Everything You Need to Know about US Taxes for Americans Living Abroad
I am not a tax professional. The information in this blog post is based on my personal experience and research as an American living abroad. Tax laws can be complex and vary based on individual circumstances. If you have specific questions, concerns, or need personalized advice, I strongly recommend consulting a qualified tax professional or accountant familiar with international and expat tax matters.
Living abroad as an American comes with specific tax obligations that many aren’t initially aware of. Here is a list (although not exhaustive) of 14 things you may not realize when it comes to taxes and being an American living abroad.
Table of Contents
You must still file a U.S. Tax Return
Did you know that as a U.S. citizen, you are required to file taxes (if you meet the threshold) even if you live and work abroad? Most countries follow a residency-based taxation system, meaning they tax you if you live or earn income within their borders—regardless of your citizenship But the U.S. (along with only one other country: Eritrea) uses a citizenship-based taxation system.
Historically, this policy was introduced during the Civil War to prevent draft dodgers from moving abroad and escaping taxes. Remains in place partly because it’s seen as a way to ensure tax compliance and deter tax evasion, especially by high earners with offshore accounts.
Just because you have to file taxes back in the US does not necessarily mean you owe taxes. There are mechanisms that aim to prevent double taxation, but you still have to file and claim these benefits—it’s not automatic: (these are explained further on)
- The Foreign Earned Income Exclusion (FEIE)
- The Foreign Tax Credit (FTC)
- Tax treaties with many countries
Foreign Earned Income Exclusion
Foreign Earned Income Exlcusion (FEIE) allows you to potentially exclude up to $120,000 (2023 ref) of foreign earned income (salaries, wages & self-employment income) from U.S. taxation if you meet the following:
- Have a tax home in a foreign country.
- Meet either the Physical Presence test (330 days out of 12 months abroad) or the Bona Fide Residence Test (you’ve established permanent residency abroad).
You have to file a return to claim FEIE, you have to submit Form 2555. You can find that form here as well as instructions and other information.
What counts as “Foreign Earned Income”?
- Salaries and wages from a job abroad.
- Freelance and consulting income earned while living abroad.
- Housing benefits or allowances provided by an employer (sometimes partially excluded under the Foreign Housing Exclusion – see point 12).
This does not include U.S.-based income, rental income, capital gains, pensions, dividends or unemployment benefits.
Foreign Tax Credit
The Foreign Tax Credit (FTC) is a provision in the U.S. tax code that helps Americans avoid being taxed twice on the same income by two countries — once by the U.S. and once by the foreign country where you live and earn income. It allows you to offset your U.S. tax liability by the amount of income tax you’ve already paid to a foreign government — like France.
You qualify if you meet the following points:
- You are a U.S. citizen or resident alien.
- You paid or accrued income tax to a foreign country (e.g., France).
- The tax was legally owed and not refundable.
- The income is also subject to U.S. tax.
If you are filling your US taxes, you will need Form 1116 to claim the FTC. This form requires the following the type of income earned (e.g., wages, interest, dividends), the amount of foreign tax paid, the country where you paid the tax. You’ll typically attach this to your Form 1040.
The Foreign Tax Credit is not to be confused with the Foreign Tax Deduction. The FTC reduces your US tax liability dollar-for-dollar where the FTD reduces your taxable income , not the tax bill directly (this is usually less beneficial than the FTC).
The Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit generally cannot be used on the same income — you must choose. Many families or higher earners opt for the FTC. Social charges (like France’s CSG/CRDS) sometimes don’t count as creditable foreign taxes.
Foreign Bank Account Report
Foreign Bank Account Report, or better known as FBAR, is a required annual filing for U.S. citizens and residents who have foreign financial accounts exceeding certain thresholds. It is not a tax form. It’s a reporting requirement under the Bank Secrecy Act, enforced by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
You must file an FBAR if:
You are a U.S. citizen, Green Card holder, or U.S. tax resident (even if you live in France),
ANDYou have a total of $10,000 or more in foreign financial accounts combined, at any time during the calendar year — even for one day.
