Do I Need to File U.S. Taxes From Abroad?

Yes, in most cases you do.

If you are a U.S. citizen or Green Card holder, you usually must file a U.S. tax return each year if your income is over the filing limit. It does not matter where you live. Moving abroad does not end your duty to file Form 1040.

You must report worldwide income

If you live outside the U.S., you still need to report your worldwide income on your U.S. tax return.

This can include:

• Salary or self-employment income earned abroad
• Rental income from property in the U.S. or overseas
• Dividends, interest, and capital gains
• Pension income, freelance income, and other foreign income

Even if another country already taxed that income, you still need to report it to the IRS.

The FEIE can lower your U.S. tax

If you qualify, the Foreign Earned Income Exclusion, or FEIE, can reduce your U.S. tax bill.

For the 2025 tax year, the maximum exclusion is USD 130,000 per person.

To claim it, you must:

• Have foreign earned income
• Have a tax home in a foreign country
• Meet either the bona fide residence test or the physical presence test

The FEIE only applies to earned income, like wages or self-employment income. It does not apply to passive income like dividends, interest, capital gains, or rental income.

The Foreign Tax Credit can also help

The Foreign Tax Credit, or FTC, is another way to avoid double tax.

It gives you a credit for income tax paid to a foreign country on the same income. That credit can reduce the U.S. tax you owe.

Key points:

• It can apply to earned income and passive income
• It often works well in higher-tax countries
• It is claimed on Form 1116

You may be able to use both

Many Americans abroad use both the FEIE and the FTC.

A common approach is to:

• Use the FEIE for part of your foreign salary, up to the limit
• Use the FTC for income above that limit and for passive income

You cannot use both on the same income. The split needs to be done with care.

Bottom line

Living abroad does not end your U.S. tax filing duty.

But in many cases, the FEIE and FTC help stop the same income from being taxed twice. For many expats, the bigger risk is not double tax. It is missing a filing or failing to claim the right tax break.