Thousands of Americans have chosen to relocate to or retire in the Philippines. The lifestyle is laid back, the beaches are stunning, the digital infrastructure is excellent, and the cost of living is affordable. What’s less relaxing, however, is the annual obligation to still file US taxes.
Even while living abroad, every American citizen or Green Card holder is required to file US taxes and report their worldwide income every year. Add Philippine tax rules into the mix, and it’s easy to feel confused or get it wrong.
In this article, we provide an overview of what American expats in the Philippines need to know about filing US taxes.
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Do American expats in the Philippines need to file US taxes?
The US has a citizenship-based taxation system, rather than one based on residency like most other countries. This means that as long as you hold a US passport or a Green Card, you have to file a US tax return every year if your income exceeds the minimum IRS thresholds.
The thresholds start at just $400 of self-employment income, or just $5 of any income if you’re married filing separately.
You must report all of your income from employment, self-employment, rental properties, investments, pensions, and even Social Security and alimony – everything – no matter where in the world it was earned. Even when you owe no US tax, failing to file can still lead to missed filing penalties, which in turn can lead to issues with immigration, loans, or passport renewals.
Filing also allows you to take advantage of exclusions and credits designed to reduce or eliminate your tax bill as an expat, which the IRS otherwise assumes you owe US income tax on your global income, regardless of tax treaties or if you pay foreign taxes overseas.
You may also have to file state taxes, depending on the rules and any maintained ties in the state where you last lived.
The US – Philippines tax treaty
The tax treaty between the United States and the Philippines was signed in 1976. It doesn’t prevent Americans in the Philippines from filing in either country, but it clarifies which country has taxing rights over certain types of income.
The treaty contains provisions covering dividends, interest, royalties, pensions, business profits, and capital gains. It sets guidelines for how each type of income is taxed depending on the country of source and the country of residence.
This treaty can be helpful if you are earning investment or business income in the Philippines and want to reduce US tax on that same income.
To claim treaty benefits, you must disclose the treaty position on Form 8833 when filing your US tax return. If you do not file this form, the IRS will assume the treaty does not apply to your situation.
For most expats, the tax treaty is less useful than other tools like the Foreign Earned Income Exclusion or the Foreign Tax Credit, which offer more practical ways to reduce tax bills.
Philippine tax residency
Your tax status in the Philippines depends on how long you stay in the country within a calendar year. If you spend more than 180 days in the Philippines, you are considered a resident for tax purposes.
Tax residents pay Philippine income tax on income earned within the Philippines. The tax is progressive, reaching up to 35 percent depending on income level. Income from foreign sources, like a US-based job or pension, is not taxed by the Philippine government if you are not a Philippine citizen.
If you are in the Philippines for less than 180 days, you are considered a non-resident alien. Non-residents pay a flat 25 percent tax on income earned within the country, with no deductions allowed. Any income earned outside the Philippines is ignored for local tax purposes.
The Philippines does not tax US Social Security income, which is helpful for retirees who have made the country their home.
Reducing double taxation
The Foreign Earned Income Exclusion (FEIE) allows qualifying Americans to exclude a set amount of foreign-earned income from US taxation each year. For 2025, expats can exclude up to $130,000 of their earned income (not passive income) from US tax. To qualify, you must either spend at least 330 full days abroad within 12 months or prove bona fide residency in another country.
Alternatively, the Foreign Tax Credit allows you to offset your US tax liability by the amount of income tax you paid to the Philippines. If you paid tax on a local salary, business income, or rental property, those payments can usually be credited against your US taxes.
Some expats use both of these provisions – the FEIE for wages and the Foreign Tax Credit for other income. Together, they often reduce US tax bills to zero, while keeping you fully compliant.
Note that you have to claim these provisions by filing the relevant forms.
What US expat retirees in the Philippines need to know
US retirees in the Philippines must file annual US tax returns reporting global income, including pensions, IRAs, annuities, and Social Security. While the Philippines does not tax US Social Security or most foreign-sourced retirement income, the IRS may tax it depending on your total income.
Roth IRA distributions are typically tax-free; traditional IRA or 401(k) withdrawals are usually taxable. If you earn local income, such as consulting or rental income, you may owe Philippine tax, but you can normally claim a US Foreign Tax Credit.
