US Taxes for Americans Living Abroad: Who Files, What Counts, When

The rule that surprises everyone

The United States taxes its citizens — and Green Card holders — on their worldwide income, regardless of where they live. Almost every other country taxes people based on residence; the US is the notable exception. Move to London, earn a salary in pounds, pay UK tax through PAYE, and the IRS still expects an annual return reporting that income.

This is a filing obligation before it is a paying obligation. The system contains generous mechanisms that prevent most double taxation, which is why the typical American abroad owes the IRS little or nothing. But those mechanisms only work when they are claimed on a return. Silence claims nothing.

Who has to file

You must file a US federal return if your gross income exceeds the filing threshold for your status — thresholds that are set without any reference to where you live. Two triggers catch expats in particular:

• Married filing separately: the threshold is just $5 of gross income. Many Americans married to non-Americans file this way, which means almost any income at all creates a filing requirement.
• Self-employment: net self-employment earnings of $400 or more require a return, whatever your other circumstances. See our guide for the self-employed abroad.

Worldwide income means exactly that: UK salary, freelance income, bank interest, dividends, rental profits, capital gains — all reportable in US dollars on a US return, even when the same income is fully taxed in the UK.

FEIE and the Foreign Tax Credit: the two main tools

Two mechanisms do most of the work of preventing double taxation.

The Foreign Earned Income Exclusion (FEIE) lets qualifying taxpayers exclude foreign earnings from US tax — up to $130,000 per person for 2025, an inflation-adjusted cap. You qualify by meeting either the physical presence test (330 full days outside the US in a 12-month period) or the bona fide residence test. It applies only to earned income — salary and self-employment — never to investment income or pensions.

The Foreign Tax Credit (FTC) takes a different approach: instead of excluding income, it credits the foreign income tax you have already paid against your US tax on the same income. Where the foreign rate is higher than the US rate — usually the case in the UK — the credit can eliminate US tax entirely, and unused credits carry forward for up to ten years.

For Americans in high-tax countries the credit is often the stronger tool, and it preserves eligibility for certain child-related credits that the exclusion can reduce. But the right answer depends on your facts, and switching between the two has consequences — this is the single most common thing we are asked to untangle.

Deadlines when you live abroad

Americans overseas get more time to file, not more time to pay:

• 15 April — the standard deadline, and the date interest starts on any unpaid balance
• 15 June — automatic two-month extension for taxpayers living abroad; no request needed
• 15 October — available by filing an extension request

The FBAR, your foreign bank account report, runs on its own track: due 15 April with an automatic extension to 15 October.

Why most expats owe little — and why filing still matters

Put the pieces together and a pattern emerges: UK tax rates generally exceed US rates, the FTC or FEIE soaks up the liability, and the typical US return from a UK-resident American shows nothing due. So why does the filing matter?

Because the benefits are elective and the penalties are not. Exclusions and credits exist only on a filed return. Information reports — the FBAR and Form 8938 — carry penalties that have nothing to do with tax owed. And an unfiled return leaves the statute of limitations open indefinitely, meaning the IRS can raise questions about that year forever.

If you are behind, there are well-trodden, penalty-managed routes back — starting with the Streamlined Foreign Offshore Procedures. The system is genuinely forgiving to people who come forward, and genuinely unpleasant to people it finds first.