Americans living abroad must still file taxes in the United States. In addition, US expat taxes are more complex. This is because there are specific rules (and benefits!) when filing an American expatriate tax return. But thanks to these benefits, many expats don’t even owe US taxes.
This guide includes filing thresholds, exclusion amounts, due dates, and much more for your Form 1040. All numbers are updated for the 2023 tax year (the return you file in 2024).
If you have additional questions or to get started on your taxes, you can schedule a free consultation with us.
- US Tax Filing Thresholds For Expats
Even when living abroad and even if they don’t owe any tax, US citizens and Green Card holders must file a US tax return if their income exceeds the threshold. The 2024 filing thresholds are:
| Filing Status | Gross income |
| Single (under age 65) | $13,850 |
| Married filing jointly (under age 65) | $27,700 |
| Married filing separately (any age) | $5 |
| Head of household (under age 65) | $20,800 |
Thresholds are higher for taxpayers 65 and older.
If you are self-employed and had at least $400 in self-employment income, you also must file. Furthermore, there are other circumstances where you should file a tax return, even though your income is below these thresholds.
Expats receive an automatic 2-month extension to file and pay. When you are abroad on the regular April tax deadline, you must file your US tax return by June 17, 2024 (June 15 is a Saturday this year).
If you still need more time, you can request an extension to October 15.
Nonetheless, any tax owed should be paid by April 15 to avoid interest penalties.
- US Expat Tax Benefits
The good news is that Americans living abroad can avoid double taxation and even lower their US taxes.
Taxes for expats are different in many ways from the tax returns that you may have filed while living in the United States. While there are additional requirements for expats, there are also many tax benefits for Americans abroad, such as:
- Excluding income from taxation with the Foreign Earned Income Exclusion (FEIE) and the Foreign Housing Exclusion or Deduction to reduce living expenses.
- Applying the Foreign Tax Credit (FTC) to offset tax paid to other countries.
- Using applicable Tax Treaty Benefits to exclude other income from US taxation.
Through these exclusions, deductions, and credits, many US expats can reduce or even eliminate their US tax burden.
The Foreign Earned Income Exclusion is one of the most popular exclusions for many Americans abroad. It can result in huge tax savings. Through the FEIE, US expats can exclude up to $120,000 of their 2023 foreign earnings from US income tax. This exclusion applies to foreign earned income only, it does not apply to Social Security benefits, pensions, annuities, interests, dividends, capital gains, etc.
Americans working abroad don’t automatically get the Foreign Earned Income Exclusion. Instead, they must claim it using Form 2555 as part of their US tax filing. In addition, they must meet the IRS requirements to qualify. To be eligible for the FEIE you must meet one of the following two tests:
- Physical Presence Test – Spending a minimum number of days in foreign countries: you have to spend at least 330 days in a 365-day period abroad.
- Bona Fide Residency Test – Having your home and strong ties in a foreign country. The Bona Fide Residency offers more flexibility when it comes to spending time in the US.
- Foreign Tax Credit (FTC)
The Foreign Tax Credit (FTC) is another common option for US taxpayers living abroad. Expats can receive a dollar-for-dollar credit for taxes paid to another country. This can offset or even entirely eliminate taxes due to the US government. Using the FTC make sense in countries with higher tax rates than the United States.
You can even carry over unused tax credits from a high-tax jurisdiction for use during the following 10 years when you move to a low-tax jurisdiction.
- US Taxes For Self-Employed Expats
The self-employment tax covers social security and Medicare tax and is 15.3% for the first $160,200 of income. A 0.9% additional Medicare tax may also apply if your net earnings from self-employment exceed $200,000 if you’re a single filer or $250,000 if you’re filing jointly.
If your residence country has a Social Security Totalization Agreement with the United States, as it does with Spain and Portugal, then you can choose which country you would like to contribute to, based on your personal and tax situation. Without a Totalization Agreement, you may end up having to pay into both countries’ systems.
- Tax Treaty Benefits
The United States has Tax Treaties with over 60 countries, including most (but not all) popular expat destinations.
The list of countries with income tax treaties includes Australia, Canada, most of Western Europe (Spain and Portugal), Mexico, China, Japan, and even far-flung places like Kyrgyzstan.
Tax Treaties can provide exemptions or reduced tax rates for certain types of income, including retirement/pension plans, as well as reduced withholding rates in passive income such as dividends and interest.
- Foreign Bank Account Reporting – FBAR (FinCen 114)
Most Americans abroad have foreign bank accounts. If they meet the threshold, they must file a Foreign Bank Account Report (FBAR).
If the combined maximum value of your foreign financial accounts was greater than $10,000 at any time during the natural year, you must report all of your foreign accounts. The combined value includes any accounts which you have a financial interest in or signature authority over.
The Foreign Bank Accounts Report is filed electronically with the Treasury Department using FinCen Form 114.
Make sure you understand the specific requirements and file correctly. Failure to disclose all relevant accounts can lead to hefty fines.
The FBAR is due the same day as for your Form 1040.
- Reporting Other Foreign Financial Assets On Form 8938
If you have other foreign financial assets such as mutual funds, foreign pensions, stocks, bonds, loans, and other investments you may also need to file Form 8938. This form is filed together with your tax return, it is part of the 1040.
The threshold for Form 8938 is higher than for the FBAR and varies depending on your filing status and residency.
A US expat filing a joint return must file Form 8938 if the value of the foreign assets exceeds:
- $400,000 on the last day of the tax year, or
- $600,000 at any time during the year.
For a US expat filing as single, Form 8938 is required if the value of the foreign assets exceeds:
- $200,000 on the last day of the tax year, or
- $300,000 at any time during the year.
Please be aware that the Form 8938 filing thresholds for expats are significantly higher than for someone who lives in the United States.
- State Taxes For Expats
As an American abroad, you may still have to pay state taxes to your former state of residence or any state that you have income from. Your obligations depend on the specific state.
The easiest states for US citizens abroad are those which do not have income tax. This includes Florida, Nevada, Texas, and Washington, among others.
Some other states have a neutral stance towards expats. These states will generally stop considering you a tax resident after you have been gone for a certain period. A few of these states may also ask you to file paperwork proving your new residency. Fortunately, in most neutral states you are unlikely to face many hurdles.
It is important to be aware of your state requirements. If you stop filing and then return to live in the state, the state may notice the gap in your filings. If you cannot prove that you were a resident somewhere else during those years, they may ask you to file and pay taxes for those missing years.
- Final consideration To File US Expat Taxes From Abroad.
As you can see, expat taxes are more complex. However, US taxpayers living abroad must remember that as residents of another country the must file and probably pay taxes in that country. Be sure that you contact for your filings experts in the taxations to be sure that you get the advantages from both countries.
Of course, every situation is unique. That is why we offer free US Spanish/Portuguese Tax consultations for expats to discuss your specific situation and tax needs and answer your questions.
If you have additional questions or wish to speak with us about other tax matters, please feel free to contact us at:
USTaxConsultants.es +34 915 194 392
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