeping tidy balance records, protects you from penalties that dwarf the tax and keeps your standing solid for years ahead.

Leaving the country does not automatically end your ties to a U.S. state, and this surprises many people. Some states make it hard to shed residency, and they keep taxing you until you clearly cut those ties. A state can look at where you are registered to vote, where your driver’s license is held, where you own or rent a home, and where your family stays. Coordinated planning for expat taxes has to include the state layer, not just the federal one.

A few states are known for aggressive residency rules. If you move abroad from one of them but keep a home, a license, and voter registration there, the state may treat you as a resident and tax your worldwide income, including the salary you already excluded federally. Other states are easier to leave and do not tax former residents once they are gone. Which state you departed from can change your total bill by thousands of dollars.

The trap tightens for people who plan to return. If you always meant to come back to your old state, that intent can weigh against you, because residency rules look at whether your move is truly permanent. Keeping a home ready for your return, storing a car there, and holding onto local memberships all read as signs that you never really left.

A worked example shows the sting. Suppose you move from a high-tax state to Portugal, earn 130,000 dollars, and exclude most of it on your Form 1040. If your former state still counts you as a resident because you kept an apartment and a license there, it can tax that 130,000 dollars at its own rate, since many states do not follow the federal exclusion. A 6 percent state rate on that income is about 7,800 dollars you did not expect. Cutting the state ties before you leave could have prevented it.

It helps to separate two ideas. Physical residency is about where you spend your days, while domicile is your true, permanent home in the eyes of a state. You can be physically in Portugal all year and still be domiciled in a state that refuses to let go, which is exactly the situation that produces an unexpected bill.

The common mistake is focusing only on the IRS and forgetting the state entirely. People spend weeks on the federal exclusion and never change their voter registration or license, leaving a trail that keeps a state’s claim alive. Another error is assuming a foreign address on the federal return tells the state anything. It does not, and the state may keep billing until you file a final part-year or nonresident return and break the connection on paper.

This is where a plan across all the moving parts earns its keep. The federal exclusion, the foreign tax credit, self-employment tax, account reporting, and state residency all interact, and a choice that helps one can hurt another. Our tax strategy service looks at the whole picture before you move, and our individual tax return service carries the plan through each filing. If your move is coming up, you can request a consultation to map the steps in the right order.

Timing is the quiet lever. Establishing foreign residency and closing or repapering state ties both work best before a move, and choosing your relief method does too. A little sequencing in the months around your departure can save real tax and spare you a state notice two years later. Building a coordinated plan now keeps your expat taxes steady no matter how many borders your career crosses next.