U.S. Tax Filing for Americans Living Abroad

Understand your obligations as a U.S. expat, from the Foreign Earned Income Exclusion to FBAR reporting requirements.

The United States is one of the few countries that taxes its citizens on worldwide income regardless of where they live. If you are a U.S. citizen or permanent resident living abroad, you must still file a federal tax return every year reporting your global income, even if you owe no U.S. taxes.

The Foreign Earned Income Exclusion (FEIE) is the primary tool for reducing double taxation. For 2025, you can exclude up to $130,000 of foreign earned income if you meet either the bona fide residence test or the physical presence test (present in a foreign country for at least 330 full days in a 12-month period). The Foreign Housing Exclusion can further exclude qualifying housing expenses above a base amount.

Beyond income taxes, expats have additional reporting requirements. If the total value of your foreign financial accounts exceeds $10,000 at any time during the year, you must file an FBAR (FinCEN Form 114). If your foreign financial assets exceed higher thresholds, you may also need to file Form 8938 under FATCA. Penalties for non-compliance with these reporting requirements are severe, making awareness and compliance essential.

Key Deductions & Credits

Foreign Earned Income Exclusion

$15,000 - $40,000

Exclude up to $130,000 of foreign earned income from U.S. taxes for 2025 if you meet the bona fide residence or physical presence test.

Foreign Housing Exclusion

$3,000 - $15,000

Exclude qualifying foreign housing expenses that exceed a base amount (generally 16% of the FEIE limit) from taxable income, up to location-specific limits.

Foreign Tax Credit

$2,000 - $50,000+

If you do not use the FEIE or for income above the exclusion, claim a dollar-for-dollar credit for foreign income taxes paid to avoid double taxation.

Moving Expenses (Military Only)

$2,000 - $10,000 (military only)

Only active duty military members can deduct moving expenses for overseas PCS moves. Civilian expats lost this deduction after 2017.

Forms You May Need

Form 2555 — Foreign Earned Income Exclusion

Form 1116 — Foreign Tax Credit

FinCEN Form 114 — Report of Foreign Bank and Financial Accounts (FBAR)

Form 8938 — Statement of Specified Foreign Financial Assets (FATCA)

Form 8833 — Treaty-Based Return Position Disclosure

Filing Tips

Take advantage of the automatic 2-month filing extension to June 15 for U.S. citizens living abroad. You can also request an additional extension to October 15.
Choose between the Foreign Earned Income Exclusion and the Foreign Tax Credit based on which saves more. If your foreign tax rate is higher than your U.S. rate, the FTC is usually better.
Keep track of your days outside the U.S. to meet the physical presence test. You need 330 full days in a foreign country within any 12-month period.
File your FBAR electronically through FinCEN's BSA E-Filing System by April 15, with an automatic extension to October 15. The FBAR is separate from your tax return.
Maintain records of foreign tax payments, residency dates, and housing expenses in both local currency and U.S. dollars.
If you have been non-compliant, consider the IRS Streamlined Filing Compliance Procedures rather than waiting for the IRS to discover the issue.

Common Mistakes to Avoid

Not filing a U.S. tax return at all because you assumed living abroad exempts you from U.S. filing requirements.
Missing the FBAR filing deadline for foreign bank accounts. Penalties can reach $10,000 per account per year for non-willful violations.
Using both the FEIE and the Foreign Tax Credit on the same income, which is not allowed. You must choose one method for each dollar of foreign income.
Not meeting the physical presence test because you counted partial days or travel days incorrectly.
Forgetting that self-employment income earned abroad is still subject to U.S. self-employment tax, which the FEIE does not cover.

Recommended Software

TurboTax handles Form 2555 (FEIE), Form 1116 (Foreign Tax Credit), and guides expats through foreign income reporting, though complex situations with multiple countries may benefit from a specialist.

Review TurboTax

FAQ

Do I still have to file U.S. taxes if I live abroad?

Yes. U.S. citizens and permanent residents must file federal tax returns reporting worldwide income regardless of where they live. The FEIE and Foreign Tax Credit help prevent double taxation, but the filing requirement always applies.

What is the difference between the FEIE and the Foreign Tax Credit?

The FEIE excludes foreign earned income from U.S. taxes (up to $130,000 for 2025). The FTC gives you a dollar-for-dollar credit for foreign taxes paid. The FEIE is better when your foreign tax rate is lower than your U.S. rate. The FTC is better when foreign taxes exceed what you would owe the U.S.

What is FBAR and do I need to file it?

FBAR (FinCEN Form 114) is required if the aggregate value of all your foreign financial accounts exceeds $10,000 at any time during the year. This includes bank accounts, investment accounts, and even accounts where you have signature authority. File electronically through FinCEN.

Can I exclude self-employment income with the FEIE?

Yes, you can exclude foreign self-employment income from income tax using the FEIE. However, the exclusion does not apply to self-employment tax (Social Security and Medicare). You will still owe SE tax unless a totalization agreement between the U.S. and your country of residence applies.