If you leave the United States but keep your U.S. citizenship or green card, you still have to pay U.S. taxes. The federal government taxes based on status, not location, so your salary, freelance work, rental income, and investment returns remain reportable to the IRS no matter which country you live in. The good news is that a handful of exclusions, credits, and treaty provisions usually shrink the actual bill to a small amount or zero, and the obligation only truly ends when you formally give up your U.S. status.
You Still File, Even With Zero U.S. Income
Every U.S. citizen and green card holder must file a federal return once gross income reaches the threshold for their filing status, and gross income means everything you receive worldwide.1Internal Revenue Service. U.S. Citizens and Residents Abroad – Filing Requirements For a single filer under 65, the 2025 threshold is $15,750.2Internal Revenue Service. Check if You Need to File a Tax Return Income you later exclude from tax still counts toward that threshold, so qualifying for an exclusion does not get you out of filing.
If both your home and your workplace are outside the United States on April 15, you automatically get until June 15 to file and pay, with no form required.3Internal Revenue Service. U.S. Citizens and Resident Aliens Abroad – Automatic 2-Month Extension of Time to File Interest on unpaid tax still runs from April 15, so the extension buys paperwork time, not payment time. A further extension to October 15 is available by filing Form 4868.
How Most Americans Abroad End Up Owing Little or Nothing
The tax code contains two main tools that keep you from paying tax twice on the same income. Many people use both in the same year.
The Foreign Earned Income Exclusion
The Foreign Earned Income Exclusion (FEIE) removes a set amount of foreign wages and self-employment income from your U.S. taxable income. For 2026, the cap is $132,900.4Internal Revenue Service. Figuring the Foreign Earned Income Exclusion You claim it on Form 2555, and you qualify by having a tax home in a foreign country plus meeting one of two tests:
- The bona fide residence test, which requires living in a foreign country for an uninterrupted period that includes a full calendar year.5Internal Revenue Service. Instructions for Form 2555 (2025)
- The physical presence test, which requires 330 full days in a foreign country during any 12 consecutive months.5Internal Revenue Service. Instructions for Form 2555 (2025)
The FEIE only covers earned income. Dividends, interest, and rental profits do not qualify. It works best when you live in a country with low or no income tax, because it wipes out the U.S. tax on that income entirely.
On top of the FEIE, you can exclude certain housing costs above a base amount, including rent, utilities, and insurance. For 2026, the general cap on qualifying housing expenses is $39,870, and the IRS sets higher limits for specified high-cost cities.4Internal Revenue Service. Figuring the Foreign Earned Income Exclusion Self-employed filers take the housing amount as a deduction rather than an exclusion.
The Foreign Tax Credit
The Foreign Tax Credit (FTC) works differently. Instead of removing income, it gives you a dollar-for-dollar credit against your U.S. tax for income taxes you already paid to a foreign government.6Internal Revenue Service. Foreign Tax Credit You claim it on Form 1116. The FTC covers both earned and passive income, so it is the only relief available for investment returns, dividends, and rental profits.
If your country of residence taxes at a higher rate than the United States, the FTC generally beats the FEIE, because the credit can cancel your entire U.S. bill on that income. You can use both in the same year, just not on the same dollars. A common approach is to apply the FEIE to earned income up to the cap and use the FTC on the rest, plus any passive income.
The Self-Employment Tax Surprise
The FEIE does not reduce your self-employment tax. If you have at least $400 in net self-employment income, you owe Social Security and Medicare tax on it even when the income itself is fully excluded from income tax.7Internal Revenue Service. Self-Employment Tax for Businesses Abroad A freelancer earning six figures abroad can end up with zero income tax and a substantial self-employment tax bill.
The relief here comes from totalization agreements, which prevent double Social Security taxation by assigning coverage to only one country. The U.S. has agreements with about 30 countries, including Canada, the United Kingdom, Germany, France, Japan, Australia, and most of Western Europe.8Social Security Administration. Country List 3 If you work in one of them and pay into its social security system, a certificate of coverage exempts you from U.S. self-employment tax. Work in a country without an agreement and you pay both systems.
Reporting Foreign Accounts and Assets
Living abroad usually means holding bank accounts, pensions, or investments outside the United States, and those trigger reporting requirements that are separate from your tax return. The filings do not create tax liability, but skipping them can be far more expensive than the tax itself.
FBAR (FinCEN Form 114)
If the combined balance of your foreign financial accounts crosses $10,000 at any point during the year, you file a Report of Foreign Bank and Financial Accounts with FinCEN.9Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) It covers checking, savings, brokerage, mutual funds, and certain foreign pensions. Filing is electronic through the BSA E-Filing System and is due April 15 with an automatic extension to October 15.