This includes the following: French checking and savings accounts, Livret A, LDD (French savings accounts), joint accounts, business accounts (if you have signing authority), investment accounts, certain retirement accounts, French PayPal or Wise accounts if linked to a French bank account.
Important: It’s the combined total that matters. You may have €4,000 in one bank, €3,000 in another, and €5,000 in a joint account — and still cross the $10,000 threshold once converted to USD.
FBAR is due every April 15th with an automatic extension till October 15th. The FBAR is not filed with your tax return, it is filed through the BSA E-Filing System online to FinCEN (Financial Crimes Enforcement Network). The official form is the FinCEN Form 114.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (FATCA) is a U.S. law that was enacted in 2010 that aims to combat offshore tax evasion by requiring that foreign financial institutions (like French banks) report financial account information of U.S. persons directly to the IRS and U.S. taxpayers to report their foreign financial assets on Form 8938, if those assets exceed certain thresholds.
FBAR is about reporting foreign bank accounts to FinCEN. FATCA is about reporting foreign financial assets to the IRS.
Under FATCA, French banks and financial institutions are required to identify their account holders who are U.S. citizens or residents (via their passport, address, or tax ID) and report the details of their accounts to the French government. Then, the French tax authority shares this information with the IRS under the FATCA intergovernmental agreement (IGA) between France and the U.S. That’s why your French bank will ask you to complete W-9 forms and may request a U.S. Social Security Number or Taxpayer Identification Number (TIN).
If you’re a U.S. taxpayer living in France and your foreign financial assets exceed certain thresholds, you must file Form 8938 with your annual U.S. tax return. The filing thresholds for U.S. expats are:
- If you are single or married filing separately and you have over $200,000 in foreign assets on the last day of the year, or over $300,000 at any point during the year.
- If you are married filing jointly and you have over $400,000 on the last day of the year, or over $600,000 at any point during the year.
Unlike the FBAR, which is filed separately, form 8938 is filed with your IRS Form 1040.
FATCA vs. FBAR – What’s the Difference?
| Feature | FATCA (Form 8938) | FBAR (FinCEN 114) |
|---|---|---|
| Filed with | IRS (on your tax return) | FinCEN (separate from tax return) |
| Filing threshold (abroad) | $200K–$600K depending on filing status | $10K aggregate foreign account balance |
| Accounts reported | Broad financial assets | Bank & financial accounts only |
| Penalties | Up to $10,000–$50,000+ | $10,000+ (non-willful), up to 50% (willful) |
| Exchange rate used | IRS Year-End Rates | U.S. Treasury December 31 rate |
State Taxes May Still Apply
Depending on your last state of residence and whether you officially severed ties, you may still owe state taxes, especially is the state is aggressive (California, New York, Virginia).
While US federal government taxes are based on citizenship, state income tax is based on residency and each state defines residency differently. Here are some reasons why you might still owe state taxes while living abroad:
- You still have a U.S. mailing address.
- You have property, a driver’s license or voter registration in your home state.
- You have a U.S.-based income.
- You file tax returns as a resident.
- You are paid by a U.S. employer.
- You didn’t fully sever ties with your state.
If you maintain certain ties to your former state, you could be considered a resident for tax purposes, and required to file and possibly pay state income taxes, even if you no longer physically live there. You can stop being considered a tax resident of your home state by:
- Filing a state tax return as a part-year resident or non-resident.
- Change the address on your voter registration to your overseas address.
- If applicable, declare your new foreign residence as your main domicile.
- Cancel your driver’s license and car registration if you haven’t already done so.
- Remove your mailing address from everything that is connected to your home state.
- If you own property, either sell or rent.
You will need to check your state’s department of revenue website to see what the filing requirements, definition of residency and non-resident rules are and to see if you meet them.
