US expat citizenship-based taxation: 2026 filing guide

The core rule: The US uses a citizenship tax system. It taxes its citizens and most green card holders on worldwide income, regardless of where they live. Moving abroad does not end your US tax obligations.

• Who files: US citizens and resident aliens generally file when they meet the 2025 filing threshold for their status, but special filing rules can apply even below those amounts. For example, married filing separately generally has a $5 gross-income threshold for 2025, and net self-employment earnings of $400 or more generally require a return. See income filing thresholds.
• What's reported: All income from any source worldwide – wages, self-employment earnings, investments, rental income, pensions, and more.
• Core forms: Form 1040, Form 2555 – FEIE, Form 1116 – FTC, FinCEN Form 114 – FBAR, and Form 8938 – FATCA.

Example: A US citizen teaching English in Germany who earns a salary and collects interest from a German savings account still reports both items on a US return – even though Germany taxes that income too. Relief tools like the foreign earned income exclusion or the foreign tax credit can reduce the US tax bill, but they don't remove the filing requirement.

Instant answer: Do US expats still file in 2026?

Yes – many US expats still file a US tax return for the 2025 tax year during the 2026 filing season. The requirement depends on your gross income, filing status, and age – the same thresholds that apply to taxpayers in the US.

For 2025, a single filer under 65 generally must file if gross income meets or exceeds $15,750.

• Who must file: US citizens and green card holders whose gross income meets or exceeds the filing threshold for their status, even if all income is earned abroad.
• What counts as worldwide income: Wages, self-employment income, dividends, interest, capital gains, rental income, retirement distributions, and other taxable items – regardless of where paid or where the account is located.
• Which forms usually come first: Form 1040, plus Form 2555 or Form 1116 for double-tax relief, and FinCEN Form 114 – FBAR – if foreign account balances exceed $10,000 at any point during the year.

US citizens or resident aliens who meet the IRS abroad criteria on the regular due date get an automatic two-month extension, generally to June 15, 2026, for calendar-year returns.

Attach a short statement to your return explaining how you qualified.

If you still need more time, file Form 4868 by June 15 to extend to October 15. Interest on any unpaid tax still runs from April 15.

Which forms you need depends on your income type, account balances, and whether you own foreign entities – the US tax forms guide for expats maps each scenario to its required filings.

Key forms and thresholds

Most expat returns include Form 1040 plus one or more of these forms – the trigger depends on your income type, account balances, and filing status.

 

The two forms expats most often overlook are FBAR and Form 8938.

FBAR is easy to forget because it's filed separately from the tax return. Form 8938 catches people off guard because the thresholds differ depending on whether you live in the US or abroad.

The triggers, due dates, and differences between FBAR and FATCA are a common source of confusion – and a frequent cause of missed filings.

Citizenship-based taxation explained

Citizen-based taxation is a tax system in which the obligation to file and pay taxes follows your citizenship rather than where you live.

The US is the most prominent country that applies citizenship taxation. If you hold US citizenship or a green card, the IRS generally expects you to report worldwide income each year, claim applicable relief, and file required information returns for foreign accounts and assets.

International tax rules require US persons to report income from every country. This makes the US an outlier in international tax policy: most countries use residence-based taxation instead.

The distinction matters for expats. Under residence-based taxation, your filing obligation to a country typically ends – or narrows to local-source income – once you're no longer a resident.

Under citizen-based taxation, your US filing obligation can continue for as long as you remain a citizen or green card holder – even after decades abroad.

The practical sequence works like this:

1. Live abroad – establish tax residency in your host country under its local rules.
2. Still file in the US if required – if your worldwide gross income meets the US filing threshold for your filing status, you file Form 1040 and report worldwide income.
3. Claim relief tools when eligible – use the FEIE, FTC, or applicable treaty provisions to reduce or eliminate double taxation on the same income.

Example: An American software developer earning $95,000 in Portugal pays Portuguese income tax on that salary. Under citizenship taxation, they also file a US return reporting the same income. After claiming the foreign tax credit for Portuguese taxes paid, their additional US tax is often $0 or close to it – but the return itself is still required.

The filing obligation under CBT does not mean every US citizen abroad automatically owes additional US tax. It means they must file a return if they meet the income thresholds, and the return is how they claim the relief that typically reduces the bill.

Most expat returns share the same core set of rules, forms, and filing deadlines – what changes is which relief tools apply.

Worldwide income – what it includes

For US worldwide income tax purposes, "worldwide income" means income from any source, anywhere. The reporting rule follows source and character – not just where the money was earned or where the account is located.

