Taxes for U.S. Citizens Living Abroad: 2025 Guide

Living abroad can be an exciting opportunity for career growth, cultural exploration, and personal development. However, while you may have left the United States, you haven’t left behind your tax obligations. U.S. citizens and residents are generally required to report and pay taxes on worldwide income, no matter where they reside. This guide will help you understand the filing requirements, deductions, credits, and reporting obligations that apply to expats, so you can stay compliant and avoid costly penalties.

Do U.S. Expats Pay Taxes?

In a word, yes. If you are a U.S. citizen or resident alien, you must typically file an annual tax return (Form 1040) just as you would if you lived stateside. The filing deadline for expats is often extended automatically to June 15, but interest on any tax due continues to accrue from the regular filing deadline (April 15). Factors like your income level, filing status, and age determine whether you must file.

Foreign Earned Income Exclusion (FEIE)

One key provision that helps U.S. expats avoid double taxation is the Foreign Earned Income Exclusion (FEIE). This allows eligible taxpayers to exclude a certain amount of foreign-earned income from U.S. taxation each year. To qualify, you must meet either:

• The Bona Fide Residence Test, showing you are a resident of a foreign country for a full tax year, or
• The Physical Presence Test, spending at least 330 days in a 12-month period outside the United States.

Foreign Tax Credit (FTC)

If you owe foreign taxes on the same income that’s subject to U.S. taxation, you can generally use the Foreign Tax Credit (FTC) to reduce your U.S. tax bill. This credit effectively prevents you from paying taxes twice on the same income. In many cases, combining FEIE and FTC strategies can help minimize or eliminate your overall U.S. tax liability.

Reporting Foreign Accounts: FBAR and FATCA

Expats with foreign bank or investment accounts may be subject to additional reporting:

• FBAR (FinCEN Form 114): Must be filed if your foreign account balances exceed certain thresholds at any point in the calendar year (typically, an aggregate balance of $10,000).
• FATCA (Form 8938): Requires disclosure of specified foreign financial assets if they exceed certain filing thresholds, which vary depending on filing status and residency.

Failure to comply with these reporting requirements can lead to significant penalties, so it’s crucial to review your account balances and file appropriately.

Other Considerations: State Taxes & Extensions

Depending on the state you lived in before moving abroad—and whether you still have ties there—you may also need to file a state income tax return. State residency rules differ, so it’s important to confirm your obligations.

Additionally, remember that although expats receive an automatic two-month filing extension, any tax payments are still due by April 15 to avoid interest charges. You can request a further extension to October 15 if needed.

Strategies for Avoiding Double Taxation

Most expats use a combination of the FEIE, FTC, and tax treaty provisions to reduce or eliminate double taxation. Each taxpayer’s situation is unique, so a personalized strategy is essential. Working with a professional well-versed in expat taxes can ensure you take advantage of every credit and exclusion available to you.

Need Help?

From staying on top of FBAR/FATCA reporting to understanding how state residency laws affect your tax obligations, there’s a lot for expats to juggle. At Strategic Tax Planning, we specialize in advising U.S. citizens living abroad on maximizing credits, lowering tax liabilities, and staying fully compliant with IRS and state rules.