Money/Tax Compliance

US Citizens and Permanent Residents are taxed on their worldwide income. Even if you pay taxes to the country you immigrate to, you're generally required to file a tax return with the IRS back in the US. Failure to do so could complicate an application for permanent residency or citizenship in another country. The good news is that most US citizens living and working outside of the US will not pay US taxes on income earned while abroad. Generally, filing your US tax return is not much more complex when working an employee in another country.

Of course, exceptions apply. US Citizens who are self-employed, invest in foreign entities or have otherwise more complex financial arrangements will generally require professional assistance when filing and paying taxes to the US and other countries.

The intent of this page is to provide general guidance on staying in compliance with US tax law while familiarizing you with issues that may be best handled with professional assistance. Even if you fully grasp what is presented here, with tax issues it's generally better to err on the side of caution and seek professional support to handle your specific tax situation.

You will also need to familiarize yourself with tax obligations you may have in countries you emigrate to. Covering those issues is beyond the scope of our project and vary wildly in complexity depending on the country and your circumstances.

Understanding the Foreign Earned Income Exclusion

Most US Citizens living and working abroad avoid paying US income tax through a method known as the Foreign Earned Income Exclusion. Qualifying for the FEIE involves understanding certain concepts that are not always intuitive. While there are other methods to shield your foreign income from being taxed by the US, the FEIE is the most commonly used method. To determine when and how you qualify, there's some concepts you should be familiar with.

Earned Income

Most money earned from work you do for others as an employee or contractor is considered "earned income" by the IRS. It's more specifically defined by the IRS as "pay for personal services performed, such as wages, salaries, or professional fees." Income earned from other sources like investment accounts, retirement funds or other income generating properties are considered unearned or variable income.

Foreign Earned Income

When you work for others outside of the US, you generally receive what's called "Foreign earned income". The IRS makes a critical and specific distinction here that is important to understand:

The source of your earned income is the place where you perform the services for which you receive the income. Foreign earned income is income you receive for performing personal services in a foreign country. Where or how you are paid has no effect on the source of the income. For example, income you receive for work done in France is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is in New York City. - IRS.gov: Foreign Earned Income Exclusion - What is Foreign Earned Income?

In other words, if you continue to work remotely for your US-based employer in your same job, that income is considered Foreign Earned Income.

Tax Home

Your "tax home" is defined by the IRS as "the general area of your main place of business, employment, or post of duty." Basically, your tax home is where you do your work. To qualify for the FEIE, your tax home must be in a country outside of the US. However, you cannot claim a Tax Home in another country while your "abode" is in the US.

Abode

In order for your tax home to be outside of the US, your "abode" must be outside of the US. Your abode is defined by the IRS as where you, "maintain your family, economic, and personal ties."

The IRS gives the following example:

Your employer transferred you to a foreign country for an indefinite period. You kept ownership of your home in the United States but rented it to another family. You placed your car in storage. In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London.

Shortly after moving, you leased a car, and you and your spouse got driving licenses in the foreign country. Your entire family got library cards for the local public library. You and your spouse opened bank accounts with a bank in the foreign country. You joined a local business league, and both you and your spouse became active in the neighborhood civic association and worked with a local charity. Your abode is in the foreign country for the time you live there, and you satisfy the tax home test in the foreign country.

IRS.GOV: Foreign Earned Income Exclusion - Tax Home in foreign country

Another example to illustrate the relevant concepts:

You sold what you could, packed two suitcases and boxed up everything else you owned hoping that a friend would ship things to you bit by bit as you fled to a country that doesn't persecute trans people. You continued to work remotely for your US employer while couchsurfing, meeting new friends and establishing yourself in a new and supportive community. You met up with your new roommates through the school where you study the local language. You found a local HRT provider, a therapist to deal with your survivor's guilt and even landed a new job managing a hostel that has become popular with other trans people fleeing the US. Your abode is in the foreign country for the time you live there, and you satisfy the tax home test in the foreign country.

The Final Challenge: Bona Fide Residence Test and Physical Presence Test

Once you have Foreign Income and have established your Tax Home outside of the US, the final hurdle to qualifying for the FEIE is passing one of these two tests of the time you have spent in another country. Generally, if you leave and do not return to the US, you will qualify after 330 days of living in another country outside of the US. Your date of departure from the US generally dictates which of these rules apply to you

Bona Fide Residence Test

Residing in a foreign country for an uninterrupted period that includes the period from January 1 through December 31. During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. Other rules apply, such as not making a declaration to a foreign country that you are not subject to their tax laws.

