The United States taxes its citizens and lawful permanent residents on worldwide income regardless of where they live - one of only two countries in the world that does this. A US citizen living in Paris, Dubai, or Tokyo still owes the IRS a tax return every year and still owes federal tax, subject to the Foreign Earned Income Exclusion and Foreign Tax Credit provisions.
IRC §6012 requires US citizens and resident aliens to file a federal income tax return if their gross income exceeds the filing threshold, regardless of where the income was earned or where they live. Living abroad does not eliminate the filing requirement. The filing thresholds are the same as for US-based taxpayers: $14,600 (single, 2026), $29,200 (married filing jointly, 2026). These are the same inflation-adjusted standard deduction amounts.
The FEIE allows qualifying US citizens and resident aliens living abroad to exclude up to $132,900 of foreign earned income from US federal income tax in 2026. To claim the FEIE, you must meet either the Bona Fide Residence Test or the Physical Presence Test and have a tax home in a foreign country.
You are a bona fide resident of a foreign country if you reside there for an uninterrupted period that includes an entire tax year, and you have established genuine residency rather than a temporary presence. Factors: where you maintain a home, social ties, intent to remain. You do not need to be a citizen or permanent resident of the foreign country. IRC §911(d)(1)(A).
You meet the physical presence test if you are physically present in a foreign country (or countries) for at least 330 full days during any 12-month period. The 330 days do not need to be consecutive. Days in international waters or airspace do not count. IRC §911(d)(1)(B).
The FEIE excludes only foreign earned income - wages, salaries, and net self-employment income earned for services performed outside the US. It does not exclude: investment income (dividends, interest, capital gains), pension income, alimony, or Social Security. Self-employment tax (IRC §1401) is not reduced by the FEIE - SE tax applies to net self-employment income even if the income itself is excluded under §911. This is one of the most common misconceptions among self-employed expats.
Instead of the FEIE, expats can elect to claim a credit for income taxes paid to foreign governments. IRC §901. The FTC reduces US tax dollar-for-dollar for foreign taxes paid on the same income. If you are in a high-tax country (France, Germany, Denmark, Australia), the FTC often eliminates your US tax liability more effectively than the FEIE.
The FEIE and FTC can be used together strategically: claim the FEIE on earned income up to $132,900, then claim the FTC for foreign taxes on income above that amount. However, you cannot claim the FTC on income excluded under the FEIE. The housing exclusion (IRC §911(a)(2)) works alongside the FEIE for excess housing costs in high-cost locations.
Living abroad does not change your FBAR and FATCA reporting obligations - it may increase them because you are more likely to have foreign financial accounts.
| Form | Threshold (Individual Abroad) | What It Covers | Due Date |
|---|---|---|---|
| FinCEN 114 (FBAR) | $10,000 aggregate at any point in year | All foreign financial accounts: bank, brokerage, pension, life insurance with cash value | April 15; auto-extended to Oct 15 |
| Form 8938 (FATCA) | $200,000 on last day of year or $300,000 at any time (single, abroad) | Specified foreign financial assets including accounts, foreign entities, foreign trusts | With Form 1040 (including extensions) |
| Form 8938 (FATCA) | $400,000 on last day or $600,000 at any time (MFJ, abroad) | Same as above | With Form 1040 |
Moving abroad does not automatically end your state tax obligations. The state in which you were last domiciled may continue to assert the right to tax you if you have not taken concrete steps to establish domicile elsewhere.
California is the most aggressive: it will assert California residency and tax California-source income indefinitely if you maintain a California domicile, regardless of where you physically live. California does not recognize the federal FEIE for state tax purposes. New York applies similarly aggressive rules. If you lived in California or New York before moving abroad, formally establishing domicile in a new state (or foreign country) before departure is critical.
States with no income tax (Florida, Texas, Nevada, Wyoming) have no state filing obligation once you establish domicile there - and many expats establish domicile in a no-tax state before moving abroad precisely to eliminate state filing obligations.
Self-employed US citizens living abroad owe self-employment tax (Social Security and Medicare) on net self-employment income, even if the income is excluded under the FEIE. The FEIE reduces income tax but not SE tax. IRC §1402(a)(11). The SE tax rate is 15.3% on the first $184,500 of net SE income (2026 Social Security wage base, estimated) and 2.9% above that.
Totalization agreements between the US and approximately 30 countries provide that you contribute to only one country's social security system - either the US or the foreign country, not both. If you are covered under a foreign social security system under a totalization agreement, you may be exempt from US SE tax. The SSA website lists all current totalization agreement countries.