US Expat Taxes 2026: What Americans Living Abroad Must Know

Here's the annoying truth: if you're a US citizen living abroad, you still file US taxes. Doesn't matter where you earn the money. Doesn't matter where you bank. This guide walks through what that actually means in 2026 — FBAR, FEIE, FATCA, and the handful of state tax traps that catch expats off guard.

The US is one of only two countries — the other is Eritrea — that taxes citizens on worldwide income regardless of residence. Odd company to keep, but that's the rule. The penalties for ignoring it are expensive enough that it pays to know where you stand.

Why Americans file wherever they live

Most countries tax you based on where you live. The US taxes you based on the colour of your passport. In practice:

• Filing requirement: All US citizens and green card holders must file annual tax returns if their income exceeds the standard deduction threshold (approximately $14,600 for single filers in 2026)
• Worldwide income: You must report all income earned anywhere in the world, including salaries, investments, rental income, and self-employment earnings
• Filing deadline: June 15th automatic extension for expats (October 15th with Form 4868), but taxes owed are still due April 15th
• FBAR and FATCA: Additional reporting requirements for foreign financial accounts

Our salary calculator is a fast way to see take-home pay in a destination you're considering.

FBAR: the foreign account report

FBAR — the Report of Foreign Bank and Financial Accounts — is the form most expats forget. Don't. The penalties are out of proportion to the mistake.

Thresholds and rules

• Filing threshold: You must file if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar year
• Accounts included: Bank accounts, brokerage accounts, mutual funds, pensions, and any account you have signature authority over (even employer accounts)
• Filing method: Electronically through FinCEN's BSA E-Filing system (not with your tax return)
• Deadline: April 15th, with automatic extension to October 15th

The penalties

A missed FBAR can cost you more than what's in the account:

• Non-willful violation: Up to $10,000 per violation (per account, per year)
• Willful violation: The greater of $100,000 or 50% of account balance per violation
• Criminal penalties: Up to $500,000 fine and/or 10 years imprisonment for willful violations

If you've missed prior FBARs, the IRS Streamlined Filing Compliance Procedures may allow you to become compliant without penalties.

FATCA and Form 8938

FATCA adds another form on top of FBAR — Form 8938, which reports specified foreign financial assets.

FATCA thresholds for expats

If you live abroad, the triggers are higher than for residents in the US:

• Single filer abroad: $200,000 on the last day of the year, or $300,000 at any point during the year
• Married filing jointly abroad: $400,000 on the last day of the year, or $600,000 at any point during the year
• What counts: Foreign bank accounts, foreign securities, interests in foreign entities, foreign pension plans, foreign life insurance with cash value

FBAR vs FATCA, in plain terms

• FBAR: Filed separately to FinCEN; $10,000 threshold; bank/financial accounts only
• FATCA (Form 8938): Filed with your tax return to IRS; higher thresholds; broader asset types
• Important: If you meet both thresholds, you must file both reports (they are not mutually exclusive)

Foreign Earned Income Exclusion (FEIE) for 2026

The FEIE is the biggest tax break most expats get. It lets you exclude a chunk of foreign earned income from US tax altogether.

The 2026 exclusion

• Maximum exclusion: $126,500 per person for tax year 2026
• Housing exclusion: Additional exclusion for qualifying housing expenses (varies by location, typically 16% of the earned income limit)
• Married couples: If both spouses work abroad and qualify, each can claim up to $126,500 (total $253,000)

How to qualify

You have to pass one of two tests:

• Bona Fide Residence Test: You must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year
• Physical Presence Test: You must be physically present in a foreign country for at least 330 full days during any 12-consecutive-month period

For most new expats, the Physical Presence Test is the easier one to satisfy.

What the FEIE doesn't cover

• Investment income (dividends, capital gains, interest)
• Rental income
• Pension or retirement distributions
• Social Security benefits
• Income earned in the US (even if living abroad)

Foreign Tax Credit (FTC)

The Foreign Tax Credit is a dollar-for-dollar reduction of your US tax bill for tax you've already paid to another country. For high earners in high-tax countries, it usually beats the FEIE.

FEIE vs the Foreign Tax Credit

• FEIE advantage: Better for expats in low-tax countries or those earning under the exclusion limit
• FTC advantage: Better for expats in high-tax countries (most of Europe) or those earning above the FEIE limit
• Important: You cannot claim both the FEIE and FTC on the same income, but you can use FTC on income exceeding the FEIE limit
• Carryover: Unused foreign tax credits can be carried back 1 year or forward 10 years

The difference between $150,000 in New York and the same number in a European city comes down to how you use these credits.

Tax treaties, and why they matter

The US has tax treaties with more than 60 countries. They shape what you actually owe.

