US EXPAT TAXES - EVERYTHING YOU NEED TO KNOW (2024)

FAQs

Do US expats have to pay US taxes? ›

Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.

U.S. citizens living abroad typically use Form 1040, the same form used by taxpayers in the United States. However, there are additional forms and schedules that may apply, such as Form 2555 (for claiming the Foreign Earned Income Exclusion) and Form 1116 (for claiming the Foreign Tax Credit).

The US is one of the few countries that taxes its citizens on their worldwide income, regardless of where they live or earn their income. This means that American expats are potentially subject to double taxation – once by the country where they earn their income, and again by the United States.

As a retiree, you do not absolve yourself of U.S tax reporting requirements. The United States requires its citizens to report their worldwide income annually - regardless of their place of residence.

The IRS charges penalties for both late filing and late payments. If your lack of filing is willful—meaning you knowingly avoided your US tax requirements while living abroad—then more serious legal consequences may apply. Failure to File Penalty: 5% of the unpaid taxes for each month the tax return is late, up to 25%.

For example, self-employed US expats and those who work for a US-based employer must file an expat tax return. For the 2023 tax year, the rate for expat employees is 7.65%. Self-employed expats, however, are responsible for both the employer and employee contribution, meaning that the total is double, (15.3%).

If you are a U.S. citizen or resident living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.

If you earned Social Security benefits, you can visit or live in most foreign countries and still receive payments. Look up the country on the SSA Payments Abroad Screening Tool to be sure you can receive your payments.

The Foreign Earned Income Exclusion – The FEIE is the most common and broadest aid to prevent double-taxation. You qualify if you live and work overseas and pass either the Bona Fide Residency test or the Physical Presence Test. If you qualify, you can exclude up to $112,000 for tax year 2022, and $120,000 for 2023.

Does the IRS go after expats? ›

Further, expatriated individuals will be subject to U.S. tax on their worldwide income for any of the 10 years following expatriation in which they are present in the U.S. for more than 30 days, or 60 days in the case of individuals working in the U.S. for an unrelated employer.

Foreign Tax Credits help U.S. expatriates avoid double taxation by allowing them to credit taxes paid to foreign governments against their U.S. tax liability. This system ensures that income is not taxed by both the United States and the country of residence.

The Internal Revenue Service reminds taxpayers they must answer the digital asset question and report all digital asset related income when they file their 2023 federal income tax return.

CPAs answer a host of tax questions every day about tax returns, deductions, personal finances, and more.

In general, yes — Americans must pay U.S. taxes on foreign income. The U.S. is one of only two countries in the world where taxes are based on citizenship, not place of residency. If you're considered a U.S. citizen or U.S. permanent resident, you pay income tax regardless where the income was earned.

As a general matter, under the U.S. Internal Revenue Code (Code), all U.S. citizens and U.S. residents are treated as U.S. tax residents.

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad.

The IRS considers you a U.S. resident if you were physically present in the U.S. on at least 31 days of the current year and 183 days during a three-year period. The three-year period consists of the current year and the prior two years.