Taxes for US Citizens Living Overseas

Are you a US citizen who is living overseas? Are you aware that you have to pay taxes for US Citizens living overseas? No, don’t worry because, at USTAXFiling, we will give you all the updates regardless of where you stay about income tax returns. Continue to read till last and follow USTAXFiling for US expat’s tax updates now!

If you are a US citizen staying overseas, income taxes may seem like a no-brainer. If you have been living abroad for years, you will be shocked to know that the IRS (Internal Revenue Service) expects income tax returns from US citizens who earn a specific amount of money, regardless of where they stay. So, you should ask, why do you have to pay US income taxes if you stay overseas? You must find out about your income taxes as an American living abroad.

Major Facts

  • If citizens of the United States fail to file US income taxes while living overseas, they might incur interest rates, fines, their passport may not be renewed, and other possible legal issues.
  • The only way to eliminate submitting a US income tax return and paying US taxes overseas under tax legislation is to renounce your citizenship in the United States.
  • Regardless of where you stay, if you are a US individual, you should file a US federal income tax return and pay US income taxes on your income worldwide.

Do American Citizens Living Overseas Have to Pay Income Taxes?

A big Yes! The United States is among the few countries that tax citizens no matter where they stay across the globe. If you are an American living overseas, you should file a US federal income tax return and pay US income taxes on your worldwide income no matter where you reside. In simple terms, you are subject to the same regulations regarding income taxation as individuals living stateside.

Why Americans Staying Overseas Still Pay US Income Taxes: Citizenship-Based Taxation

The United States takes an approach to taxing an individual’s income. Several countries use one of the two tax systems: Residence-based and territorial-based taxation.

  • Under the taxation of residence, the country taxes local residents on income earned from both foreign and local sources. For non-residents in these countries, only income that is earned locally is taxed, the same as the territorial-based system.
  • In a territorial-based income taxation system, the country taxes people only on income from resources earned inside that country’s borders.

The United States is among the three countries that impose citizenship taxation. The other countries are North Korea and Eritrea. Under Citizenship taxation, citizens are taxed on their income worldwide regardless of where they reside.


Few countries have no income at all, such as Monaco, the Bahamas, and Bahrain. Several expats prefer to move to these income-tax-free countries to reduce their annual tax bills. But it does not get them out of owing taxes to the US government.

What Taxes Do You Have to Pay If You Work Abroad?

In the US income tax system, foreign income is taxed at the marginal rate as any income earned inside the country. It means that as an American staying overseas, you have to file a United States federal income tax return this year if your total, regardless of where the income was earned and in what currency, exceeds any of the income criteria:

  • For citizens who file as married filing jointly:
  • $28700 if both spouses are above 65 years or older
  • $27300 if any of the spouse is under 65 and another is 65 years or older
  • $25900 if both spouses are under 65 years
  • For citizens who are filing income tax as single:
  • $14700 if 65 years or older
  • $12,950 if under 65 years
  • For citizens who file as married separately: $5 it is really $5 to be paid
  • For citizens who file as self-employed for them, $400
  • For citizens who file as an eligible surviving spouse with a dependent kid:
  • $27,300 if 65 years or older
  • $25,900 if under 64 years old
  • For citizens who file as a household head:
  • $21,150 if 65 years or older
  • $19,400 if under 65 years older

Even if you have not stayed in the United States at any point during the year and have earned your income in a foreign nation, the Internal Revenue Service still demands that you file an income tax return. 


Based on where you reside before moving abroad, you have to file a state income tax return. It might complex your yearly tax obligations. If you are not sure of whether you must file a state income tax return, you must consult an expat tax expert.

How Will You Eliminate Paying US Taxes Overseas?

Depending on the United States income tax regulations, the only method to eliminate filing a United States income tax return and paying US taxes overseas is to renounce your citizenship in the United States. Renouncing your citizenship in the United States is a permanent and serious matter that must not be taken lightly. Before deciding on this option, you should know all the implications and needs of citizenship renunciation. 

As long as you are a green card holder or citizen of the United States, you should file an income tax return yearly and pay the necessary taxes while staying overseas. Also, it is possible to eliminate double taxation and decrease your US tax bill using deductions, special tax credits, and exclusions that are available to Americans staying overseas.

How do you eliminate double taxation on your foreign income?

One problem that comes under a citizenship taxation system is that a person may theoretically be doubly taxed on income- both by the US and their country of residence. This case is relevant for an American staying overseas full-time who is not eligible as a resident in other local tax systems.

To assist you in eliminating this situation, the US income tax code includes a provision known as the FEIE (Foreign earned income exclusion). Under the FEIE, expats are allowed to exclude $112,000 of income earned overseas from their tax obligation in the United States.

Another provision to assist you in eliminating double taxation is the FTC (Foreign tax credit). It provides Americans a dollar-for-dollar tax credit for the income taxes they owe or pay to a foreign government. What makes this provision complicated is that it implies only a specific income type, and there are considerations related to foreign countries. 

The United States has tax treaties with countries worldwide that assist in preventing double taxation for citizens. These treaties set out how much income will be income taxed by every country and consider that country has the right to tax specific income types.

What Happens If US Citizens Don’t File Their Income Taxes While Staying Overseas?

Citizens of the United States who don’t file US income taxes while staying overseas may not get their passports renewed and might face issues, criminal charges, or even interest costs. The Internal Revenue Service charges fines for both late payments and late filing. If your lack of filing is willful, it means that you knowingly eliminated your US tax needs while staying overseas- then more severe legal issues may arise.

  • Failure to pay charges:

0.5 percent of the unpaid income taxes for every month the income tax payment is late up to 25 percent

  • Failure to file charges:

Five percent of the unpaid taxes for every month, the income tax return is late up to 25 percent. If more than two months late, there is a minimum charge of either $450 or 100 percent of the income tax shown because of the return, whichever is less.

Also, the Internal Revenue Service provides a way for Americans overseas to get caught up penalty-free if they don’t know they have to file US income taxes living abroad. Regardless of how many years you have missed, the streamlined filing compliance process only needs you to file the past three years of federal income tax returns and the previous six years of Financial bank and account reporting, making it simpler and less expensive to become compliant. 

What Else Is Needed for US Taxes Living Overseas? 

When you file your US expat income taxes, there are several items you have to report in addition to your earned income. The Internal Revenue Service needs you to disclose your foreign assets and accounts that cross a specific value threshold. Also, your retirement contributions in foreign retirement accounts might be tax-deferred and can be taxable. If you have a registered company outside the United States, there are many forms you might file each year to eliminate potential charges starting at $10,000 for every foreign company every year.

Ensure to familiarize yourself with the additional tax criteria for US citizens living overseas:

  • Tax regulations for passive foreign investment companies
  • Foreign bank account reporting
  • Foreign Account Tax Compliance Act

When it comes to filing US income taxes while residing overseas, it is necessary to know everything you have to report in your income tax filing.

Moved Overseas Recently and Have Questions about Your US Expat Taxes. We’re Here to Assist!

In this article, we have helped you to know your income tax obligations in the US as an American staying overseas. Our tax experts at USTAXFiling are highly skilled and have years of experience to help you with income tax filing. Our tax experts ensure to discuss all your doubts and resolve all the problems related to income tax filing at the earliest. Also, our expat tax services at USTAXFiling ensure you take care of your income tax filing while you can sit back and relax. Call USTAXFiling right away for US tax filing now!

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