U.S. taxes when you live abroad

Moving abroad doesn't end your relationship with the IRS. The United States taxes its citizens on their worldwide income wherever they live, so most Americans abroad keep filing a U.S. tax return every year. The good news is that several rules exist to keep you from paying tax twice on the same income.

You still file

If your income is above the usual filing threshold, you file a U.S. return, just as you would at home. Americans living abroad get an automatic two-month extension to file, to June 15, though any tax owed is still due in April. Your new country may expect a tax return too.

The foreign earned income exclusion

The foreign earned income exclusion lets you exclude up to $132,900 of income in 2026 from U.S. tax, if you qualify by living abroad for most of the year. The key word is earned: it covers wages and self-employment income for work done abroad. It does not cover pensions, Social Security, IRA or 401(k) withdrawals, interest, dividends or capital gains. For many retirees, that means the exclusion doesn't help much.

The foreign tax credit

When your new country taxes the same income, the foreign tax credit generally lets you subtract the foreign tax you paid from your U.S. tax on that income. In higher-tax countries, this often wipes out the U.S. tax; in lower-tax countries, you may owe the difference to the IRS.

Tax treaties

The U.S. has tax treaties with many countries that decide which country gets to tax certain income, such as pensions or Social Security. The details differ by treaty, so look up the one with your destination, or ask a tax adviser who works with both countries.

Reporting foreign accounts

These rules catch many people by surprise:

• FBAR: If your foreign accounts together exceed $10,000 at any point in the year, you report them to the Treasury on FinCEN Form 114. It's a report, not a tax, but the penalties for missing it can be severe.
• Form 8938: If your foreign financial assets are larger, you may also report them with your tax return. The thresholds are higher for people living abroad.
• Foreign mutual funds and similar investments can be taxed very harshly by the U.S. Many advisers suggest keeping investments in U.S. accounts and funds where possible.

Your old state

Some states keep treating you as a resident, and taxing you, unless you clearly cut ties: selling or renting out your home, changing your driver's license and voter registration, and moving your bank and doctors. Leave deliberately and keep records.

Get help from someone who knows both systems

Cross-border taxes are a specialty. A tax preparer who works with Americans in your destination country can usually save you more than they cost, especially in your first year.

This is general information, not tax advice. Figures are for 2026 and rules change, so confirm details with the IRS and a qualified adviser.