US Taxes for Citizens Living Abroad (2026): Filing, FEIE, FBAR
Key takeaways
- The US uses citizenship-based taxation: citizens and lawful permanent residents report worldwide income even while living overseas (IRS).
- Expats get an automatic two-month extension to 15 June; you can extend to 15 October with Form 4868, and to 15 December by written request.
- The Foreign Earned Income Exclusion (FEIE) on Form 2555 excludes up to $130,000 of foreign earned income for tax year 2025 and $132,900 for 2026 if you pass the physical-presence or bona-fide-residence test.
- The Foreign Tax Credit (FTC) on Form 1116 offsets US tax dollar-for-dollar with foreign income tax paid — often better than the FEIE in high-tax countries.
- The FBAR (FinCEN Form 114) is required if your foreign accounts together exceed $10,000 at any point in the year; Form 8938 (FATCA) has much higher thresholds and is filed with your return.
- The FEIE reduces income tax but not self-employment tax (15.3%); leaving a US state cleanly matters because “sticky” states can keep taxing you.
You still have to file: worldwide income
US citizens and resident aliens are “subject to tax on worldwide income from all sources” and must file if their gross income exceeds the standard filing threshold, which is broadly the standard deduction for their filing status. The IRS guidance for citizens and resident aliens abroad is explicit that foreign residence does not remove the duty to file, and that benefits such as the exclusion and credits are only available if you file a return to claim them. The authoritative reference is Publication 54, Tax Guide for US Citizens and Resident Aliens Abroad.
Deadlines and extensions for expats
If your tax home and residence are outside the US on the regular due date, you receive an automatic extension to 15 June without asking — but interest still runs on any tax owed from 15 April. You can extend the filing date to 15 October by submitting Form 4868, and a further discretionary extension to 15 December is available by writing to the IRS. Late filing of information returns carries its own penalties, so treat the deadlines seriously even when no tax is due.
The Foreign Earned Income Exclusion (Form 2555)
The FEIE lets you exclude foreign earned income — wages, salary and self-employment income for work performed abroad — from US income tax. The maximum exclusion is inflation-indexed each year: $130,000 for 2025 (the return you file in 2026) and $132,900 for 2026. You claim it on Form 2555 and must pass one of two tests:
- Physical Presence Test — present in a foreign country for at least 330 full days during any 12-month period.
- Bona Fide Residence Test — a bona fide resident of a foreign country for an uninterrupted period that includes a full tax year.
The exclusion covers only earned income, not dividends, interest, rents, capital gains or pension distributions. If you moved mid-year, the exclusion is prorated by qualifying days. Eligible taxpayers can also claim the foreign housing exclusion or deduction for certain housing costs above a base amount, on the same form. See the Instructions for Form 2555.
The Foreign Tax Credit (Form 1116)
If you pay income tax to a foreign country, the Foreign Tax Credit on Form 1116 reduces your US tax by the foreign tax paid, dollar-for-dollar, on the same income. In countries with tax rates higher than the US, the FTC often eliminates US tax entirely and can generate carryforwards. You cannot claim the FTC on income you already excluded under the FEIE, so many expats model both approaches — and switching away from a previously claimed FEIE can lock you out of it for five years without IRS consent. Detailed rules are in Publication 514.
Self-employment and Social Security tax
An important trap: the FEIE reduces income tax but does not reduce self-employment tax, which runs at 15.3% on net self-employment earnings for Social Security and Medicare. A self-employed American abroad can therefore owe US self-employment tax even after excluding all of that income for income-tax purposes (IRS). The way to avoid double social-security taxation is a totalization agreement: if you contribute to the foreign system and hold a certificate of coverage, you can be exempt from US self-employment tax on that income.
