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If you are a U.S. citizen living abroad, often referred to as an expatriate (expat), it’s essential to understand your tax obligations back home. The Internal Revenue Service (IRS) requires many expats to file a U.S. income tax return just like any other American taxpayer.

Here are the tax laws you need to be aware of as an expat and your tax guide for how to file U.S. taxes while living abroad.

When to file a tax return as a US citizen living abroad

The United States is one of only a few countries that taxes its citizens and resident aliens on worldwide income, regardless of where they live. If you’re a U.S. citizen or a resident alien, you must report your global income to the IRS by filing Form 1040. Failure to do so can result in penalties and interest on any taxes owed.

Requirements to file

Your income, filing status, and age typically determine your standard deduction amount. You must file a federal income tax return if your gross income from worldwide sources meets or exceeds the standard deduction for your filing status.

Tax Tip: According to the IRS, your gross income includes “all income you receive in the form of money, goods, property, and services that is not exempt from tax.”

Here are the standard deduction rates for tax years 2023 and 2024:

Exceptions

• You are 65+ or blind: The IRS sets higher standard deductions for those over age 65 and/or blind. Reference the Filing Requirements table on page 4 of Chapter 1 in IRS Publication 54. You are considered 65 on the day before your 65th birthday.
• You are self-employed: You must file a U.S. income tax return if your net self-employment earnings total at least $400 (even if your gross amount is less than the amount listed for your filing status in the table above).

Tax breaks for USA expats

As an American expat, you may be eligible for certain tax breaks to help lessen your tax burden.

Foreign earned income exclusion

The FEIE allows eligible taxpayers to exclude some foreign-earned income from U.S. taxation. For tax year 2024, the maximum exclusion is $126,500 per qualifying person (up from $120,000 in 2023).

To qualify for the FEIE:

• Your tax home must be in a foreign country.
• You must be ONE of the following:
• A S. citizen who is a bona fide resident of one or more foreign countries for an uninterrupted period that includes an entire tax year.
• A S. resident alien who is a citizen or national of a country with which the U.S. has an income tax treaty in effect and who is a bona fide resident of one or more foreign countries for an uninterrupted period that includes an entire tax year.
• A S. citizen or a U.S. resident alien who is physically present in one or more foreign countries for at least 330 full days during any period of 12 consecutive months.

You must complete Form 2555 when filing your tax return to claim the FEIE. The IRS has an Interactive Tax Assistant tool that can help you determine whether your foreign income is eligible to be excluded.

Foreign housing exclusion or deduction

You may also qualify for the foreign housing exclusion or foreign housing deduction. These tax benefits allow you to exclude or deduct the cost of rent for housing abroad from your gross income. You can claim these in addition to the FEIE.

Here’s the difference between the two:

• Foreign housing exclusion: Reduces earned income used to pay or rental housing expenses (including amounts paid by your employer as salary or wages).
• Foreign housing deduction: The same as the exclusion, but only available to self-employed expats (does not reduce your self-employment tax).

To claim either of these tax breaks, you must meet the bona fide residence test OR the physical presence test. The IRS also has rules about what housing expenses qualify and how much you can exclude or deduct, which you can learn more about on the IRS website.

Foreign tax credit

The FTC is a nonrefundable tax credit for income taxes paid to a foreign country, which helps offset some of your U.S. tax liability and avoid double taxation. You can also take this credit as an itemized deduction, which reduces your U.S. taxable income rather than your tax liability.

To qualify for the FTC, you must:

• Be a U.S. citizen or resident alien (this includes green card holders). Nonresidents do not qualify.
• Pay taxes on income derived from foreign sources.
• Have a legal obligation to pay foreign income taxes.

You must complete Form 1116 to claim the FTC when filing your tax return.

Note that the U.S. has tax treaties with various countries to prevent double taxation and provide other tax benefits, which may affect your FTC calculation or eligibility. The IRS Interactive Tax Assistant can help determine if you qualify to claim the FTC.

Tax Tip: If you take the foreign housing exclusion or deduction, you can’t take the FTC on your excluded income.