Non-willful violations can be penalized up to $16,536 per account per year.10eCFR. 31 CFR 1010.821 – Penalty Adjustment and Table Willful violations are penalized at the greater of roughly $100,000 (inflation adjusted) or 50% of the account balance at the time of the violation, and criminal penalties are possible for intentional evasion.
Form 8938
Form 8938 covers a broader set of foreign financial assets, including foreign stock, partnership interests, and certain trusts, and it is filed with your tax return. Thresholds depend on where you live. A single filer inside the United States must file at $50,000 on the last day of the year or $75,000 at any point during the year.11Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets? For a single filer living abroad, those thresholds rise to $200,000 on the last day of the year or $300,000 at any point.12Internal Revenue Service. Instructions for Form 8938 (Rev. November 2021)
The base penalty for failing to file is $10,000, with an additional $10,000 for every 30-day period the failure continues after the IRS sends a notice and 90 days pass, up to $50,000 in additional penalties.13GovInfo. 26 USC 6038D
Your Former State May Still Want a Return
Nine states have no income tax, so if that was your last residence you can stop worrying about the state level. Everywhere else, the question is domicile. Most states treat your domicile as unchanged until you affirmatively establish a new one, and leaving the country does not sever it by itself. Keep a home, driver’s license, voter registration, or local bank account in your former state and it has a strong argument that you never left for tax purposes. Some states pursue this aggressively, and people have been assessed state tax years after moving abroad because they never formally abandoned domicile.
If you can plan the move, establishing residence in a no-income-tax state before leaving is the cleanest route. If you’re already gone, check your former state’s specific rules for severing domicile. Canceling voter registration, surrendering a driver’s license, and closing local accounts are typical steps, but the requirements vary.
Ending Your U.S. Tax Obligation for Good
Nothing about time or distance ends your U.S. filing duty. An expired passport, decades abroad, or a full tax bill paid to another country changes nothing. The only exits are formally renouncing citizenship or formally abandoning a green card.
Citizens renounce by taking an oath of renunciation in person at a U.S. embassy or consulate.14U.S. Department of State. Relinquishing U.S. Nationality Abroad The administrative fee is $450, reduced from $2,350 under a recent rule change.15Federal Register. Schedule of Fees for Consular Services – Fee for Administrative Processing of Request for Certificate of Loss of Nationality of the United States Renunciation is irrevocable, and you will need citizenship or legal status in another country because free entry to the U.S. ends with it.
Long-term residents (green card holders for at least 8 of the last 15 tax years) end their obligation by filing Form I-407 with a U.S. consular or immigration officer and surrendering the card.16Internal Revenue Service. Instructions for Form 8854 (2025) Either group also files Form 8854 with the IRS and notifies the Department of Homeland Security (for green card holders) or the Department of State (for citizens).17Internal Revenue Service. Expatriation Tax
The Exit Tax
Giving up U.S. status can trigger an expatriation tax if you count as a covered expatriate. The rule treats your worldwide assets as sold the day before you leave, creating a capital gains bill on assets you still hold. You are a covered expatriate if any one of these is true:18Internal Revenue Service. 2025 Instructions for Form 8854
- Your net worth is $2 million or more on the date of expatriation.
- Your average annual net income tax liability for the five preceding years exceeds an inflation-adjusted threshold ($206,000 for 2025).
- You cannot certify on Form 8854 that you met all federal tax obligations for the five preceding years.
The third test catches people whose finances would otherwise be well under the limits. A few missed returns puts you into covered expatriate status by default. For 2025, a covered expatriate can reduce the deemed gain by an exclusion of $890,000, with unrealized gain above that taxed as capital gain in the year of expatriation.18Internal Revenue Service. 2025 Instructions for Form 8854 The exclusion adjusts for inflation each year. Retirement accounts and deferred compensation follow separate rules.
If You Never Filed
Plenty of Americans abroad only learn about all this after years of not filing. Some were born overseas to U.S. parents and never lived in the country. Others assumed paying tax where they live was enough. The IRS has two programs for coming into compliance without penalties.
The Streamlined Foreign Offshore Procedures apply when your failure to file was non-willful, meaning it came from negligence, mistake, or a good-faith misunderstanding rather than deliberate evasion.19Internal Revenue Service. Streamlined Filing Compliance Procedures You must live outside the United States, file the last three years of income tax returns, file the last six years of FBARs, and certify that your non-compliance was not willful. You cannot use the program if the IRS has already started examining your returns or if you are under criminal investigation.
Former citizens who never filed and want to renounce cleanly may qualify for Relief Procedures for Certain Former Citizens. Eligibility is narrower: net worth under $2 million, total tax liability of $25,000 or less for the six relevant years, and no previous filing history as a U.S. person.20Internal Revenue Service. Relief Procedures for Certain Former Citizens Qualifying lets you avoid covered expatriate status and owe no back taxes or penalties for those years.