FBAR: reporting foreign accounts
Separate from your tax return, you must file an FBAR — FinCEN Form 114 — if the aggregate value of your foreign financial accounts exceeded $10,000 at any time during the year. This is a low, cumulative threshold: several modest accounts can trip it. The FBAR is filed electronically with the Treasury’s Financial Crimes Enforcement Network through the BSA E-Filing System, not with the IRS. It is due 15 April with an automatic extension to 15 October. Penalties for non-wilful failure can be several thousand dollars per year, and wilful violations carry far higher penalties, so this filing matters even when no tax is owed. See the IRS FBAR reference.
FATCA (Form 8938) and how it differs
FATCA reporting on Form 8938 is filed with your tax return and has much higher thresholds for taxpayers living abroad: for single filers, foreign financial assets over $200,000 on the last day of the year or $300,000 at any point; for married filing jointly, $400,000 / $600,000. FBAR and Form 8938 overlap but are distinct — different agencies, different systems, different thresholds — and you may have to file both. The IRS maintains a side-by-side comparison.
Catching up if you have fallen behind
Many Americans only discover the filing rules after they have already moved. The IRS offers the Streamlined Filing Compliance Procedures for taxpayers whose failure to file was non-wilful: you file the last three years of returns and six years of FBARs and certify non-wilfulness, generally without the usual penalties. This is a well-trodden route for expats and is far cheaper than waiting for the IRS to find you. Note too that the 3.8% Net Investment Income Tax can apply to higher-income expats and cannot be offset by the Foreign Tax Credit, so investment income deserves separate attention.
State residency: don’t forget to exit
Federal rules are only half the story. Some states — notably California, New York, New Mexico, South Carolina and Virginia — are “sticky”: they can continue to treat you as a resident for income tax until you demonstrably sever ties (give up your home, driving licence, voter registration and other connections). Before you leave, plan a clean break, file a final part-year resident return, and keep evidence of your move date. Moving from a no-income-tax state such as Florida or Texas is simpler.
How Flyto can help
Flyto moves households from the US to Europe and worldwide, door-to-door. We handle packing, international shipping, customs clearance and delivery so your relocation runs smoothly while you and your tax adviser handle the filings above; get a quote.
Frequently asked questions
Do I still have to file US taxes if I live abroad?
Yes. The US taxes citizens and green-card holders on worldwide income regardless of residence, and exclusions and credits are only granted if you file. See the IRS.
How much foreign income can I exclude in 2025 and 2026?
Up to $130,000 of foreign earned income for tax year 2025 and $132,900 for 2026, claimed on Form 2555 if you meet the physical-presence or bona-fide-residence test.
Should I use the FEIE or the Foreign Tax Credit?
It depends on your country’s tax rates. The FEIE suits low-tax countries; the Foreign Tax Credit often works better in high-tax countries and can create carryforwards. You cannot use both on the same income.
What is the FBAR threshold?
You must file an FBAR if your foreign accounts together exceeded $10,000 at any time during the year. File it with FinCEN through the BSA E-Filing System.
Is the FBAR the same as Form 8938?
No. The FBAR goes to FinCEN; Form 8938 goes to the IRS with your return and has higher thresholds ($200,000/$300,000 single abroad). You may need to file both, as the IRS comparison explains.
When are expat taxes due?
You get an automatic extension to 15 June, can extend to 15 October with Form 4868, and to 15 December by written request. Interest on tax owed still runs from 15 April.
Sources
- IRS — US Citizens and Resident Aliens Abroad
- IRS — Publication 54, Tax Guide for Citizens and Resident Aliens Abroad
- IRS — Form 2555 (Foreign Earned Income Exclusion)
- IRS — Instructions for Form 2555 (exclusion amounts)
- IRS — Form 1116 (Foreign Tax Credit)
- IRS — Report of Foreign Bank and Financial Accounts (FBAR)
- FinCEN — BSA E-Filing System (FinCEN Form 114)
- IRS — Form 8938 (FATCA, Statement of Foreign Financial Assets)
- IRS — Comparison of Form 8938 and FBAR Requirements
- IRS — Self-Employment Tax for Businesses Abroad