Social Security & Self-Employment
If you are self-employed abroad, you are required to report your worldwide income, a.k.a. your self-employment income, on a yearly tax return using the 1040 form. If you were self-employed in the United States, you pay the following 12.4% to Social Security and 2.9% to Medicare for a total of 15.3% on net earnings over $400/year. But if you are living and working in France you are paying into the French Social Security system and are possibly exempt from U.S. self-employment tax because of the U.S.-France Totalization Agreement. This agreement is a bilateral agreement between the France and the United States that was put into place to prevent double Social Security taxation for people who live and work in one country but are subject to the laws of the other.
If you are self-employed and legally registered in France (for example, as a micro-entrepreneur or under another regime), and are contributing to French cotisations sociales (social charges), you’re typically exempt from paying U.S. self-employment tax. To prove your exemption, you’ll need a Certificate of Coverage from the French Social Security authority, attestation des droits from Assurance Maladie. This certificate confirms that you’re covered in France and allows you to avoid the 15.3% SE tax in the U.S., though you still need to report your income annually.
Even if you’re exempt from self-employment tax in the U.S., you still need to file your U.S. tax return each year, report your self-employment income (Schedule C), and possibly include Form 8833 if you’re claiming treaty benefits. You may also qualify for the Foreign Earned Income Exclusion or Foreign Tax Credit to avoid or reduce your U.S. income tax. On the French side, you’ll need to register your business with URSSAF or as a micro-entrepreneur and pay your French social contributions, which vary depending on your business type.
Tax Deadlines are Extended - But Not Payments
Americans living abroad are automatically granted and extension to file taxes from April 15th until June 15th. But be aware that interest can still accrue from April 15 if you owe any taxes (like from self-employment or quarterly estimates). Keep in mind that the date to file is extended, not the date to pay.
If you do owe taxes, the date to pay taxes is still April 15th, even as an American living abroad. If you are unsure of what you will owe by April 15th, it is suggested that you make an estimated payment so you can avoid the possibility of penalties. If ever you make an overpayment, you’ll receive a refund once you have filed your tax return.
If you find that the June 15 deadline is not enough time to get your paperwork together and prepared to file, you can ask for an extension to October 15th by using form 4868, but keep in mind this is just a request for an extension to file, not pay.
Child Tax Credit & Other Benefits
If you have children, you may be eligible for the Child Tax Credit, but as always, there is a list of general requirements that need to be met.
- Child(ren) must be under the age of 17 at the end of the tax year.
- The child(ren) must be claimed as dependent on your U.S. tax return.
- The child(ren) must be a U.S. citizen, national, or resident alien.
- The child(ren) must have a valid Social Security number.
- You (the filer) must have earned income (wages or self-employment).
If you live abroad and you qualify for the Child Tax Credit, receiving the refundable portion depends on where you live and whether you exclude your income using the FEIE. If you claim FEIE, you may be unable to receive the refund portion of the CTC. If you claim the FTC, there’s a possibility you may qualify for a refundable credit of up to $1600 per child (2023) thanks to the Additional Child Tax Credit.
Dependent Care Credit
If you pay for childcare such as crèche, nounou or assistante maternelle, so you can work or run a business, you may be eligible for this credit. You will need to report the care provider’s name and foreign tax ID and this cannot be used if you exclude your income with the FEIE.
Education-related Credits
This is mainly if you have a child that is attending a university and are paying a U.S.-based college tuition. You must meet residency and income thresholds. Foreign schooling typically does not apply to this credit.
Exchange Rate Reporting
All amounts on your U.S. return must be reported in U.S. dollars as the IRS only accepts monetary amounts reported in USD. You must convert all foreign income and expenses using official exchange rates. Since the IRS does not publish a fixed rate, you can check with the U.S. Treasury and their yearly average exchange rate or you can find the exchange rate on the specific day of the transaction. You can also use sources such as the Federal Reserve, OANDA, or X-Rates .
