Filing US Expat Taxes In 2024 – Comprehensive Guide

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.

We created this Guide to US Expat Taxes to explain taxation for US citizens abroad.

We discuss the key tax benefits for expats, how to qualify and claim them. The guide includes filing thresholds, exclusion amounts, due dates, and much more. All numbers are updated for the 2023 tax year (the return you file in 2024).

Here we cover the following:

1. US Tax Filing Thresholds
2. US Expat Tax Benefits
3. Foreign Earned Income Exclusion
4. Form 2555
5. Physical Presence Test
6. Bona Fide Residence Test
7. Foreign Housing Exclusion Or Deduction
8. Foreign Tax Credit
9. Self-Employed Expats
10. Tax Treaty Benefits
11. Foreign Bank Account Reporting – FBAR
12. Other Foreign Asset Reporting – Form 8938
13. State Taxes
14. Tax Deadlines
15. How To File US Expat Taxes From Abroad

Of course, a guide like this can only provide an overview and doesn’t replace a personalized consultation with an expat tax accountant.

If you have additional questions or to get started on your taxes, you can schedule a consultation with us.

1. 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. This also applies to Digital Nomads.

The 2024 filing thresholds are:

Thresholds are higher for taxpayers 65 and older.

If you are self-employed and had at least $400 in self-employment income, you also have to file. Furthermore, there are other circumstances where you should file a tax return, even though your income is below these thresholds.

2. 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)
• Claiming 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.

More on the FEIE, Housing Exclusion, FTC, and tax treaties below.

3. Foreign Earned Income Exclusion (FEIE)

The Foreign Earned Income Exclusion is one of the most beneficial exclusions for many Americans abroad. It can result in huge tax savings. (Some expats, however, benefit more from the Foreign Tax Credit. More about that later.)

Through the FEIE, US expats can exclude up to $120,000 of their 2023 foreign earnings from US income tax. The IRS adjusts this amount each year for inflation.

This exclusion applies to foreign earned income only. Income earned in the US is still subject to income tax. You also cannot claim the FEIE for passive income, such as interest, dividends, rental income, etc. Our Guide to the Foreign Earned Income Exclusion explains all the details.

4. Form 2555 To Claim The FEIE

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
• Bona Fide Residency Test – Having your home and strong ties in a foreign country

5. Physical Presence Test

Expats qualify for the FEIE under the Physical Presence Test (PPT) if they spend at least 330 days in a 365-day period in a foreign country or foreign countries.

This requirement is often simplified as “no more than 35 days in the US”. However, travel days to and from the US and time spent in or over international waters count as days in the US.

Fortunately, the 365 day-period does not have to be the calendar year. It can be any period that starts or ends in the tax year. For example, you could leave the US on July 1 and return on July 1 of the following year and be in a foreign country for 330 full days during this period.

This allows Americans abroad to select a timeframe that maximizes their time in foreign countries and therefore the exclusion amount they can claim under the FEIE.

New expats often request an extension to file until October 15. This gives them more time to qualify for the FEIE. More about the deadlines, and a special provision for expats, later.

6. Bona Fide Residence Test

Being a bona fide resident of a foreign country is another way to qualify for the FEIE. While the PPT is clear cut – counting days – the Bona Fide Residence Test is more subjective.

To qualify you must have your home in a foreign country and have strong ties there. No single tie or list of ties determines your resident status. Rather a collection of strong ties abroad and no ties in the US help to qualify. Strong ties include:

• Long-term lease or own home
• Family members there
• Health insurance
• Local bank accounts (keep in mind that you may have to report on the FBAR)
• Gym membership
• Church membership or other community involvement

The Bona Fide Residency offers more flexibility when it comes to spending time in the US.

7. Foreign Housing Exclusion Or Deduction And Eligible Expenses

Americans living abroad who claim the FEIE can also use the Foreign Housing Exclusion or Deduction to save on eligible housing expenses. This helps to offset the higher cost of living in many foreign countries.

