Do I pay taxes if I live abroad? If you’re a US citizen, you keep filing a US return every year, wherever you live, as soon as your gross income passes the filing threshold. That line follows the standard deduction, which the IRS set at $16,100 for a single filer for 2026. Filing isn’t the same as owing, though. A salary earned abroad can be excluded up to $132,900 for 2026, and tax paid to another country usually comes off the US bill as a credit.
So the US return stays. What changes is the math, the forms that ride along, and one problem people rarely see coming: the state they left.
Figures are from the IRS, FinCEN and state tax agencies as of October 2026. I’m not a tax adviser. Take this to one.
Do I pay taxes if I live abroad, or just file?
The US taxes its citizens on worldwide income, not on where they sleep. The IRS puts the rule plainly: the filing requirement for a citizen living abroad is the same as for one living at home, decided by income, filing status and age.
Here are the lines for the return most people are filing right now, the 2025 return, from the Form 1040 instructions:
| Filing status (2025 return) | You must file if gross income is at least |
|---|---|
| Single, under 65 | $15,750 |
| Single, 65 or older | $17,750 |
| Married filing jointly, both under 65 | $31,500 |
| Married filing separately, any age | $5 |
| Self-employed, any status | $400 of net self-employment earnings |
For 2026 income, the single line moves with the standard deduction to $16,100, and the joint line to $32,200.
The catch is how “gross income” is counted. IRS Publication 54 says that for the filing test, gross income includes money you can exclude as foreign earned income. A single person earning $60,000 abroad and excluding all of it still has to file. Excluding income is something you claim on a return. You can’t skip the return to claim it.
That married-filing-separately line isn’t a typo. It’s $5.
The foreign earned income exclusion for 2026: $132,900
If you work abroad, this is the tool most people use. For 2026, you can exclude up to $132,900 of foreign earned income per qualifying person, up from $130,000 for 2025. You claim it on Form 2555.
To qualify, you pass one of two tests:
- Bona fide residence: you’re a resident of a foreign country for an uninterrupted period that includes an entire tax year.
- Physical presence: you’re physically in a foreign country or countries for at least 330 full days in any 12 consecutive months.
Three limits catch people.
It only covers earned income: wages and self-employment. Pensions, Social Security, IRA and 401(k) withdrawals, interest, dividends and rent are outside it. A retiree gets almost nothing from it.
It doesn’t touch self-employment tax. The IRS says you count all self-employment income when figuring net earnings, even the part you excluded. A freelancer can owe zero income tax and still owe self-employment tax on all of it. The exception is a country with a US totalization agreement, where a certificate of coverage can put your social security taxes in one country only.
And you can’t double up. You get no foreign tax credit for tax paid on income you’ve excluded.
The foreign tax credit, for everything else
The foreign tax credit is the other route. You pay income tax to the country you live in, then claim it on Form 1116 against the US tax on the same income. It’s a credit, so it comes off the bill dollar for dollar, not off your income.
In a low-tax country, the exclusion usually wins. Where rates are higher than the US’s, the credit can wipe out the US tax on that income by itself. Retirees mostly rely on the credit and the tax treaty, since their income isn’t “earned.” How treaties split pensions and Social Security is on is Social Security taxed abroad.
FBAR and FATCA: the two reports, and their thresholds
Neither is a tax. Both are reports.
| Report | Who files | Threshold | Where |
|---|---|---|---|
| FBAR (FinCEN Form 114) | Anyone with foreign accounts | Over $10,000 combined at any time in the year | FinCEN’s BSA E-Filing System |
| Form 8938 (FATCA), living abroad | Single or married filing separately | Over $200,000 at year end, or $300,000 at any time | With your 1040 |
| Form 8938 (FATCA), living abroad | Married filing jointly | Over $400,000 at year end, or $600,000 at any time | With your 1040 |
| Form 8938 (FATCA), living in the US | Single / joint | $50,000 / $100,000 at year end, or $75,000 / $150,000 at any time | With your 1040 |
The FBAR line is low. Open a local account, move in three months of rent and a deposit, and you’ve likely crossed $10,000 for the year. The FBAR is due April 15, with an automatic extension to October 15. The IRS comparison page has the full overlap. Many people need both.
The income tax return has its own clock. Citizens living abroad on the regular due date get an automatic two-month extension, to June 15. Interest on any tax you owe still runs from April 15.
The state tax trap: California and Virginia
Your last state may still want a return too. It decides by its own rules.
California. The Franchise Tax Board’s residency guide says someone domiciled in California who’s away for a “temporary or transitory purpose” stays a resident. Domicile changes only when you leave the old one, physically move, and intend to stay in the new place permanently or indefinitely. There’s a safe harbor, but it’s narrow. It covers people abroad under an employment-related contract for at least 546 consecutive days. It’s lost if intangible income tops $200,000 in a year, or if the main purpose of the absence is avoiding tax, and visits back can’t total more than 45 days a tax year. A retiree has no employment contract, so the safe harbor doesn’t apply.
Virginia. Virginia Tax treats anyone whose legal domicile is Virginia as a domiciliary resident, and says they stay one until they acquire a legal domicile somewhere else. Living abroad doesn’t end it by itself.
What helps anywhere: sell or rent out the house, move your driver’s license, close the voter registration, and keep the paper trail. Check your state before you leave. Not after the letter arrives.
Renouncing: the fee fell to $450, the paperwork didn’t
Does giving up citizenship end all this? The State Department fee for a Certificate of Loss of Nationality dropped from $2,350 to $450 on April 13, 2026, under a final rule published March 13.
The fee is the cheap part. You still file Form 8854, and skipping it can cost a $10,000 penalty. You’re a “covered expatriate,” and may owe an exit tax on unrealized gains, if any one of these applies:
- your net worth is $2 million or more;
- your average annual net income tax for the five years before you leave was more than $206,000 (the 2025 figure);
- you can’t certify five years of US tax compliance.
For 2025, the first $890,000 of gains under that regime is excluded. And unlike a tax bill, renouncing can’t be undone.
What to do before the move
- If you’ll earn abroad, pick your exclusion test and count days from arrival.
- Open the foreign account knowing it puts you on the FBAR list.
- Cut your state ties on paper.
- Book one hour with an expat tax preparer before you go. A move date is easier to choose than to fix.
The bigger picture, including what the new country takes, is on taxes when you retire abroad. Country pages: Spain, Portugal, Mexico, Panama and Costa Rica. I don’t have an arrangement with any tax preparer or firm.