Even with modest income, retirees must file FBARs if the combined values of their foreign accounts exceed $10,000 in total value at any point during the year. FATCA (Form 8938) may also apply to larger foreign asset holdings.
Planning IRA withdrawals, converting to Roth accounts before moving abroad, or coordinating pension distributions can reduce future tax liability. Filing remains mandatory regardless of age or income level.
For entrepreneurs and digital nomads
Self-employed expats in the Philippines, including digital nomads, must report their global income and also pay US self-employment tax (15.3%) on net earnings, even if they qualify for the Foreign Earned Income Exclusion, which doesn’t reduce self-employment tax.
Owning a Philippine business can trigger complex IRS reporting. Americans with foreign corporations or partnerships may need to file Forms 5471, 8865, or 8858. Failing to file carries steep penalties.
Reporting foreign accounts and assets
Americans in the Philippines may also need to report their foreign financial accounts to US authorities.
If the total value of all your foreign accounts exceeds $10,000 at any point in the year, you must file the Foreign Bank Account Report (FBAR). This includes checking accounts, savings, investment accounts, and even joint accounts and any business accounts you have control over.
In addition, if your foreign financial assets exceed certain thresholds (starting at $200,000 for single filers living abroad), you must also file Form 8938 under FATCA (the Foreign Account Tax Compliance Act).
These forms do not imply that you owe US tax, they’re just for reporting, but failing to file them carries steep penalties. Even unintentional mistakes can result in thousands in fines.
Deadlines and extensions
The standard IRS filing deadline is April 15. However, if you live outside the US on that date, you receive an automatic two-month extension to June 15.
If you need additional time beyond that, you can file Form 4868 to extend your deadline to October 15.
The FBAR is due by April 15 as well, but it comes with an automatic extension to October 15.
Filing late, even with no tax due, can still result in penalties. Staying ahead of these deadlines is crucial.
Catching up if you’re behind
If you have lived abroad for a while but never filed US tax returns, the IRS offers a way to catch up without penalties.
The Streamlined Filing Compliance Procedures allow you to file the last three years of returns and six years of FBARs. You must certify that your failure to file was non-willful—that is, due to misunderstanding or neglect, rather than deliberate avoidance.
Once accepted, you can return to full compliance with no late fees or fines. This is the safest and cleanest way to fix past mistakes and avoid future risks.
Staying compliant long term
Once you’ve caught up, staying compliant is easier than many expats expect. Most Americans in the Philippines don’t end up owing US tax thanks to exclusions, credits, and the lack of local tax on foreign income.
Still, you need to file each year, report your accounts, and keep records of income, time spent abroad, and any taxes paid locally.
Getting organized once, then keeping things updated annually, can save you from stress, penalties, and overpaying down the road.
FAQ: US taxes for Americans in the Philippines
1. Do I have to file US taxes if I live full-time in the Philippines?
Yes. As a US citizen or green card holder, you must file a federal tax return each year if your income exceeds the IRS filing threshold, even if you live abroad permanently and earn no US income.
2. Does the Philippines tax US Social Security benefits?
No. The Philippine government does not tax US Social Security payments. However, the IRS may tax part of your benefits based on your total worldwide income.
3. Can I avoid paying US taxes by becoming a resident of the Philippines?
No. US tax obligations are based on citizenship, not residency. Even as a legal resident of the Philippines, you still need to file US tax returns and report worldwide income.
4. What tax breaks can help expats reduce or eliminate US taxes?
The Foreign Earned Income Exclusion and Foreign Tax Credit are the two main tools expats use. They can significantly reduce or eliminate your US tax liability if you qualify.
5. What happens if I haven’t filed taxes in years while living abroad?
You may qualify for the IRS Streamlined Filing Procedures, which let you catch up without penalties. You’ll need to file the last 3 years of returns and 6 years of FBARs and certify your noncompliance was non-willful.
The Philippines offers a peaceful lifestyle, warm culture, and affordable living. With the right advice and strategies, getting your US expat taxes compliant and optimized can be easy, too.
Compliance isn’t just about avoiding penalties; it also keeps your financial life flexible, protects your passport, and gives you peace of mind.
You moved abroad for a better life or overseas adventure – ensure your taxes don’t prevent you from enjoying it fully.
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