Married and filing taxes with a non-U.S. spouse
If you are married to a French national, like me, and they are a non-U.S. spouse (a.k.a. nonresident alien spouse, or NRA) you have a few options, depending on how you want to treat the situation.
The most common way to file is married filing separately. This is the simplest approach if you don’t want your spouse to be involved in the U.S. tax system. You will only report on your worldwide income and you may loose access to some tax benefits/credits.
You can opt to be married filing jointly, but your spouse’s income will the be taxed upon by the U.S. government. Your spouse will receive an individual taxpayer identification number (ITIN) and you must report all of your spouse’s income on you U.S. tax return, even if the income was earned entirely in France. If you opt this way, the is a long-term decision and can only be revoked with approval from the IRS.
In certain situations, you can file as head of household. You may apply if you live separately from your non-US spouse and pay more than half the costs of maintaining a home for a dependent. Your spouse must be a NRA and you need to meet other IRS criteria for this.
You Might Qualify for the Foreign Housing Exclusion/Deduction
If you qualify for the FEIE, you may also be able to deduct certain housing expenses (rent, utilities, insurance) above a base amount, especially in high-cost cities like Paris. The Foreign Housing Exclusion is for employees who earn wages (i.e. based on a job contract). The Foreign Housing Deduction is for self-employed individuals. Both use form 2555.
There are certain qualified housing expenses that can be deducted if they exceed a base amount set by the IRS. These expenses include:
- Rent
- Utilities (excluding telephone, television, internet)
- Property insurance
- Furniture rentals
- Residential parking fees
- Repairs
- Occupancy taxes
The average amount is 16% of the FEIE limit. For 2024, that is $126,500, with a base amount of $20,240 per year or $1,688.67 per month. You can only exclude the amount above the base, up to a maximum depending on the city you live in. Be careful as there are location-specific caps based on where you live.
Renunciation Doesn't Erase Past Tax Obligations
If you choose to renounce your U.S. citizenship to avoid future filings, you must still be compliant for the previous five years and may be subject to an exit tax depending on your net worth and income history. If you are not compliant with your previous tax returns, you cannot renounce cleanly and this may cause penalties to incur.
In order to be compliant, the previous 5 years of tax returns must have been filed. A final dual-status return for the year you renounce must be filed as well, this includes FBARs and any other required forms.
| Requirement | Description |
|---|---|
| 5 Years of Tax Compliance | File all returns and pay any owed taxes |
| Form 8854 | Certify tax compliance, report net worth, income |
| Exit Tax | May apply if net worth ≥ $2M or high income |
| Final Return | Dual-status return due for the year of renunciation |
| Possible Tax on U.S. Income | Even after renunciation, some U.S. income may be taxed |
Once you’ve renounced, you are no longer subject to U.S. taxation on worldwide income, but you may still owe taxes on U.S.-sourced income such as dividends from U.S. stocks, real estate rental income, which is through withholding taxes.
Get Professional Help if Needed
Expat taxes can get complex quickly. Consider working with a CPA or tax advisor who specializes in expat and/or international U.S. taxation—especially if you own foreign investments, a business, or property. Here are two resources that I use every time I am dealing with my U.S. taxes:
My Expat Taxes
MyExpatTaxes is an easy-to-use, IRS-compliant software specifically designed for Americans living abroad. They offer affordable federal and state filing packages, automatic FBAR filing, and help with claiming the Foreign Earned Income Exclusion, Foreign Tax Credit, and Child Tax Credit.
I’ve been using MyExpatTaxes since I moved abroad in 2020. They have made filing and staying up to date easy and painless. The great thing is that they are one of the only software filling systems that allows a NRA spouse, so I file married filing separately.
Want 20% off? I got you covered!
France Fiscal Support (Facebook)
This private Facebook group is run by tax experts versed in different international backgrounds. This group is used simply for advice and help when dealing with specific situations. There is a selection of extensive guides that are detailed and helpful. If you have any questions or concerns you need to reach out to a tax professional.
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