U.S. Expat Tax Guide
Understand U.S. federal taxes, state residency, foreign income exclusions, and foreign bank reporting while living abroad.
This guide is for general educational purposes and is not individualized tax, legal, accounting, or financial advice.
The Three Tax Questions
Start With These Three Questions
Does My State Tax Me?
Living outside the United States does not automatically terminate state residency or domicile. State residency and domicile need to be evaluated separately from federal expatriate taxation.
Does the U.S. Tax My Foreign Income?
U.S. citizens and resident aliens generally remain subject to U.S. federal income tax on worldwide income. Living abroad does not automatically eliminate the obligation to file a U.S. federal tax return.
Do I Have to Report Foreign Bank Accounts?
Foreign financial accounts may trigger FBAR and/or Form 8938 reporting requirements. Tax liability and information-reporting requirements are not the same thing.
Three States to Consider
States With No Individual Income Tax
Florida
No individual state income taxPros
- No broad individual income tax
- Large international population
- Major international airports
- Strong business infrastructure
- No state individual income tax on ordinary wages
- No broad state individual income tax on investment income
Cons
- Property taxes can be significant
- Insurance costs can be substantial in some areas
- Sales and local taxes still apply
- Domicile must be properly established
Best For
Americans looking for a traditional U.S. domicile with no individual income tax and convenient international travel.
Texas
No individual state income taxPros
- No individual income tax
- Large economy
- Major international airports
- Strong business infrastructure
- Attractive for entrepreneurs and business owners
Cons
- Property taxes can be relatively high
- Local taxes vary
- Homeownership can carry significant property-tax costs
- Domicile must be properly established
Best For
Entrepreneurs, business owners, and individuals who want access to a large U.S. economic center.
Nevada
No broad individual income taxPros
- No broad individual income tax
- No state tax on ordinary wages
- Western U.S. location
- Major metropolitan areas
- Popular state for individuals establishing western U.S. domicile
Cons
- Sales taxes can be relatively high
- Housing costs vary
- Other taxes and fees still apply
- Domicile must be properly established
Best For
Americans who prefer the western United States and want a state without a broad individual income tax.
| Factor | Florida | Texas | Nevada |
|---|---|---|---|
| Individual income tax | None | None | None |
| International travel | Excellent | Excellent | Good |
| Business environment | Strong | Excellent | Strong |
| Property tax concern | Moderate | Higher | Moderate |
| International community | Excellent | Excellent | Good |
| Overall expat appeal | High | High | High |
Florida
- Individual income tax
- None
- International travel
- Excellent
- Business environment
- Strong
- Property tax concern
- Moderate
- International community
- Excellent
- Overall expat appeal
- High
Texas
- Individual income tax
- None
- International travel
- Excellent
- Business environment
- Excellent
- Property tax concern
- Higher
- International community
- Excellent
- Overall expat appeal
- High
Nevada
- Individual income tax
- None
- International travel
- Good
- Business environment
- Strong
- Property tax concern
- Moderate
- International community
- Good
- Overall expat appeal
- High
"No individual income tax" does not mean "no taxes." Property taxes, sales taxes, insurance costs, business taxes, fees, and other state/local taxes may still apply.
Third-party reference — Tax Foundation — 2026 State Individual Income Tax Rates. Tax Foundation is not a government agency.
Moving Overseas Does Not Automatically End State Residency
A person can live outside the United States and still have unresolved state residency or domicile issues. Possible factors include:
- Previous home
- Property ownership
- Driver's license
- Voter registration
- Vehicle registration
- Family connections
- Business connections
- Mailing address
- Banking relationships
- Time spent in the state
- Evidence of permanent domicile
- Statements showing intent
State domicile should be reviewed before assuming that moving abroad eliminates state income tax.
Section 3
Foreign Earned Income Exclusion
FEIE — Form 2555
The Foreign Earned Income Exclusion can allow qualifying taxpayers to exclude a limited amount of foreign earned income from U.S. federal income tax.
$132,900
Maximum 2026 exclusion per qualifying person
The amount is adjusted annually for inflation.
FEIE Eligibility
Bona Fide Residence Test
A qualifying taxpayer generally must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.
IRS Bona Fide Residence InformationPhysical Presence Test
A taxpayer generally must be physically present in a foreign country or countries for at least 330 full days during a qualifying 12-month period.
IRS Physical Presence InformationFEIE — What Qualifies?
Generally Qualifying Earned Income
- Wages
- Salary
- Commissions
- Professional fees
- Certain self-employment income
- Compensation for personal services performed abroad
Generally NOT FEIE Earned Income
- Dividends
- Interest
- Capital gains
- Most pension income
- Social Security
- Most passive investment income
The FEIE is not a blanket exclusion for all foreign income.
