Do You Have to Pay US Taxes if You Move to Another Country?

United States citizens and Green Card holders typically remain subject to U.S. taxation on their worldwide income, regardless of where they reside. Moving abroad does not automatically exempt individuals from their U.S. tax responsibilities.

Who is Subject to US Taxation Abroad

Individuals considered “U.S. persons” for tax purposes are subject to U.S. taxation on their worldwide income, even if they live outside the United States. This category primarily includes U.S. citizens and lawful permanent residents.

This status generally means these individuals have the same tax filing requirements as those residing within the U.S. Their obligation to file a U.S. tax return persists annually if their gross income exceeds the minimum filing threshold for their filing status, which for a single individual in 2024 was $14,600, or $400 if self-employed.

Understanding Worldwide Income Taxation

The United States taxes all income earned by its citizens and Green Card holders under a system of worldwide income taxation. This principle applies irrespective of the country where the income was generated or received.

Various types of income are included in this worldwide scope, such as wages, salaries, and earnings from self-employment. Investment income, including dividends, interest, and capital gains, as well as rental income and business profits, are also subject to U.S. taxation regardless of their foreign origin. The location of the taxpayer’s residence or the source of the income does not alter this fundamental U.S. tax principle for those classified as U.S. persons.

Strategies for Reducing US Tax Liability Abroad

To alleviate the potential for double taxation, where income is taxed by both the U.S. and a foreign country, several mechanisms are available to U.S. citizens and Green Card holders living abroad. The Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC) are primary tools designed to reduce or eliminate U.S. tax liability on foreign-earned income.

The Foreign Earned Income Exclusion (FEIE) allows eligible individuals to exclude a specific amount of their foreign earned income from U.S. taxation. For the 2025 tax year, this exclusion can be up to $130,000. To qualify for the FEIE, an individual’s tax home must be in a foreign country, and they must meet either the Bona Fide Residence Test or the Physical Presence Test. The Bona Fide Residence Test requires an individual to be a bona fide resident of a foreign country for an entire tax year. The Physical Presence Test requires an individual to be physically present in a foreign country for at least 330 full days during any 12-month period. To claim the FEIE, taxpayers must file Form 2555, “Foreign Earned Income,” with their annual U.S. tax return.

Alternatively, the Foreign Tax Credit (FTC) allows taxpayers to claim a dollar-for-dollar credit against their U.S. tax liability for income taxes paid or accrued to a foreign country. To qualify, the tax must have been imposed by a foreign country and paid or accrued by a U.S. citizen or resident alien. The foreign taxes must be on income derived from foreign sources. Taxpayers generally use Form 1116, “Foreign Tax Credit (Individual, Estate, or Trust),” to calculate and claim the FTC. While both the FEIE and FTC can be used, they cannot be applied to the same portion of income.

Essential Reporting Requirements for Americans Abroad

Beyond income tax obligations, U.S. citizens and Green Card holders living abroad must comply with specific informational reporting requirements, even if they owe no U.S. income tax. These requirements include the Foreign Bank and Financial Accounts Report (FBAR) and reporting under the Foreign Account Tax Compliance Act (FATCA) via Form 8938.

The Foreign Bank and Financial Accounts Report, known as FBAR, requires U.S. persons to report their financial interest in or signature authority over foreign financial accounts. This obligation arises if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar year. The FBAR is filed electronically with the Financial Crimes Enforcement Network (FinCEN) using FinCEN Form 114. The filing deadline for FBAR is typically April 15, with an automatic extension granted until October 15. Failure to file an FBAR when required can result in substantial penalties.

The Foreign Account Tax Compliance Act (FATCA) mandates reporting of specified foreign financial assets on Form 8938, “Statement of Specified Foreign Financial Assets.” This form is attached to the taxpayer’s annual income tax return. Reporting thresholds for individuals living abroad are higher than for those residing in the U.S. For unmarried individuals living abroad, Form 8938 must be filed if the total value of specified foreign financial assets exceeds $200,000 at the end of the year or $300,000 at any time during the year. For married individuals filing jointly who live abroad, the thresholds are $400,000 at year-end or $600,000 at any time during the year. Types of assets to report include foreign bank accounts, investment accounts, and interests in foreign entities.

Formal Renunciation of US Citizenship or Green Card Status

For individuals seeking to fully sever their ties with the U.S. tax system, formal renunciation of U.S. citizenship or abandonment of Green Card status is the ultimate step. This is an irrevocable decision with significant implications.

The process for renouncing U.S. citizenship requires an individual to appear in person before a U.S. consular or diplomatic officer at a U.S. Embassy or Consulate. For Green Card holders, abandoning lawful permanent resident status typically involves filing Form I-407, “Record of Abandonment of Lawful Permanent Resident Status,” with U.S. Citizenship and Immigration Services (USCIS). This form notifies the U.S. government of the abandonment.

Before expatriation, individuals are generally required to certify that they have complied with all U.S. federal tax obligations for the five years preceding their expatriation. This certification is made on Form 8854, “Initial and Annual Expatriation Statement,” filed in the year of expatriation. Form 8854 helps determine if an individual is a “covered expatriate,” which could trigger an “exit tax” on their worldwide assets. An exit tax may apply to high-net-worth individuals, typically those with a net worth exceeding $2 million or an average annual net income tax liability above a certain threshold for the five preceding years.