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GUIDE · 2025 FEDERAL RETURNS

US taxes while living abroad.

An orientation to US federal taxes for citizens and resident aliens abroad: worldwide income, the filing check, the two main tax breaks, foreign account reports, currency and dates. Written for the 2025 federal return.

THE STARTING POINT

Income from everywhere.

US citizens and resident aliens generally report worldwide income, including income earned abroad. Moving abroad alone does not end federal obligations.

The starting point is income from everywhere: the United States and the countries where you live, work or invest. Your address and the currency you are paid in do not turn foreign earnings into an automatic exemption.

Make an income list before choosing any tax break, and keep the statements behind each amount. This is a practical recommendation, not a tax rule.

THE FILING CHECK

Do you need to file?

Whether a return is required and the final tax owed are separate checks. Overseas tax benefits are available only when the relevant return is filed.

WHAT DECIDES IT

Income, status and age

Income, filing status and age generally determine whether a return is required. Use the IRS rules for your tax year and circumstances.

EXCLUDED INCOME

It still counts

Foreign earned income or foreign housing amounts count in gross income for the filing requirement, even if you expect to exclude them.

OTHER SITUATIONS

More than one threshold

Self-employment, being claimed as someone else's dependent and other tax situations can change the filing check.

THE TWO MAIN TAX BREAKS

FEIE and the foreign tax credit.

The foreign earned income exclusion concerns qualifying earnings from work abroad; the foreign tax credit concerns qualifying foreign taxes. Neither is a blanket promise of a tax-free return.

Foreign earned income exclusion (FEIE)Foreign tax credit (FTC)
What it doesCan exclude qualifying foreign earned income up to an annual limit.May reduce US tax liability when qualifying foreign tax was paid or accrued on income also subject to US tax.
What it needsForeign earned income, a foreign tax home, and an applicable residence or physical-presence test. Living abroad alone is not enough.Qualifying foreign tax. Not every foreign charge qualifies.
How it is claimedOn the federal return.Individuals generally use Form 1116.
Watch forPensions, including social security benefits, are not foreign earned income. The exclusion does not reduce self-employment tax.No credit for taxes on income excluded through the FEIE or the foreign housing exclusion.

Choosing a claim depends on your actual income, foreign taxes and circumstances. This overview does not select one for you.

FEIE eligibility Credit rules and limits
FOREIGN ACCOUNTS

Two reports, two systems.

Filing Form 8938 does not replace an FBAR. Either, both or neither can be required.

FBAR (FinCEN Form 114)Form 8938
Who generally filesA US person with a financial interest in or signature authority over foreign financial accounts whose combined value exceeds $10,000 at any time in the calendar year. Check the instructions for exceptions.Check your specified foreign financial assets against the applicable threshold. Thresholds depend on filing status and whether you qualify as living abroad.
What it coversForeign financial accounts.Specified foreign financial assets, which are not identical to FBAR accounts.
Where it goesFiled separately to FinCEN through its BSA E-Filing system.Attached to the federal income tax return when required.
ValuesUse the FBAR's own valuation and conversion instructions.Use Form 8938's own valuation and conversion instructions.
Thresholds and reporting rules
Woman relaxing on the floor of a new apartment among moving boxes
CURRENCY, RECORDS AND DATES

Dollars, records and timing.

US return amounts are reported in US dollars. For a taxpayer whose functional currency is the dollar, the IRS generally points to the exchange rate when an item is received, paid or accrued. The conversion must match the item and the applicable rules.

What to keep

  • The original currency amount, the relevant date, the rate used and its source.
  • Pay statements, foreign tax records and travel dates for 2025.
  • Account statements that help establish values during the year.

This is a practical recommendation, not a complete legal recordkeeping standard or retention rule. Records checklist

BEYOND THE FEDERAL RETURN

State, country and what we prepare.

This guide covers US federal income tax. Federal, state and country obligations are separate.

STATE

Check with the state

State requirements are checked with the relevant state tax authority. The IRS state government websites page lists every state, with each entry linking to an IRS-hosted state page.

COUNTRY

Your country of residence

The tax authority of the country where you live sets that country's requirements.

Official resources by country EXPATRETURN.US

Eligible 2025 federal returns

Our current preparation scope is eligible federal individual returns (2025 e-filed, earlier years on paper). We do not prepare state returns; FBARs are prepared and e-filed separately, $59 per person, outside the plan price.
Check your situation
BEFORE YOU PREPARE

Four checks.

General orientation, not a decision on your residency, filing requirement, eligibility or best election. Your own facts and the current official instructions come first.

  1. 1

    Filing requirement

    Confirmed for the right tax year.

  2. 2

    All income listed

    Before considering an exclusion or credit.

  3. 3

    Account reports and dates

    Checked for each filing.

  4. 4

    Forms and special circumstances

    Matched to preparation coverage.

Official sources

Last reviewed 22 October 2026

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NEXT STEP

See if your return is in scope.

Check your situation against our preparation scope for eligible 2025 federal individual returns.

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