FEIE vs. Foreign Tax Credit
| FEIE | Foreign Tax Credit | |
|---|---|---|
| Primary purpose | Exclude qualifying earned income | Credit qualifying foreign income taxes |
| Main form | Form 2555 | Form 1116 |
| Foreign tax required? | No | Generally yes |
| Earned income | Yes | Potentially |
| Passive income | Generally no | Potentially |
| Can reduce U.S. tax? | Yes | Yes |
| Can both apply? | Potentially, but rules interact | Potentially |
Income excluded under the FEIE generally cannot also generate a foreign tax credit for the foreign taxes attributable to that excluded income.
FEIE Does Not Automatically Eliminate Self-Employment Tax
The Foreign Earned Income Exclusion generally applies to federal income tax but does not automatically eliminate U.S. self-employment tax. This is an important misconception to understand.
IRS — Foreign Earned Income ExclusionSection 4
Foreign Housing Exclusion / Deduction
Qualifying taxpayers may potentially receive additional tax benefits for certain foreign housing expenses.
For 2026
General housing expense limitation: $39,870
Actual limitations can vary by location and individual circumstances.
IRS FEIE CalculationSection 5
Foreign Bank & Financial Account Reporting
FBAR — FinCEN Form 114
$10,000
Aggregate foreign-account threshold
A U.S. person generally must file an FBAR when the aggregate value of qualifying foreign financial accounts exceeds $10,000 at any time during the calendar year.
The $10,000 threshold applies to the combined qualifying accounts — not $10,000 per account.
FinCEN — Purpose of FBARFBAR Example
Vietnam checking
$7,000
Vietnam savings
$8,000
Foreign brokerage
$4,000
Combined maximum
$19,000
The existence of an FBAR filing requirement does not automatically mean the account balance itself is taxable income.
FBAR Account Types
Checking accounts
Savings accounts
Brokerage accounts
Securities accounts
Certain investment accounts
Other qualifying foreign financial accounts
Always review the specific account type and ownership structure.
Foreign Currency Conversion
Foreign-account values generally need to be converted to U.S. dollars when determining reportable maximum account values.
View FinCEN Currency GuidanceFBAR vs. Form 8938
| FBAR | Form 8938 | |
|---|---|---|
| Agency | FinCEN | IRS |
| Form | FinCEN Form 114 | Form 8938 |
| Law/framework | Bank Secrecy Act | FATCA |
| Foreign financial accounts | Yes | Yes, depending on asset |
| Threshold | $10,000 aggregate | Different thresholds |
| Filing system | FinCEN BSA E-Filing | Filed with federal tax return |
| Same requirement? | No | No |
You May Need Both
FBAR and Form 8938 have different thresholds, definitions, and reporting requirements.
IRS — Compare FBAR & Form 8938Section 7
FATCA — Form 8938
Form 8938 is used by certain U.S. taxpayers to report specified foreign financial assets when applicable thresholds are exceeded. Thresholds vary depending on:
- Filing status
- Whether the taxpayer lives inside or outside the United States
- Maximum value of specified foreign financial assets
- Other circumstances
Do not simplify Form 8938 into the $10,000 FBAR threshold. Form 8938 and FBAR are separate reporting requirements with different thresholds.
Section 8
Federal + State + Foreign Country
Layer 1
United States Federal Tax
Worldwide income generally remains relevant for U.S. citizens and resident aliens.
Layer 2
Foreign Country Tax
The country where you live may impose its own income tax and reporting requirements.
Layer 3
U.S. State Tax
Your state domicile may create additional state tax obligations.
Living abroad does not automatically eliminate any of these layers.
Section 9
Expat Tax Planning Checklist
Federal
State
Foreign
Banking
Section 10
Common Mistakes
Section 11
Official Government Resources
Only official government sources are listed below. Third-party references are clearly labeled.
IRS
Foreign Earned Income Exclusion
Visit IRSForeign Earned Income Exclusion Overview
Visit IRSForeign Tax Credit
Visit IRSForm 2555
View Form 2555Form 1116
View Form 1116Form 8938
View Form 8938FBAR vs. Form 8938
Compare RequirementsFinCEN
U.S. Treasury
Treasury International Policy & Currency Resources
Visit TreasuryEducational Disclaimer: This information is provided for general educational purposes only and is not tax, legal, accounting, immigration, or investment advice. International tax rules, state residency rules, foreign reporting requirements, and filing thresholds can change. Individual circumstances may significantly affect the outcome. Consult a qualified tax professional experienced in U.S. expatriate taxation before making tax, residency, domicile, business, or financial decisions.
Living Abroad? Understand Your Tax Responsibilities Before You Move.
Understanding federal taxes, state domicile, foreign income, and foreign financial-account reporting can help you avoid expensive surprises.
Educational Disclaimer: This information is provided for general educational purposes only and is not tax, legal, accounting, immigration, or investment advice. International tax rules, state residency rules, foreign reporting requirements, and filing thresholds can change. Individual circumstances may significantly affect the outcome. Consult a qualified tax professional experienced in U.S. expatriate taxation before making tax, residency, domicile, business, or financial decisions.
Tax rules and thresholds can change. Verify current amounts directly with the IRS, FinCEN, and applicable state authorities.