Instructions for paying US expat tax on money earned abroad

Filing taxes while living abroad involves several steps. Here’s what you need to do:

1. Determine your filing status: This will help you determine whether you need to file a U.S. tax return, as discussed above.
2. Gather necessary documents: Make sure you have all tax forms, income statements, and records on hand, as well as documentation for any deductions and credits you intend to claim.
3. File with TaxAct®: Tax preparation software like TaxAct allows you to easily e-file your Form 1040 and any other necessary documents, such as Form 2555 or Form 1116.
4. Report foreign financial accounts: The IRS wants to know if your foreign income and financial accounts exceed certain thresholds (typically $10,000). You may need to fill out IRS Form 8938 or FinCEN Form 114 (also known as FBAR).
5. File state income taxes (if applicable): Some U.S. states may require you to file a state tax return or foreign-earned income. TaxAct can help determine if this is necessary when filing with us.
6. Pay any taxes owed: Pay your tax bill or set up an IRS payment plan if you can’t swing the full amount.

FAQs for expats about how to file US taxes abroad

Do US citizens living abroad pay taxes twice?

Double taxation occurs when you are taxed twice — by the U.S. and the foreign country where you earned the income. To help combat this, the U.S. has tax treaties with various countries, which can help further reduce or eliminate taxes on certain kinds of income. The FEIE and FTC can also help you avoid or mitigate double taxation.

Can you file with TaxAct if you live abroad?

Yes, you can e-file with TaxAct if you live abroad. However, to create an account with us and pay for the tax filing service, you will need a U.S. phone number capable of receiving SMS (text) messages and a credit card with a U.S. or Canadian billing address.

Does the IRS know about foreign financial assets?

Yes, the Foreign Account Tax Compliance Act (FATCA) requires foreign banks and financial institutions to report accounts held by U.S. citizens, which allows the IRS to track your foreign income and financial accounts.

What is the FBAR?

U.S. citizens abroad with at least $10,000 combined in all their financial accounts overseas (such as bank accounts, brokerage accounts, or mutual funds) must file a Foreign Bank Account Report (FBAR). The FBAR is not filed through the IRS but the Financial Crimes Enforcement Network (FinCEN) with FinCEN Form 114.

Because this form needs to be filed separately from your federal tax return, you can’t file it through TaxAct. Instead, you can e-file the FBAR through the BSA E-Filing System. The FBAR deadline is April 15, but you get an automatic extension to Oct. 15 if you miss this deadline.

Can I get a tax refund if I live abroad?

Yes, you can still get a tax refund as a U.S. expat. It all depends on your personal tax situation, including which tax breaks you can claim. If the government owes you a tax refund, TaxAct can help you claim it when you e-file with us.

Can you file a US tax return with a foreign address?

Yes, you can file a U.S. tax return with a foreign address. Check the TaxAct FAQ page on foreign addresses for more information on how to enter a foreign address in our program.

What are the deadlines for US expats to file their taxes?

While the standard tax due date is April 15, expatriates get an automatic two-month extension, making their tax filing deadline June 15 (the expat deadline was June 17 in 2024 due to the regular deadline falling on a weekend). If you request a tax extension with Form 4868, you can extend your deadline even more to Oct. 15.

However, note that if you owe U.S. taxes, you must pay your tax bill by the standard tax deadline on April 15.

How to file US taxes while living abroad with TaxAct

To file abroad with TaxAct, you will need the following:

• A U.S. phone number capable of receiving SMS messages
• An email address
• A credit card with a U.S. or Canadian billing address (PayPal® is also an available payment option when you e-file using our online DIY product)

If you have everything on the checklist above, you’re ready to file your U.S. income tax return with TaxAct. Simply follow these steps:

1. Sign up and log in: Create an account on the TaxAct website if you don’t already have one. You will need a U.S. phone number for account authentication purposes.
2. Enter your information: TaxAct asks questions about your personal details, including income and deduction information, to ensure accurate filing. We also save your information so you can come back and finish filing another day if needed.
3. Complete the required forms: TaxAct guides you through the applicable tax forms and tax breaks, including Form 2555 for the FEIE and Form 1116 for the FTC. Check out this TaxAct FAQ page for more detailed information on how to find these forms in TaxAct.
4. E-file your return: Pay and submit your return electronically through TaxAct. Note that you’ll need a U.S. payment method for any tax payments.

Using TaxAct can streamline the tax filing process and ensure you meet all filing requirements. It’s a convenient option for expats who need a reliable and straightforward way to file their U.S. taxes.

The bottom line

Remember, even when living your best life abroad, Uncle Sam still wants to hear from you. Filing U.S. taxes while living abroad can be confusing, but understanding the filing requirements for expats and using an intuitive tax filing program like TaxAct can make it more manageable. We can help you fulfill your tax obligations without unnecessary stress.

This article is for informational purposes only and not legal or financial advice.

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