US Expat Taxes Explained: What Americans Abroad Actually Owe in 2026

Moving overseas does not end your relationship with the IRS. It just changes the shape of it.

The United States is one of the only countries in the world that taxes based on citizenship rather than residency. That means an American living in Lisbon, Bangkok, or Mexico City still has a US filing obligation, even if every dollar they earn comes from a foreign employer and they have not set foot in the US all year.

Most new expats do not learn this until they are already settled abroad. The good news is that owing US taxes and actually paying US taxes are two different things.

Most Americans abroad end up owing little to nothing once the right exclusions and credits are applied. The filing requirement, however, does not go away on its own.

“One of the biggest misconceptions we see is that moving overseas means you’re no longer subject to U.S. taxes,” says Josh Katz, CPA, founder of Universal Tax Professionals. “In reality, most Americans abroad still have a U.S. filing requirement. The good news is that, with proper planning and the right use of provisions like the Foreign Earned Income Exclusion and Foreign Tax Credit, many expats ultimately owe little or no U.S. tax. The key is understanding the rules before small oversights become expensive problems.”

Here is what actually matters if you are living outside the US, or planning to move.

Who Has to File

Any US citizen or green card holder who meets the standard income filing thresholds must file a federal return, regardless of where they live.

For 2026 filing, that threshold is roughly $14,600 for a single filer under 65, and lower thresholds apply to self-employment income.

Location does not change this. Neither does paying taxes in your country of residence. The US filing requirement sits on top of whatever tax obligations you already have where you live.

Two Tools That Prevent Double Taxation

The reason most expats do not owe US tax comes down to two mechanisms.

• The Foreign Earned Income Exclusion (FEIE) lets qualifying expats exclude a set amount of foreign-earned income from US tax, adjusted annually for inflation. To qualify, you generally need to pass either the Physical Presence Test (330 full days outside the US in a 12-month period) or the Bona Fide Residence Test.
• The Foreign Tax Credit (FTC) lets you offset US tax liability dollar-for-dollar against income tax already paid to a foreign government. This tends to work better than the FEIE for expats living in higher-tax countries, since the credit can often eliminate US tax entirely and carry forward unused amounts.

Choosing between the two, or combining them, depends on your income type, your host country’s tax rate, and whether you have foreign passive income the FEIE does not cover.

This is where a lot of self-filed returns go wrong, since the two elections interact with retirement contributions, self-employment tax, and state residency in ways that are easy to miss.

FBAR and FATCA: The Forms That Catch People Off Guard

Income tax is only half the picture. If you hold foreign bank or investment accounts, you may have separate reporting obligations that exist purely to disclose the accounts, not to tax them directly.

The FBAR (FinCEN Form 114) is required if the combined balance of all your foreign financial accounts exceeded $10,000 at any point during the year, even for a single day.

This includes joint accounts, business accounts you have signature authority over, and accounts that never had US tax consequences. Penalties for not filing can be steep, so this is not one to skip.

FATCA (Form 8938) has a similar purpose but higher thresholds and files with your tax return rather than separately. Depending on your filing status and where you live, the threshold can range from $50,000 to $600,000 in foreign assets.

Many expats are surprised to learn they needed to file these forms years before anyone told them. Local banks abroad are not going to flag this for you. It is on the account holder to know.

What Happens If You Fall Behind

Expats who go several years without filing are more common than most people assume.

Some did not know they had to file. Others assumed no US income meant no US obligation. Either way, catching up does not have to mean facing back-tax penalties for every missed year.

The IRS Streamlined Filing Compliance Procedures exist specifically for non-willful non-filers living abroad. Under this program, you typically file the last three years of federal returns and six years of FBARs, and penalties are waived if the IRS accepts that the failure to file was not willful.

“Many of our clients come to us after discovering they haven’t filed U.S. tax returns or FBARs for several years because they simply didn’t know they still had an obligation,” says Katz. “The IRS Streamlined Filing Compliance Procedures were created for exactly this situation. When someone qualifies, it’s often possible to become fully compliant without facing the significant penalties that many people fear.”

This is dramatically less painful than filing every missed year individually, and it is the standard route most tax professionals recommend for expats who are behind.

Note that the IRS has been actively updating and tightening related non-filer programs in 2026, which makes it worth confirming current eligibility before assuming Streamlined still applies to your situation.

For anyone with self-employment income, foreign accounts, or several unfiled years to sort out, working with someone who handles Streamlined Filing regularly is usually the faster and safer path, since eligibility and the right filing order are easy to get wrong on your own.

State Taxes Do Not Always Disappear Either

Moving abroad does not automatically cut ties with a US state. Some states, notably California, Virginia, South Carolina, and New Mexico, are aggressive about continuing to tax former residents unless specific steps are taken to formally break residency.

This usually means giving up a driver’s license, voter registration, and any property or bank ties in that state before the move, not just changing your mailing address.

If you moved from one of these states, this is worth resolving before you file your first return abroad, not after a state tax notice shows up.

Filing US taxes from abroad is manageable once you understand the moving parts: the annual filing requirement, the FEIE and FTC, FBAR and FATCA, and the Streamlined program if you have fallen behind.

None of it is designed to trip up honest filers, but the rules are specific enough that mistakes are common, and the penalties for account reporting failures are disproportionate to how easy they are to overlook.

For expats with straightforward W-2 income and no foreign accounts, self-filing with expat-specific software can work. For anyone with a more layered situation, getting it right the first time matters more than getting it done fast.

Wherever you are in the world, the deadline still applies. Plan for it the same way you would plan for any other part of the move.

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