Taxes & Finance

US citizens are taxed on worldwide income regardless of where they live—a policy shared only with Eritrea among major nations. However, several provisions help avoid double taxation and reduce your overall tax burden. The Foreign Earned Income Exclusion (FEIE) allows qualifying expats to exclude up to $130,000 of foreign-earned income in 2025. To qualify, you must pass either the Bona Fide Residence Test (be a bona fide resident of a foreign country for an entire tax year) or the Physical Presence Test (be physically present in a foreign country for at least 330 full days during any 12-month period). Beyond FEIE, the Foreign Tax Credit provides dollar-for-dollar credit for taxes paid to foreign governments, and the Foreign Housing Exclusion allows exclusion of up to $39,000 in qualified housing expenses. Self-employment income remains subject to the 15.3% self-employment tax even when excluded under FEIE.

Key Points

• 1FEIE limit increased to $130,000 for 2025, up from $126,500 in 2024
• 2FBAR required if foreign accounts exceed $10,000 total at any point during the year
• 3FATCA Form 8938 required for foreign assets over $200,000 (expats) or $50,000 (US residents)
• 4Automatic 2-month filing extension to June 15 for expats; FBAR deadline is April 15 with auto-extension to October 15
• 5Non-willful FBAR penalties can reach $16,536 per year—among highest in the tax system
• 6Streamlined Foreign Offshore Procedures available for catching up on unfiled returns
• 7Self-employment tax (15.3%) still applies even when income is excluded under FEIE