Part of the U.S. Expat Tax Series by Tax.Travel

This article is part of Antravia’s U.S. Expat Tax Series - a collection of practical guides for Americans living or working abroad. Whether you’re a long-term expat, digital nomad, or remote entrepreneur, these resources explain how to stay compliant with the IRS while reducing double taxation and managing your finances internationally.

How to File U.S. Taxes while living abroad | 2025 Expat Tax Guide

Introduction

Tax.Travel by Antravia helps U.S. citizens and Green Card holders living abroad understand how to meet their tax obligations without overpaying or missing key reliefs. Whether you’re a full-time expat, a remote worker, or a digital nomad, you’re still required to file an annual U.S. tax return. The good news is that most Americans abroad don’t end up paying tax twice, but provided they file correctly and claim the right exclusions or credits.

This 2025 guide explains how the U.S. tax system works for citizens overseas, what forms you need, and how to protect yourself from penalties. This guide draws from the latest IRS updates as of late 2025, including inflation-adjusted figures and procedural tweaks. We'll dive deep into eligibility, forms, deadlines, strategies, and pitfalls. Whether you're a first-time filer, a serial nomad, or a retiree in Costa Rica, you'll find actionable steps here. Remember: Tax laws evolve (e.g., the FEIE rose from $120,000 in 2023 to $126,500 for 2024), so while this is thorough, it's no substitute for a certified expat tax pro. Let's demystify the process and get you back to adventuring.

1. Why U.S. Expats still have to file Taxes

Unlike almost every other country, the United States taxes based on citizenship, not residence. This means:

• Every U.S. citizen and Green Card holder must file an annual Form 1040, even if they live permanently abroad.

• Worldwide income, so including salary, self-employment income, dividends, rent, or pensions, must be reported.

• Filing is required even if no U.S. tax is owed, because the IRS uses these filings to confirm eligibility for credits, exclusions, and treaty benefits.

There is no general exemption for living abroad, but the IRS offers multiple relief mechanisms that reduce or eliminate double taxation. Even if you’ve lived overseas for decades, U.S. citizenship maintains your connection to worldwide taxation. The United States is one of the few developed nations that taxes based on citizenship rather than residency.

For the 2025 tax year, you must file a federal return if your gross income meets or exceeds the thresholds below, regardless of exclusions such as the Foreign Earned Income Exclusion (FEIE). Gross income includes wages, self-employment earnings, dividends, rental income, pensions, and even cryptocurrency transactions.

• Single filers must file if their income is at least $15,700, or $17,750 if age 65 or older.

• Married couples filing jointly must file if their combined income is $31,400, or $33,050 if one spouse is 65 or older, and $34,700 if both are.

• Heads of household must file with income of $22,650, or $24,700 if age 65 or older.

• Married individuals filing separately must file if they earn $5 or more.

• Qualifying surviving spouses must file at $31,400, or $33,050 if age 65 or older.

Self-employed individuals must still file if their net earnings exceed $400. These figures reflect the IRS’s 2025 inflation adjustment, an average increase of about 7.5% from 2024 thresholds. These thresholds adjust annually for inflation, increasing by roughly 5.4% from 2023 and 7.5% from 2024. Even if you fall below the filing threshold, submitting a return can still be beneficial—for instance, to claim a refund on taxes withheld or to access credits like the Child Tax Credit or the Additional Child Tax Credit.

In fact, an IRS study in 2024 found that one in five U.S. citizens living abroad who did not file a return did so because they believed their income was too low, yet many of them would have qualified for refunds averaging over $500.

Certain cases require additional attention. For example, dual citizens, those who hold both U.S. and foreign citizenship, must still file U.S. tax returns but can use tax treaties to prevent double taxation. Green card holders planning to relinquish their status must file Form I-407 and may face an exit tax if their worldwide net worth exceeds $2 million or if they meet other “covered expatriate” criteria.

Digital nomads, who frequently change countries, must establish a “tax home” for U.S. purposes. This is typically the country where they primarily work and live, and it determines whether they qualify for the Foreign Earned Income Exclusion or housing deductions.

Failing to file can have serious consequences. Beyond standard penalties and interest, unreported income can trigger FATCA (Foreign Account Tax Compliance Act) alerts. When flagged, foreign banks are required to report the accounts to the IRS, and in some cases, freeze them pending compliance review. In 2024 alone, the IRS pursued over 5,000 cases of willful non-filing, recovering more than $1.2 billion in back taxes from overseas taxpayers.

2. Key Filing Requirements for 2025

Form 1040 – The U.S. Individual Income Tax Return

All U.S. expats start with Form 1040, the same return used by taxpayers living in the States. You can e-file from overseas using IRS-approved software or an authorized preparer.

Deadlines:

• Standard deadline: April 15, 2025.

• Automatic two-month extension for expats: June 15, 2025.

• Further extension possible to October 15, 2025 using Form 4868.

You must attach all supporting schedules (Schedule B for foreign interest, Schedule C for self-employment, Schedule E for rental income, etc.).

