United States

Who Has to File

Filing year 2026, covering income earned in 2025

The United States taxes by citizenship and residency, not by where income is earned. US citizens and green card holders generally must file a federal return on their worldwide income every year, regardless of where they live. Moving abroad does not end the filing obligation. Many Americans living abroad are unaware of this rule until a foreign bank asks for a US taxpayer identification number.

Foreign nationals and the substantial presence test

A foreign national who is not a green card holder can still become a US tax resident if they meet the substantial presence test: 31 days in the current year and 183 days over the current and two prior years (counting all current-year days, one-third of prior-year days, and one-sixth of the year before that). Once that threshold is crossed, a person is generally treated as a US resident for tax purposes for that year.

Dual-status years

In the year a person arrives in or departs from the US, they may be a dual-status alien: a nonresident for part of the year and a resident for the other part. Dual-status returns are more complex and may limit certain deductions and credits.

Residency Tests

For US citizens abroad: physical presence vs bona fide residence

US citizens living abroad are still US tax residents, but to claim the Foreign Earned Income Exclusion (FEIE) they must qualify under one of two tests:

• Physical presence test. The person must be physically present in a foreign country or countries for at least 330 full days in any consecutive 12-month period. Days in the US do not count, and partial days do not count.
• Bona fide residence test. The person must have established a genuine residence in a foreign country for an uninterrupted period that includes a full calendar year. Intention and the nature of the stay matter more than day counts.

Green card holders abroad

Green card holders remain US tax residents and must file federal returns on worldwide income regardless of how long they have lived outside the US. Abandoning the green card does not automatically end the obligation for the year of abandonment. Long-term permanent residents who relinquish status may be subject to exit tax rules.

Key 2026 Deadlines

Reliefs and Credits

Foreign Earned Income Exclusion (FEIE)

US citizens and qualifying resident aliens who live and work abroad may exclude a portion of their foreign earned income from US tax. The exclusion amount for 2025 income is $130,000 (adjusted annually for inflation; the 2026 figure is $132,900). The exclusion applies only to earned income (wages, self-employment income) and requires qualifying under the physical presence or bona fide residence test. It is claimed on Form 2555.

Foreign Housing Exclusion

Alongside the FEIE, qualifying individuals may also exclude or deduct a portion of their foreign housing costs above a base amount. The housing limit varies by location and is higher in expensive cities. It is also claimed on Form 2555.

Foreign Tax Credit (FTC)

Tax paid to a foreign country on income also subject to US tax can generally offset US tax on that same income, dollar for dollar up to the amount of US tax on that income. The Foreign Tax Credit is claimed on Form 1116 and is often the better option for people in high-tax countries like France or Germany, where the tax rate exceeds the US rate.

Standard deduction and itemized deductions

US residents may claim the standard deduction (for 2025: $14,600 for single filers, $29,200 for married filing jointly) or itemize deductions such as state and local taxes (capped at $10,000), mortgage interest, and charitable contributions. Non-resident aliens generally cannot claim the standard deduction.

Foreign Accounts and Reporting

FBAR (FinCEN 114)

Where a US person's non-US financial accounts together exceeded $10,000 at any point in 2025, an FBAR must generally be filed with FinCEN (not the IRS). The FBAR is separate from the tax return. Penalties for non-compliance can be significant, and a tax return extension does not extend the FBAR deadline beyond October 15.

FATCA Form 8938

Individuals with foreign financial assets above certain thresholds must also report them on Form 8938, attached to their federal tax return. The thresholds depend on filing status and whether the person lives in the US or abroad. The FBAR and Form 8938 can overlap but are not the same: both may apply.

Streamlined filing procedures

The IRS offers streamlined procedures for US persons who have failed to meet their filing obligations but whose failure was non-willful. There are separate procedures for those living abroad (Streamlined Foreign Offshore) and those in the US (Streamlined Domestic Offshore). These procedures allow back-filing with reduced or no penalties in qualifying cases. A qualified tax professional should be consulted before submitting.

Common Forms at a Glance

State Income Taxes

Federal and state income taxes are separate in the US. States have their own rules about who qualifies as a resident and who must file. Some states (Florida, Texas, Nevada, and a few others) impose no state income tax. Others, such as California, New York, and Virginia, can be aggressive about maintaining residency and continuing to tax income even after someone moves abroad.

Domicile and intent

Most states use a combination of physical presence and domicile (the place a person intends to return to) to determine residency. Cutting ties properly matters: voters registration, driver's license, club memberships, and where close family members live can all be relevant to state residency determinations.

Part-year returns

In the year of moving, many states require a part-year return covering income earned while resident. Some states also tax non-residents on income sourced within the state, such as wages earned there or rental income from state property.

Tax Treaties

The US has tax treaties with more than 60 countries. These treaties generally determine which country has the primary right to tax each type of income when both countries could otherwise claim it. For individuals, key provisions often cover:

• Employment income: typically taxed where the work is performed
• Pensions: often taxed only in the country of residence
• Dividends, interest, royalties: usually subject to withholding tax limits
• Capital gains on property: typically taxed where the property is located

Saving clauses

Most US tax treaties contain a "saving clause" that preserves the US right to tax its own citizens as if the treaty did not exist. This means US citizens generally cannot use a treaty to avoid paying US tax on US-source income, even if they live in the treaty country. Treaty benefits for US citizens are narrower than for residents of treaty countries who are not US citizens.