What a treaty can actually do

• Reduced withholding rates: Lower taxes on dividends, interest, and royalties
• Social Security totalization: Avoid double Social Security taxation
• Pension provisions: Determine which country can tax pension income
• Tie-breaker rules: Determine tax residency when you qualify as a resident of both countries

Treaties worth knowing

• UK: Comprehensive treaty with pension provisions and totalization agreement
• Germany: Strong treaty benefits; Social Security totalization
• France: Favorable pension and investment income provisions
• Netherlands: Covers pensions, dividends, and self-employment
• Canada: Comprehensive treaty with totalization agreement

Note: Tax treaties do not eliminate the requirement to file US taxes; they help prevent double taxation and may reduce overall tax burden.

Self-employment tax abroad

Self-employment tax is the one most American freelancers abroad overlook. Don't.

The basics

• Rate: 15.3% on net self-employment income (12.4% Social Security + 2.9% Medicare)
• FEIE does not apply: The Foreign Earned Income Exclusion only applies to income tax, not self-employment tax
• Social Security cap: The 12.4% Social Security portion only applies to income up to $168,600 (2026)
• Medicare: No cap on the 2.9% Medicare tax; additional 0.9% on income over $200,000 (single) or $250,000 (married filing jointly)

Totalization agreements

If there's a Social Security totalization agreement between the US and where you live, you usually pay into one system, not both:

• Countries with agreements: UK, Germany, France, Netherlands, Spain, Portugal, Italy, Canada, Australia, Japan, and others
• How it works: Generally, you pay into the system of the country where you work
• Self-employed: Usually pay into the system of the country of residence
• Certificate of coverage: May need to obtain from foreign country to prove exemption from US self-employment tax

State taxes don't disappear when you leave

Moving abroad doesn't automatically cancel your state tax obligations. Some states fight harder than others to hold on to you.

States that still come after expats

• California: One of the strictest; continues to tax former residents for years if they maintain ties
• New York: Particularly strict about NYC residents; maintains "statutory resident" rules
• New Mexico: Taxes worldwide income of residents indefinitely
• Virginia: Can claim residency based on intent to return
• South Carolina: Strict about domicile determination

States with no income tax

Establishing residency in a state with no income tax before you leave makes things simpler:

• Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming
• New Hampshire (dividends and interest only)

Breaking state residency

To actually cut ties:

• Selling or renting out your home in the state
• Changing your driver's license and vehicle registration
• Closing local bank accounts
• Updating voter registration
• Changing your estate documents (will, trust)
• Maintaining clear documentation of your intent to leave permanently

The mistakes that get expats in trouble

The ones that come up again and again:

Filing mistakes

• Not filing at all: "I live abroad so I don't need to file" is the most common and costly misconception
• Missing FBAR: Forgetting to file FinCEN 114 separately from your tax return
• Ignoring state taxes: Assuming moving abroad automatically ends state tax obligations
• Overlooking Form 8938: Missing FATCA reporting requirements

FEIE mistakes

• Revoking FEIE without understanding consequences: Once revoked, you cannot use FEIE again for 5 years without IRS approval
• Claiming FEIE and FTC on same income: You must choose one or the other for each dollar of income
• Miscounting physical presence days: Days of departure and arrival don't count as full days abroad
• Not keeping travel records: You need documentation of your days outside the US

Investment mistakes

• Holding PFICs (Passive Foreign Investment Companies): Foreign mutual funds and ETFs face punitive US taxation
• Not reporting foreign retirement accounts: May need to file Forms 3520 or 8621
• Ignoring currency gains: Gains from currency fluctuations may be taxable

When to hire someone

Some returns you can file yourself. Others are worth paying for. Get help if:

When to get professional help

• You have significant foreign investments or hold PFICs
• You're self-employed or have complex business income
• You participate in a foreign pension plan
• You have rental property income (US or foreign)
• You're behind on filings and need to catch up
• You earn significantly above the FEIE limit
• You're renouncing citizenship or abandoning green card
• You have assets above FATCA thresholds

Who to hire

• Enrolled Agents (EAs): IRS-licensed; often specialize in expat taxes; usually most cost-effective
• CPAs: Look for those with international tax certification; may charge more
• Tax attorneys: Best for complex situations, IRS disputes, or renunciation
• Expat-specific firms: Companies like Greenback, Bright!Tax, and others specialize in US expat taxes

What it costs

• Basic expat return: $300-$500
• Return with FBAR and Form 8938: $500-$800
• Complex return with investments/self-employment: $1,000-$2,500+
• Streamlined filing procedure (catch-up): $2,000-$5,000+

Key dates for 2026

• April 15, 2026: Tax payment deadline (even if filing later); domestic filing deadline
• April 15, 2026: FBAR deadline (automatic extension to October 15)
• June 15, 2026: Automatic filing extension for expats
• October 15, 2026: Extended filing deadline with Form 4868