FBAR (FinCEN Form 114)

If you hold one or more foreign bank or financial accounts with an aggregate balance exceeding $10,000 at any point during the year, you must file an FBAR electronically with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).

Penalties for non-filing are severe and up to $10,000 per unreported account for non-wilful violations.

FATCA (Form 8938)

FATCA requires disclosure of foreign financial assets on your tax return itself. The thresholds are higher than FBAR and depend on filing status and residency:

• For single filers living abroad: $200,000 at year-end or $300,000 at any time during the year.

• For joint filers abroad: $400,000 at year-end or $600,000 at any time.

FBAR and FATCA often overlap but are separate filings; both are mandatory when applicable.

3. How to avoid Double Taxation

Two major reliefs protect most expats from paying tax twice on the same income.

Foreign Earned Income Exclusion (FEIE)

Using Form 2555, you can exclude up to $130,000 of foreign earned income in 2025.
To qualify, you must pass either:

• The Physical Presence Test (spend 330 days abroad in any 12-month period), or

• The Bona Fide Residence Test (prove long-term residence and intent to live abroad).

This exclusion applies only to earned income (wages or self-employment), not dividends, rent, or capital gains.

Foreign Tax Credit (FTC)

Claimed on Form 1116, the FTC gives you a dollar-for-dollar credit for foreign income tax paid to another country. It’s often better than the FEIE if you live in a higher-tax country or earn passive income.

You can sometimes use both, but not on the same income source. Choosing the right approach requires comparing overall tax outcomes, which Antravia can model for you.

4. State Tax Residency – Cutting Ties Correctly

Some U.S. states, notably California, New York, and Virginia, continue to treat former residents as taxable unless you meet specific criteria for breaking residency. Typical requirements include:

• Selling or renting out your U.S. property.

• Establishing tax residence abroad.

• Severing voter registration, driver’s licence, and mailing address ties.

Failing to do so can result in ongoing state filing obligations even while living overseas.

5. Self-Employment and U.S. Social Security Tax

If you freelance or run your own business abroad, you may owe self-employment tax to the U.S. (15.3%) even when your income is excluded under FEIE.

Check whether your country has a Totalization Agreement with the U.S. (such as the UK, Italy, Germany, Canada, or Japan). These agreements prevent double Social Security contributions and determine where you should pay.

6. Missed Filings and IRS Amnesty Options

Many Americans living abroad discover years later that they should have been filing U.S. returns. The IRS offers the Streamlined Filing Compliance Procedures, allowing eligible taxpayers to catch up without penalties.

To qualify, you must certify that the failure was non-wilful and file:

• The last three years of tax returns, and

• The last six years of FBARs.

Antravia assists clients through this process, ensuring accurate back-filings and proper disclosure of foreign accounts.

7. Retirement, Social Security, and Totalization

Americans working abroad can still earn U.S. Social Security credits if they pay into the system or if their host country’s system is covered by a totalization agreement.

Key points:

• You can usually combine years of contributions between systems to qualify for benefits.

• U.S. retirement plans (IRA, 401(k)) remain subject to U.S. tax rules even when living overseas.

• Withdrawals may also be taxable locally, depending on treaties.

8. Practical Filing Tips for U.S. Expats

• Keep digital copies of all bank statements and tax documents.

• Track days spent in and out of the U.S. to support FEIE claims.

• Use multi-currency accounting software if you’re self-employed.

• File early if you expect refunds, expat returns often take longer to process.

• Always report foreign pensions and investments, even if tax-deferred locally.

9. Common Mistakes to Avoid

• Believing no U.S. filing is required if you pay local tax.

• Using a local accountant unfamiliar with U.S. rules.

• Missing FBARs or FATCA due to multiple small accounts.

• Mixing personal and business income while abroad.

• Ignoring state tax residency.

10. Staying Compliant with Confidence

Navigating expat taxation requires filing forms and structuring your finances to minimise risk and double taxation. Antravia provides accounting and tax support for Americans abroad, combining compliance with practical, international financial insight.

Explore more U.S. Expat Tax Guides

• FBAR & FATCA – Reporting Foreign Accounts for U.S. Expats

• FEIE vs Foreign Tax Credit – Choosing the Right Relief Abroad

• State Residency Rules for U.S. Expats

• Streamlined Filing Procedures – Fixing Missed Returns from Abroad

Looking for more expat tax guidance? Visit tax.travel/us-expats for detailed resources on filing from abroad, FBAR and FATCA rules, and other essentials for U.S. citizens overseas.

Need help with your U.S. taxes abroad?

Antravia supports American expats, freelancers, and digital nomads with expert tax and accounting guidance. We help you file accurately, claim the right exclusions, and stay compliant wherever you live.

Talk to Antravia →

References

• IRS Publication 54 – Tax Guide for U.S. Citizens and Resident Aliens Abroad: https://www.irs.gov/publications/p54

• IRS Foreign Earned Income Exclusion (2025): https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

• FinCEN FBAR Guidance: https://www.fincen.gov/report-foreign-bank-and-financial-accounts

• IRS Streamlined Filing Procedures: https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
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