In order to qualify for the Foreign Housing Exclusion or Deduction, you must qualify for the FEIE. Like the FEIE, the Housing Exclusion or Deduction is also claimed on Form 2555.

US taxpayers can deduct or exclude housing expenses above the threshold of $19,200 for 2023 (16% of the maximum FEIE), up to the applicable limit. The exact maximum amount varies depending on where you live. The standard limit is $36,000, therefore the standard maximum foreign housing exclusion for 2023 is $16,800.

Expensive cities have higher exclusion limits. The city with the highest maximum exclusion is Hong Kong with $114,300. Americans living in Singapore can deduct up to $82,900 in housing expenses, a slight increase over the prior year. And in Geneva, up to $98,300 for the 2023 tax year, which is lower than for 2022. The IRS updates the limits each year.

Eligible expenses must be reasonable housing expenses that you, your spouse, or dependents incurred as a result of living abroad.

Expenses such as personal property insurance, leasing fees, rental furniture, parking rental, and repairs are all eligible for the Foreign Housing Exclusion or Deduction.

Housing expenses that are non-essential or deemed extravagant are not eligible for the Foreign Housing Exclusion or Deduction. Mortgage payments, costs associated with domestic labor, television services, internet, telephone, and purchased furniture do not qualify for exclusion or deduction.

8. 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.

However, you cannot use the tax credit for income that you have already excluded using the FEIE. But you can apply the Foreign Tax Credit against any income that exceeds the FEIE threshold or that was not excluded originally.

Using the Foreign Tax Credit instead of the Foreign Earned Income Exclusion can often 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 at a later date when you move to a low-tax jurisdiction. Talk to an experienced expat tax accountant to evaluate which is better for your situation.

9. US Taxes For Self-Employed Expats

Self-employed expats need to know that the FEIE only excludes income from income tax. They must still pay self-employment tax on their net earnings.

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, then you can choose which country you would like to contribute to, based on your personal and tax situation. For example, in Italy, you can choose to pay the US 15% self-employment tax or the 25% Italian equivalent.

Without a Totalization Agreement, you may end up having to pay into both countries’ systems.

10. 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, Mexico, China, Japan, and even far-flung places like Kyrgyzstan. Singapore, Hong Kong, UAE, Brazil, Colombia, however, don’t have a tax treaty with the US at this time.

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.

An experienced US expat tax accountant will make sure to apply all applicable treaty benefits to your US tax return.

11. 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 value of your foreign financial accounts was greater than $10,000 at any time during the calendar 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 on April 15, however, the government grants an automatic extension to October 15.

12. 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 (video). This form is filed together with your tax return.

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.

13. 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.

The most difficult and aggressive states are California, South Carolina, New Mexico, and Virginia. Issues have also been reported with Massachusetts, Maryland, and North Carolina.

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.

14. Expat Tax Filing Dates

Generally, 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, maybe to qualify for the FEIE, you can request an extension to October 15.

Nonetheless, any tax owed should be paid by April 15 to avoid interest penalties.

In certain circumstances, a further extension until December 15 may be available at the discretion of the IRS.

Also, be aware of due dates for estimated taxes if you are self-employed or otherwise don’t have automatic withholdings.

15. How To File US Expat Taxes From Abroad

As you can see, expat taxes are more complex. However, US taxpayers living abroad can potentially take advantage of significant tax benefits, when knowing what tax provisions apply to them.

Using a standard tax software or your old domestic accountant might not be the best approach though, as they might not be familiar with international situations. If you consider keeping your old CPA, it’s best to ask them how many expat tax returns they have filed last year (our experienced team files hundreds every year).

This Guide to US Expat Taxes gives an overview of the key tax implications of being a US citizen living abroad. Of course, every situation is unique. We offer US tax consultations for expats to discuss your specific situation and tax needs and answer your questions.

To get help from our experts, schedule a consultation.