American citizens living abroad are still required to file taxes in the United States. US expat taxes are particularly complex due to specific rules and benefits applicable to expatriate tax returns. However, many expats find that they don’t owe any US taxes thanks to these benefits.
This guide provides updated filing thresholds, exclusion amounts, due dates, and more for your Form 1040, reflecting the 2023 tax year (filed in 2024).
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US Tax Filing Thresholds for Expats
Regardless of residence abroad, US citizens and Green Card holders must file a US tax return if their income exceeds certain thresholds. The 2024 thresholds are:
| Filing Status | Gross Income |
|---|---|
| Single (under age 65) | $13,850 |
| Married filing jointly (under age 65) | $27,700 |
| Married filing separately (any age) | $5 |
| Head of household (under age 65) | $20,800 |
Thresholds increase for taxpayers aged 65 and older.
Self-employed individuals with at least $400 in self-employment income must also file. Additional circumstances may necessitate filing even if income is below these thresholds.
Expats receive an automatic 2-month extension to file and pay. If abroad on the regular April deadline, file your return by June 17, 2024 (June 15 is a Saturday). If more time is needed, request an extension to October 15. Note that any tax owed should be paid by April 15 to avoid interest penalties.
US Expat Tax Benefits
Americans living abroad can often avoid double taxation and lower their US tax liability through various benefits:
- Foreign Earned Income Exclusion (FEIE): Exclude up to $120,000 of foreign earnings from US income tax for 2023. This applies to foreign earned income only, not to Social Security benefits, pensions, annuities, interest, dividends, or capital gains. Claim the FEIE using Form 2555 and meet either the Physical Presence Test (330 days abroad in a 365-day period) or the Bona Fide Residency Test (established home and strong ties in a foreign country).
- Foreign Housing Exclusion or Deduction: Reduce living expenses.
- Foreign Tax Credit (FTC): Offset taxes paid to other countries with a dollar-for-dollar credit against US taxes. This is beneficial in countries with higher tax rates than the US. Unused credits can be carried forward for up to 10 years.
- Tax Treaty Benefits: Use applicable tax treaties to exclude or reduce US taxation on specific types of income, such as retirement plans and passive income like dividends and interest.
US Taxes for Self-Employed Expats
Self-employment tax, covering Social Security and Medicare, is 15.3% for the first $160,200 of income. An additional 0.9% Medicare tax applies if net earnings exceed $200,000 (single) or $250,000 (jointly).
Countries with Social Security Totalization Agreements, such as Spain and Portugal, allow expats to choose which country’s system to contribute to. Without such an agreement, you might have to pay into both systems.
Tax Treaty Benefits
The US has tax treaties with over 60 countries, including popular expat destinations like Australia, Canada, most of Western Europe, Mexico, China, and Japan. These treaties can provide exemptions or reduced tax rates for certain types of income.
Foreign Bank Account Reporting – FBAR (FinCen 114)
US expats with foreign bank accounts must file an FBAR if the combined maximum value of these accounts exceeds $10,000 at any time during the year. File electronically with the Treasury Department using FinCen Form 114 by the same deadline as Form 1040.
Reporting Other Foreign Financial Assets on Form 8938
Expats with other foreign financial assets, such as mutual funds, pensions, stocks, and bonds, may need to file Form 8938 with their tax return. The thresholds are higher than for the FBAR and vary by filing status and residency. For joint filers, the threshold is $400,000 on the last day of the year or $600,000 at any time during the year. For single filers, it’s $200,000 on the last day of the year or $300,000 at any time.
State Taxes for Expats
Expats may still owe state taxes to their former state of residence or any state where they earn income. States without income tax, like Florida, Nevada, Texas, and Washington, are easier for expats. Other states may require proof of new residency to stop considering you a tax resident.
Final Considerations for Filing US Expat Taxes
Expat taxes are intricate, and US taxpayers living abroad must also comply with the tax laws of their country of residence. Consulting with tax experts ensures compliance and maximizes benefits from both countries.