Your worldwide income tax obligation does not disappear because the income was earned outside the United States.

Income categories that are generally reportable:

• Employment income: salary, bonuses, commissions, housing allowances, stock compensation
• Self-employment income: freelancing, consulting, business profits, gig work
• Investment income: interest, dividends, capital gains, mutual fund distributions
• Rental income: foreign rental properties, property sale gains
• Retirement income: many foreign pensions, annuities, IRA distributions – treaty rules can change how some items are taxed
• Other income: foreign currency gains in certain cases, some crypto/digital asset transactions, prizes, and other reportable items

Included vs. not included

 

Example: A US citizen teaching at an international school in Thailand earns a $65,000 salary and $800 in interest from a Thai bank account. Both items are reportable on their US return, and both feed into the worldwide income calculation – even though the salary may be fully excludable under the FEIE.

The distinction between earned and unearned income determines which relief tools are available for each income type.

Who it applies to – US citizens and green card holders

Citizen-based taxation generally applies to:

• US citizens, including those born abroad to a US citizen parent
• Dual citizens – holding another citizenship does not remove US filing obligations; the same rules apply to dual citizen tax situations
• Lawful permanent residents – green card holders are treated as US tax residents and subject to worldwide income reporting until they formally end that status
• Former green card holders who have not completed the formal steps to abandon residency – they may still be treated as US tax residents under the green card exit tax rules

Common exceptions and edge cases:

• Mid-year status changes: If you became a US resident or gave up your green card during the year, you may be a dual-status filer – part of the year as a resident, part as a nonresident. Different rules apply to each portion.
• Nonresident aliens with US-source income: Some non-citizens who do not meet the green card or substantial presence test may still have limited US filing obligations on US-source income, but they fall under a different set of rules.
• Renounced citizens: A US citizen who formally renounces faces a final tax return, potential exit tax under IRC 877A, and Form 8854 reporting. Renunciation does not retroactively remove past filing obligations.

What US expats must file each year?

Annual expat filing is easier to manage when you break it into tiers: forms you almost always need, forms that commonly apply, and forms that come up in specific situations.

Almost always required:

• Form 1040 – US individual income tax return, the base return reporting worldwide income
• Schedule B – often required when you have foreign bank accounts; Part III asks about foreign accounts and trusts

Often required:

• Form 2555 – FEIE – if you want to exclude qualifying foreign earned income, up to $130,000 (2025)
• Form 1116 – FTC – if you paid foreign income taxes and want to credit them against US tax
• FinCEN Form 114 – FBAR – if aggregate foreign financial account balances exceeded $10,000 at any time during the year
• Schedule C – if you're self-employed abroad
• Schedule SE – for self-employment tax; check whether a totalization agreement applies

Sometimes required:

• Form 8938 – FATCA – if specified foreign financial assets exceed the applicable threshold
• Form 8621 – if you own non-US pooled investments often treated as PFICs, such as many foreign mutual funds
• Form 5471 – if you own 10% or more of a foreign corporation or meet certain officer/director/control tests
• Form 3520 – if you received foreign gifts or bequests above threshold amounts
• Schedule D – if you have capital gains from foreign investments
• Schedule E – if you have foreign rental income

E-filing vs. mailing: Most expat returns can be e-filed with compatible software or through a preparer. FBAR is filed electronically through FinCEN's BSA E-Filing System – it is not attached to Form 1040.

Each of the forms above has specific thresholds and instructions – the expat tax forms checklist includes the filing triggers and common mistakes for each one.

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What forms are commonly required beyond Form 1040?

Once you've confirmed that you need to file a US return, the next question is which additional forms apply. Here's a quick filing map for the forms that most commonly affect expats:

 

This list isn't exhaustive. Expats with foreign corporations, trusts, PFICs, or large gifts from foreign persons may need additional forms – Form 5471, Form 3520, Form 8621, among others.

If your situation includes any of these, the filing complexity increases – and the penalties for missed information returns can be significant.

The ultimate tax documents checklist can help you confirm you haven't missed anything before filing.

Residency-based vs citizenship-based taxation

Most countries tax individuals based on where they live. The US taxes based on who they are. This is the fundamental difference between residence-based taxation and citizen-based taxation.

 

Under residence-based taxation, losing residency can reduce or end your ongoing filing obligation to that country.

Under US citizenship taxation, the filing obligation typically follows you for as long as you remain a citizen or green card holder – which is why expats often maintain two parallel tax systems.

