Living abroad is no longer merely a pipe dream for many Americans; it’s a rapidly increasing reality. Whether for a better work-life balance, lower cost of living, or just for the thrill of a new cultural scene, US citizens are setting up roots everywhere in record numbers.
But with the thrill of foreign living comes one thing that never gets a break: US taxes. The US is one of the few nations on the planet that taxes its citizens regardless of where they reside. So, before you pick up your passport and board a flight, you need to know how moving affects your taxes.
Where Are Americans Moving in 2025?
Each year, a handful of nations are expat magnets. Some attract remote workers, some retirees, and others are just. easy to love. Here’s what’s hot:
- Portugal: Mild climate and friendly residency schemes keep Portugal number one, particularly for retirees and remote workers.
- Mexico: A little closer to home, it promises a lower cost of living, good healthcare, and limitless tacos. What’s not to adore?
- Australia: Adventure and structure in one for those who desire both.
- UAE: For those working in tech, finance, or startups, Dubai and Abu Dhabi provide attractive paychecks and no tax on income.
- Spain & Thailand: Lifestyle enthusiasts, digital nomads, and fans of long lunches love both.
- Japan: Excellent for educators and tech workers willing to adopt a completely different pace of life.
All these nations have their advantages, but none of them waving a magic wand that removes your US tax burden.
The Complexity of US Taxation Overseas
Moving abroad doesn’t erase your tax responsibilities. For U.S. citizens living overseas, the IRS still expects full disclosure of global income—no matter how long you’ve been away or where you currently reside. This obligation lies at the core of what makes U.S. expat tax filing so complicated for many Americans abroad.
Filing from outside the United States is rarely as simple as submitting a single form. Expatriates often encounter a tangle of reporting requirements that go far beyond Form 1040. From foreign bank accounts to international investments, the documentation involved can quickly overwhelm even financially savvy individuals. Here’s what most expats typically need to file when dealing with complicated U.S. expat tax requirements:
- Form 1040 – The standard federal income tax return that every U.S. citizen must file, regardless of location.
- FBAR (FinCEN Form 114) – Required if you held over $10,000 across all foreign bank accounts at any point during the year.
- FATCA (Form 8938) – Discloses specified foreign financial assets that exceed IRS thresholds.
- Form 2555 – Lets you claim the Foreign Earned Income Exclusion (FEIE), reducing taxable income if you meet residency and income criteria.
- Form 1116 – Applies if you want to claim the Foreign Tax Credit (FTC) to avoid double taxation on the same income.
These aren’t optional forms—they’re part of the U.S. government’s rigorous approach to international tax enforcement. Misreporting or failing to file could result in stiff penalties, even if you genuinely didn’t know you were out of compliance.
Whether you’re newly expatriated or have lived abroad for years, don’t underestimate the intricacies of the IRS’s global reporting rules. U.S. expat tax filing is a legally binding responsibility—and one that demands attention to every form, threshold, and deadline.
Streamlined Tax Amnesty: A Lifeline for Non-Compliant Expats
If you’ve been abroad and 3 or more years have passed without filing taxes because you didn’t realize you still had to file US taxes, take heart. Lots of American expats mistakenly think they’re exempt when they depart from the U.S. That’s where the Streamlined Filing Compliance Procedures enter the picture.
This IRS initiative is meant to allow expats to catch up on past-due penalties-free tax returns. If you can attest that your failure to file was non-willful (i.e., it was an error and not intentional), the streamlined process allows you:
- File the last three years of tax returns
- File the last six years of FBARs
- Avoid failure-to-file and failure-to-pay penalties
It’s one of the best options available to get back on track without triggering an audit or large fines. Many expats don’t realize this option exists until they speak with a tax professional familiar with international filing.
Why Working with a Tax Pro Is Worth It
Even if you are current, expat tax regulations are subject to frequent changes. Treaties with nations, new filing thresholds, and varied reporting requirements for foreign businesses or pensions can change from year to year. A US tax professional familiar with expat matters can:
- Assist in lowering your tax bill legally through credits and exclusions
- Ensure compliance with all IRS regulations
- Help you correct past errors or omissions
- Provide peace of mind so you can concentrate on your new life abroad
Final Thoughts
Moving to a foreign country is a doorway to amazing possibilities. But don’t let taxes catch you off guard. Understanding your filing requirements and your choices if you’ve fallen behind by a step or two can save you from stress, time, and expenses.
Important Note: This content is intended to provide general tax guidance for US expats and is not endorsed or guaranteed by this website or website owners. The article is not a substitute for personalized tax advice. Tax laws are subject to change and may vary by jurisdiction. Please consult a licensed tax advisor or CPA for advice tailored to your circumstances.
Written by: Michael Baquing – Expat US Tax
