Do I Still Have to Pay US Taxes If I Move Abroad?

Last updated: March 2026

Yes, US citizens and green card holders must file federal tax returns and report worldwide income no matter where they live. The US is one of only two countries (along with Eritrea) that taxes based on citizenship rather than residency. But before you panic, know this: IRS data shows 62% of Americans filing from abroad owed $0 in federal taxes after applying available exclusions and credits.

What Exactly Do You Have to File?

Quick answer: At minimum, a Form 1040 reporting worldwide income, plus potentially an FBAR and FATCA report for foreign financial accounts.

If your gross income exceeds $15,750 (single filer, 2025 tax year) or you earned more than $400 in self-employment income, you must file. Living abroad does not change this threshold.

Here is what most expats need to file each year:

• Form 1040 — your standard federal income tax return
• Form 2555 — to claim the Foreign Earned Income Exclusion
• FinCEN Form 114 (FBAR) — if your foreign accounts exceeded $10,000 at any point during the year
• Form 8938 (FATCA) — if foreign assets exceed $200,000 at year-end (single filers abroad)

The Foreign Earned Income Exclusion: Your Biggest Tax Break

Quick answer: You can exclude up to $130,000 (2025) or $132,900 (2026) of foreign earned income from US taxes using Form 2555.

The Foreign Earned Income Exclusion (FEIE) is the reason most expats owe nothing. To qualify, you must pass one of two tests:

1. Bona Fide Residence Test — you are a bona fide resident of a foreign country for an entire calendar year
2. Physical Presence Test — you are physically present in a foreign country for at least 330 full days during any 12-month period

Married couples where both spouses work abroad can each claim the exclusion, potentially excluding up to $260,000 (2025) combined.

You can also claim a Foreign Housing Exclusion of up to $39,000 (2025) or $39,870 (2026) for qualifying housing expenses abroad.

The Foreign Tax Credit Alternative

Quick answer: If you pay taxes in your country of residence, you can claim a dollar-for-dollar credit against your US tax bill using Form 1116.

The Foreign Tax Credit (FTC) is often better than the FEIE if you live in a high-tax country like Germany, France, or the Netherlands. You cannot use both the FEIE and FTC on the same income, so run the numbers both ways or consult a tax professional.

The US has tax treaties with over 60 countries that clarify how specific income types like pensions and Social Security are taxed, which can provide additional relief.

FBAR and FATCA: Reporting Foreign Accounts

Quick answer: If your foreign bank accounts exceed $10,000 total at any point during the year, you must file an FBAR electronically by April 15 (auto-extended to October 15).

This is a reporting requirement, not a tax. But the penalties for non-compliance are severe:

• Non-willful violations: up to $16,536 per account per year
• Willful violations: up to $165,353 or 50% of account balance, plus potential criminal charges

FATCA (Form 8938) has higher thresholds for expats — $200,000 at year-end or $300,000 at any point during the year for single filers living abroad.

Key Deadlines for Expats

The automatic 2-month extension to June 16 is free and requires no paperwork. However, interest accrues on any unpaid taxes from April 15.

What If You Have Never Filed From Abroad?

Quick answer: The IRS Streamlined Filing Compliance Procedures let you catch up without penalties if your failure to file was non-willful.

If you have been living abroad and did not know you needed to file, the Streamlined Procedures require you to file 3 years of back tax returns and 6 years of FBARs. The IRS will not impose penalties as long as you certify the non-compliance was not willful.

Do not ignore this. The IRS is increasing enforcement on foreign account reporting, and FATCA means foreign banks now report American account holders directly to the IRS.

Can You Escape US Taxes Permanently?

Quick answer: Only by renouncing US citizenship, which costs $2,350 and may trigger an exit tax if your net worth exceeds $2 million.

If you are classified as a "covered expatriate" (net worth over $2 million, or average tax liability above $211,000 over five years), you face a mark-to-market exit tax on unrealized gains above $890,000 (2025). This is a drastic step and should only be considered with professional legal and tax advice.

For most expats, the combination of the FEIE, Foreign Tax Credit, and tax treaties means you can legally reduce your US tax bill to zero while remaining a citizen. Use the Compare tool to evaluate tax implications across different countries.

Frequently Asked Questions

Do I need to pay state taxes if I move abroad? It depends on your last state of residence. States like California and New York may continue to tax you until you formally establish domicile elsewhere. States with no income tax (Texas, Florida, Nevada) are easier to leave cleanly.

Can I use TurboTax to file from abroad? Yes, but most standard tax software handles Form 2555 and FBAR poorly. Expat-specialized services like Greenback, Bright!Tax, or Taxes for Expats are better options, typically costing $500-$800 per return.

What if I earn income in cryptocurrency while abroad? Crypto income is fully taxable and must be reported on your Form 1040. The FEIE can apply to crypto earnings if they qualify as earned income, but most crypto gains are considered investment income and do not qualify.

Do I still need to file if I earn under the FEIE threshold? Yes. You must still file a return to claim the exclusion. The FEIE is not automatic — you must actively elect it on Form 2555.

Key Takeaways

• US citizens must file federal tax returns and report worldwide income regardless of where they live
• The FEIE lets you exclude up to $130,000 (2025) or $132,900 (2026) of foreign earned income
• 62% of Americans abroad owe $0 in federal taxes after exclusions and credits
• Foreign bank accounts over $10,000 must be reported via FBAR — penalties for non-compliance are severe
• You get an automatic filing extension to June 16, but taxes owed are still due April 15

Sources

1. IRS — US Citizens and Residents Abroad Filing Requirements
2. IRS — Foreign Earned Income Exclusion
3. IRS — Form 2555 Instructions (2025)
4. IRS — Expatriation Tax
5. American Citizens Abroad — US Taxes Abroad 2025
6. Bright!Tax — FBAR Filing Requirements