The US applies taxation worldwide – meaning all income, regardless of source country, must be reported.

Countries that use residence-based taxation include Canada, the UK, Australia, Germany, and Singapore, among many others. Rules differ by country, and some have deemed-residency provisions or tie-breaker tests that can complicate the picture.

The difference between country of domicile and country of residence can affect which tax rules apply in both systems.

How US expats reduce double taxation

The main concern for most expats under citizenship-based taxation isn't the filing itself – it's the risk of paying tax on the same income to two countries.

In practice, the US global tax system provides tools that reduce or eliminate double taxation in most cases: the foreign earned income exclusion, the foreign tax credit, and – where applicable – tax treaty provisions.

Each tool covers different income types and works best in different situations:

• FEIE – Form 2555 reduces your US taxable income by excluding up to $130,000 (2025) of qualifying foreign earned income. It works well when you live in a low-tax or no-tax country, and your income is primarily from employment or self-employment. It does not cover investment income.
• FTC – Form 1116 gives you a dollar-for-dollar credit for eligible foreign income taxes you've already paid. It often fits best when you live in a high-tax country or when you have investment income – dividends, interest, capital gains – that FEIE can't exclude.
• Tax treaties can affect how specific types of income are sourced or taxed – for example, certain pensions, government service income, or residency tie-breakers. Treaties typically help reduce double taxation through specific rules and credits, but they usually do not eliminate the US filing obligation for citizens.

You can use both FEIE and FTC on the same return, but not on the same income. If you exclude income under FEIE, you cannot also claim a foreign tax credit on that excluded income.

Quick comparison: FEIE, FTC, and tax treaties

FEIE works best for earned income in low-tax countries, FTC for high-tax countries or investment income, and treaties for specific income types like pensions.

 

High-tax-country employee example: A US citizen earning $120,000 in the Netherlands pays Dutch income tax at a rate above the US rate on that income. FTC typically works best here – the foreign tax credit can offset most or all of the US tax, and any excess credits may carry forward to future years. FEIE would also apply to exclude earned income, but excess Dutch taxes on excluded income can't generate an FTC.

Low-tax-country contractor example: A US freelancer earning $90,000 in the UAE pays no local income tax. FEIE is the primary tool – it excludes the earned income from US tax. FTC is of limited use because there's little or no foreign tax to credit. Self-employment tax is still owed separately.

The choice between FEIE and FTC depends on your income mix, tax rate, and whether you have non-earned income.

Choosing between FEIE and FTC? We'll model both options for your situation.

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FEIE vs FTC: When each tends to fit

The right tool depends on your income type, the tax rate where you live, and whether you have investment income alongside wages.

 

Practical notes:

• Self-employment income is eligible for FEIE, but the exclusion only reduces income tax. The 15.3% self-employment tax – Social Security and Medicare – is calculated separately. If a totalization agreement exists between the US and your country, you may be exempt from one country's social security system. The Social Security wage base for 2025 is $176,100.
• The foreign housing exclusion on Form 2555 can exclude or deduct qualifying housing expenses above a base amount. For 2025, the base is $20,800 – 16% of the FEIE maximum – and the default limit is $39,000. Some high-cost locations have higher caps per IRS Notice 2025-16.
• Foreign tax payment timing can affect FTC – the credit is generally available in the year the tax is paid or accrued, depending on your election.

Whether to take the foreign tax credit or the deduction is a separate decision that depends on how much foreign tax you paid relative to your US liability.

Countries that tax citizens abroad

The United States and Eritrea are the two countries most commonly cited for taxing citizens on worldwide income regardless of where they live. The list of citizen-based taxation countries is short.

The US system is by far the more detailed of the two. It requires full income tax returns, information reporting for foreign accounts and assets, and participation in international tax agreements. Eritrea applies a flat 2% diaspora tax on income earned abroad, which is a much narrower model.

Most countries that tax worldwide income do so under residence-based systems – residents report worldwide income, while nonresidents are generally taxed only on local-source income.

In those systems, leaving the country and ending tax residency typically ends the worldwide reporting obligation. Under US citizen-based taxation, it does not.

A few countries have limited citizenship-based elements:

• Hungary: domestic law treats Hungarian citizens as tax residents by default, which can create a CBT-like result. The US-Hungary tax treaty was terminated effective for tax years beginning in 2024, so treaty tie-breaker relief is no longer available to dual citizens in this situation – domestic Hungarian rules (and, on the US side, the foreign tax credit) are what's left to manage any overlap.
• Myanmar: since October 2023, Myanmar has imposed income tax on salary earned abroad by nonresident Myanmar citizens in certain circumstances.

