← All articles

October 2026 · Expat Tax · By Khal A. Abd, CPA

Living Abroad? 5 Things Every US Expat Should Know About Taxes

Moving overseas is exciting, but many Americans are surprised to learn that the IRS still expects to hear from them. As a CPA who spends part of the year abroad myself, here are the five things I wish every expat knew.

1. You still have to file a US return

The US taxes its citizens and green card holders on their worldwide income, no matter where they live. If your income is above the normal filing threshold, you need to file a US return, even if you end up owing nothing.

2. You get extra time, but not for interest

If you live and work outside the US on the regular April deadline, you automatically get until June 15 to file. You can extend to October 15 with Form 4868. Any tax owed still accrues interest from April 15, so it pays to estimate early.

3. The Foreign Earned Income Exclusion can shelter much of your salary

If you qualify under the bona fide residence or physical presence test, Form 2555 lets you exclude a large amount of foreign earned income from US tax: $130,000 for tax year 2025, adjusted each year for inflation. It only applies to earned income, not investment income.

4. The Foreign Tax Credit may be the better choice

If you live in a country with higher tax rates than the US, claiming a credit for foreign taxes paid (Form 1116) can sometimes eliminate your US tax entirely and carry excess credits forward. Choosing between the exclusion and the credit is one of the most important decisions in an expat return, and switching back and forth has restrictions.

5. Foreign bank accounts must be reported

If the combined balance of your foreign financial accounts exceeded $10,000 at any time during the year, you must file an FBAR (FinCEN Form 114). This is separate from your tax return, and the penalties for not filing can be steep. Larger balances may also require Form 8938 under FATCA.

Behind on filing? There's a path back

Many expats simply didn't know about these rules. The IRS Streamlined Foreign Offshore Procedures let eligible taxpayers catch up, often without penalties, if the failure wasn't willful. Acting before the IRS contacts you matters.

This article is for general informational purposes only and is not tax or legal advice. Tax rules change and every situation is different. Please consult a qualified professional about your specific circumstances.