IRS.GOV: Bona Fide Residence Test

Physical Presence Test

In short, living in a foreign country for 330 days in a 12 month period. Even that simple definition can get complicated.

IRS.GOV: Physical Presence Test

Timing your departure

Naturally, you may not have a choice as to exactly when during the year you depart the US. If you depart the US and do not return, you can take the following as a general guide for how to proceed with your taxes in the year that you depart the US. Bear in mind, many other factors may affect the exact dates, such as which countries you're in and the connections you make while in them.

• Departing the US January 1 - July 31: Odds are you will qualify under the physical presence test by the June due date of your return. If you live abroad, you qualify for an automatic two month extension on your tax return, making your due date June 15 the year after the year you departed the US.
• Departing the US July 31 - October 31: Odds are you will qualify under the physical presence test if you file an extension, making the due date of your return October 15.
• Departing the US after November 1: Odds are at this point in the year, the bulk of your income will have been earned in the US. If you do continue working through November and December and you wish to exclude that income from tax, you generally have one of two options:
  • File a return for your year of departure and then amend it once you qualify under one of the two tests.
  • Apply for a special extension to a date after you expect to qualify. We strongly recommend seeking a professional to assist with this option.

More information on timing can be found through the Instructions for Form 2555: Foreign Earned Income

Applying the Foreign Earned Income Exclusion

Once you have:

• Foreign Earned Income
• A tax home in a foreign country
• Qualified under the Bona Fide Residence OR Physical Presence Test

You can exclude up to US $130,000 or foreign equivalent of Foreign Earned Income for the 2025 tax year. This is an inflation adjusted amount and will generally increase every year. For tax purposes, excluded income generally means amounts that will not be considered in the calculation of your final tax owed.

See: https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad

Other things to keep in mind

There are a litany of complicated laws that affect how US citizens are taxed on their earnings from other countries. In general, we believe most of our potential users will not run into these issues. However, you should be aware of the reporting requirements in general since the fines and consequences for non-compliance can jeopardize your status in another country.

FBAR: Foreign Bank and Financial Accounts

If you have one or multiple foreign bank accounts with a total value exceeding the equivalent of US$10,000 at any time during the calendar year, you will likely need to file a Report of Foreign Bank and Financial accounts or FBAR. Note that the amount counted towards this threshold is cumulative across all foreign bank accounts that you own. The specific threshold may vary depending on the country.

See: https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar

FATCA: Foreign Account Tax Compliance Act

FATCA is aimed at catching tax evasion by US persons with foreign financial assets. This comes into play when your foreign financial assets such as stock, ownership in trusts and certain foreign pension accounts exceed have an aggregate value over $200,000.

See: https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-us-taxpayers

GILTI: Global Intangible Low-taxed income

The global intangible low-taxed income (GILTI) tax applies to U.S. companies that own more than 50% of a foreign corporation and individual shareholders who own more than 10% of any stock in that corporation.

While we don't believe it will apply to the vast majority of our audience, it may apply to you if you move your small business to some places with lower tax rated such as Ireland, Cyprus, Bulgaria, and Hungary.

IRS information on GILTI tax and filing: https://www.irs.gov/forms-pubs/about-form-8992

A well written guide on the tax (Sadly it is not an official government source): https://tax.thomsonreuters.com/en/glossary/global-intangible-low-taxed-income#four

Student Loans as an Expat:

The bad news is that as an expat, you still have to pay your student loans. The good news is that, as an expat, you can often reduce the payment due to $0.00 if you are on (or elect be on) an income based repayment plan. This is because your AGI determines your repayment level, and the FEIE will usually reduce your AGi to $0.

This will not apply to all loans (private loans are generally not covered), or all income (such as investment income, nor will it stop interest from accumulating on unsubsidized Stafford loans ( subsidized Stafford loan interest will pause, however), but it definitely worth looking into if you have student loans, as it applies to majority of people who hold student loans.

Professional tax services

For more information, please read the relevant IRS pages and consult a professional tax service to help guide you through your specific tax situation, as there are many different aspects that come into play for which tax forms you need when.

Some tax services that come recommended through firsthand experience by US citizens abroad are:

• H+R Block (affordable self filing option to guide you through the right tax forms, similar to TurboTax): https://www.hrblock.com/expat-tax-preparation/diy-expat-tax-filing-online/
• Greenback Tax Services (includes actual accountants to consult with, good for more complicated tax situations): https://www.greenbacktaxservices.com/