If I Live Overseas, Do I Pay Taxes?

U.S. citizens and permanent residents are required to pay U.S. taxes even while living in another country. The United States employs a citizenship-based taxation system, meaning your worldwide income is subject to U.S. income tax regardless of where you reside. This applies even if you live permanently in a foreign country and have no U.S.-based income. While this can create a situation of double taxation, the tax code contains provisions to mitigate this, but the initial filing obligation remains.

Determining Your U.S. Filing Requirement

You must file a U.S. federal income tax return from abroad if your gross worldwide income exceeds certain thresholds, which vary by filing status and age. For tax year 2024, a single individual under age 65 must file if their gross income is at least $14,600. For married couples filing jointly where both spouses are under 65, the threshold is $29,200.

Lower thresholds apply in specific situations. An individual who is married but files separately must file if their gross income is $5 or more. Self-employed individuals must file if they have net earnings from self-employment of at least $400. This income is subject to U.S. self-employment taxes even if earned in a foreign country.

You may also have state tax obligations depending on the rules of the last state where you lived. Some states consider you a resident until you take specific actions to sever your ties and establish residency elsewhere.

Key Exclusions and Credits for U.S. Expatriates

Living and working abroad does not mean you will necessarily owe U.S. taxes due to several provisions designed to prevent double taxation. The most prominent is the Foreign Earned Income Exclusion (FEIE), which allows qualifying individuals to exclude a portion of their foreign earnings from U.S. income tax. For the 2024 tax year, the maximum exclusion is $126,500. This is claimed using Form 2555.

To qualify for the FEIE, you must have a tax home in a foreign country and meet either the Bona Fide Residence Test or the Physical Presence Test. The Bona Fide Residence Test requires you to be a resident of a foreign country for an uninterrupted period that includes an entire tax year. The Physical Presence Test is met if you are physically present in a foreign country for at least 330 full days during any 12-month period.

Foreign Housing Exclusion and Deduction

As a supplement to the FEIE, you may be able to claim an exclusion or deduction for a portion of your foreign housing costs. The Foreign Housing Exclusion applies to employees, while the Foreign Housing Deduction is for self-employed individuals. The amount is based on qualified expenses like rent and utilities that exceed a base amount, which is $20,240 for 2024. The maximum housing expenses you can claim is generally limited to $37,950, though this can be higher in designated high-cost areas.

Foreign Tax Credit

Another option for avoiding double taxation is the Foreign Tax Credit (FTC), claimed with Form 1116. The FTC reduces your U.S. income tax liability on a dollar-for-dollar basis for income taxes you have paid to a foreign country. This is often more beneficial than the FEIE for those in high-tax countries, as it applies to all income types. You cannot claim a credit for foreign taxes paid on income excluded using the FEIE.

To be creditable, a foreign tax must meet certain criteria:

• It must be an income tax or a tax in lieu of an income tax.
• It must be imposed on you.
• You must have paid or accrued it.

If your creditable foreign taxes exceed your U.S. tax liability, you may carry the excess credit back one year or forward for up to 10 years.

Reporting Foreign Financial Accounts and Assets

In addition to filing an income tax return, U.S. citizens abroad may have separate reporting obligations for their foreign financial assets. These are informational returns, but failing to file them can result in significant penalties, even if no tax is owed.

Report of Foreign Bank and Financial Accounts (FBAR)

The Report of Foreign Bank and Financial Accounts (FBAR) is a requirement filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department. You must file FinCEN Form 114 if the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the calendar year. This threshold applies to the combined total of all accounts, not each one individually. A “financial account” is broadly defined to include bank accounts, brokerage accounts, and certain foreign retirement or insurance policies. The FBAR is filed electronically through the BSA E-Filing System and has an April 15 deadline, with an automatic extension to October 15.

Statement of Specified Foreign Financial Assets (FATCA)

The Foreign Account Tax Compliance Act (FATCA) imposes another reporting requirement through Form 8938, which is filed with your annual income tax return. The reporting thresholds for FATCA are higher than for the FBAR and depend on your filing status. For a single person living abroad, Form 8938 is required if the total value of specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year. For married couples filing jointly, these thresholds increase to $400,000 and $600,000, respectively. “Specified foreign financial assets” include financial accounts and other assets like stock in a foreign corporation. Because the rules and thresholds differ, you may be required to file one form but not the other, or both.

The Filing Process from Abroad

After preparing your return, the final step is submitting it and any payment to the IRS. The process from a foreign country involves specific deadlines and submission methods for compliant filing.

Filing Deadlines

U.S. citizens residing overseas receive an automatic two-month extension to file their federal income tax return. For the 2024 tax year, this pushes the standard April 15 deadline to June 16, 2025. This is an extension to file, not to pay. Any tax owed is still due by April 15, and interest will accrue on any unpaid balance from that date. If more time is needed, you can file Form 4868 by the June deadline to request an extension to October 15. A further discretionary extension to December 15 may be available in certain circumstances.

Submission Methods

You have several options for submitting your completed tax return from abroad. E-filing through IRS-approved tax software is an efficient method that provides quick confirmation that the IRS has received your return. Many software providers accommodate foreign addresses and the specific forms required for expatriates. Alternatively, you can mail a paper return. The mailing address depends on whether you are including a payment.

• Without a payment: Department of the Treasury, Internal Revenue Service, Austin, TX 73301-0215, USA.
• With a payment: Internal Revenue Service, P.O. Box 1303, Charlotte, NC 28201-1303, USA.

Making Tax Payments

If you have a tax liability, the IRS offers several ways to pay from a foreign country.

• Pay directly from a U.S. bank account using IRS Direct Pay or the Electronic Federal Tax Payment System (EFTPS).
• Make payments by credit or debit card through an IRS payment processor, though fees may apply.
• Use an international wire transfer.
• Send a check or money order drawn on a U.S. bank.

If you are unable to pay your full tax liability at once, you may be able to set up a payment plan by filing Form 9465.