These are narrow exceptions, not full CBT systems comparable to the US. The US and Eritrea are prominent examples of tax systems that follow citizens abroad, but they are not the only countries with citizenship-linked taxation. Myanmar also taxes certain foreign income of nonresident citizens. These systems differ substantially in scope, rates, and reporting requirements.

NOTE!: Claims about foreign countries' tax systems are based on publicly available information and may change. The rules above do not affect your US filing obligation – under US law, the IRS filing requirement for US citizens and green card holders is independent of what any other country does.

Common expat scenarios

The right combination of forms and relief tools depends on your income mix, the tax rate where you live, and the size of your foreign account balances. Here are four common patterns.

Scenario A: High-tax country wages

Profile: Salaried employee in a high-tax country – e.g., France, Germany, the UK. This is one of the most common profiles among TFX clients.

• Filing issue: You owe foreign income tax at a rate that often exceeds the US rate on the same income.
• Likely relief path: FTC on Form 1116 is typically the better fit. The foreign tax credit offsets your US tax liability, and excess credits may carry forward to future years.
• Watch out: If you're covered under your host country's social security system and a totalization agreement exists, you generally won't owe US Social Security/Medicare tax on those earnings. Verify coverage before filing.

Scenario B: Low- or no-tax country wages

Profile: Employee or contractor in a country with little or no income tax – e.g., UAE, Qatar, the Bahamas. We file a large number of returns from the Gulf states each year.

• Filing issue: You still report worldwide income on Form 1040, but there may be little or no foreign tax to credit.
• Likely relief path: FEIE on Form 2555 is often the primary tool. If your qualifying earned income is under $130,000 (2025), FEIE may eliminate the US income tax.
• What to verify before filing: Confirm your tax home is in the foreign country, document your qualifying period, and check whether the housing exclusion adds further benefit.

Scenario C: Wages + investments

Profile: Salaried expat who also holds foreign brokerage accounts with dividends, interest, and capital gains. Many TFX clients fall into this category – especially those who have lived abroad long enough to accumulate local investments.

• Wages: May be partially or fully excludable under FEIE.
• Dividends and interest: FEIE does not apply – these are unearned income. If foreign taxes were paid on this income, FTC on Form 1116 may apply.
• Capital gains: Reported on Schedule D. FTC may apply if foreign tax was paid on the gains.
• Note: When you have both earned and investment income, the FEIE/FTC decision becomes more layered. Many expats in this position use FEIE for wages and FTC for investment income.
• Records to gather: Foreign employer statements, brokerage statements showing dividends/interest/gains, documentation of foreign taxes paid on each income type.

If you sold foreign investments during the year, Form 8949 is used to report capital gains and losses from those transactions.

Scenario D: Foreign accounts over $10,000

Profile: Expat with multiple foreign bank or brokerage accounts whose combined balances exceeded $10,000 at some point during the year. This applies to the majority of our clients – most expats with a local checking and savings account cross the $10,000 aggregate threshold quickly.

• Filing issue: This typically triggers FBAR reporting, and depending on asset values, may also trigger Form 8938.
• What to check:
  1. Balances: The $10,000 FBAR threshold is based on the aggregate highest balance across all foreign financial accounts at any point during the year – not the year-end balance, and not just accounts that earned income.
  2. Ownership: Accounts where you have financial interest or signature authority count, including joint accounts and some business accounts.
  3. Signature authority: If you can control the funds in a foreign account even without owning it, that account may be reportable.
• Penalties for missed FBAR filing can be significant. The non-willful penalty is up to $16,536 per report per year – 2025, inflation-adjusted. Willful failures carry substantially higher penalties. Following the Supreme Court's 2023 decision in Bittner v. United States, a non-willful FBAR reporting violation is generally penalized per report rather than per account. Willful FBAR reporting penalties can still apply on a per-account basis. If you have unfiled FBARs from prior years, remediation options exist.

Conclusion

Citizen-based taxation means US citizens and most green card holders report worldwide income to the IRS each year – even when they live and pay taxes abroad. The filing obligation follows your citizenship, not your address.

For the 2025 tax year filed during the 2026 season, the key figures are: FEIE maximum of $130,000 per qualifying person, FBAR threshold of $10,000 in aggregate foreign account balances, and Form 8938 thresholds that commonly start at $200,000/ $300,000 for single/MFS filers living abroad.

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