US Taxes for Americans Abroad: FBAR, FATCA & Foreign Income

If you are a US citizen or green-card holder, you owe US tax on your worldwide income no matter where you live or where the money is earned. The United States taxes by citizenship, not residency. The good news: tools like the Foreign Earned Income Exclusion and the Foreign Tax Credit usually erase most or all of the double tax, as long as you file correctly and report your foreign accounts on time.

That last part trips people up. The tax is often manageable. The reporting is where the real risk lives, because the penalties for missing a foreign-account form can dwarf the tax itself. Here is what actually matters, in plain English.

Who has to deal with US international tax?

You are in international-tax territory if any of the following apply to you:

• You are a US citizen or green-card holder living abroad (an expat).
• You live in the US but have foreign income, a foreign business, or foreign bank, brokerage, or pension accounts.
• You moved to or from the US during the year, or hold dual citizenship.
• You receive foreign rental income, foreign dividends, or an inheritance from overseas.

If that is you, your return is no longer a simple one. It is not necessarily expensive to handle, but it does need someone who knows the forms. Our international tax and FBAR compliance service is built for exactly these situations.

How the US stops you from being taxed twice

Two main mechanisms keep you from paying full tax to two countries on the same income.

The Foreign Earned Income Exclusion (FEIE)

The FEIE lets qualifying expats exclude a large chunk of earned income from US tax. For tax year 2025 the maximum exclusion is $130,000 per qualifying person, and it rises to $132,900 for 2026. You claim it on Form 2555, and you have to meet either the bona fide residence test or the physical presence test (broadly, being abroad for a full tax year, or physically present in a foreign country for at least 330 full days in a 12-month period).

The FEIE only covers earned income, meaning wages and self-employment income. It does not cover dividends, interest, capital gains, or rental income.

The Foreign Tax Credit (FTC)

The FTC gives you a dollar-for-dollar US credit for income tax you already paid to a foreign government, claimed on Form 1116. If you live in a country with higher tax rates than the US, the FTC often wipes out your US bill on its own, and can even build a carryover for future years. For many expats the real planning question is FEIE versus FTC, or a combination, because choosing wrong can leave money on the table or strand foreign tax credits you could have used.

The foreign-account reporting that causes the real trouble

This is the part most people do not know about, and it is where the steep penalties hide. Reporting an account is not the same as owing tax on it. You can owe zero tax and still face large penalties for failing to file these information forms.

The FBAR (FinCEN Form 114)

If the combined value of your foreign financial accounts was more than $10,000 at any point during the year, even for a single day, you must file an FBAR. This includes foreign checking, savings, brokerage, and many pension accounts. The FBAR is filed electronically with FinCEN, separate from your tax return, and it is due April 15 with an automatic extension to October 15. It is purely informational, so filing it does not create a tax bill. Not filing it is the expensive mistake.

FATCA (Form 8938)

Form 8938 is filed with your tax return and covers a broader set of specified foreign financial assets. The thresholds depend on your filing status and whether you live in the US or abroad. As a starting point, a single filer living in the US files once specified foreign assets exceed $50,000 at year-end, while thresholds are higher for those living abroad. Many people have to file both the FBAR and Form 8938 in the same year, because they measure different things.

What happens if you are already behind?

Plenty of people find out about these rules years late, usually after a bank asks for US tax forms or they read something that makes their stomach drop. You are not the first, and there are established IRS programs, such as the streamlined filing procedures, designed for taxpayers whose failure to file was non-willful. The worst move is to keep waiting, because the programs that reduce or remove penalties are most useful before the IRS contacts you first. If this is your situation, it is worth a conversation before you do anything else.

How this connects to the rest of your return

International issues rarely travel alone. If you moved between states in the same year you left or returned to the US, see our guide to multi-state taxes and avoiding double taxation. If part of your foreign activity involves digital assets held on overseas exchanges, our crypto tax guide covers how those are reported. And if you simply want someone to handle all of it under one flat fee, that is what we do.

Frequently asked questions

Do I have to file a US tax return if I live abroad and pay tax there?

Yes. US citizens and green-card holders file a US return on worldwide income regardless of where they live or whether they already paid foreign tax. The FEIE and Foreign Tax Credit usually reduce or eliminate the US tax, but the return itself is still required.

Will filing an FBAR make me owe tax?

No. The FBAR is an informational report filed with FinCEN. It does not calculate or create any tax. The penalties are for failing to file it, not for filing it.

What if I have not filed for several years?

There are IRS programs, including the streamlined procedures, for taxpayers who fell behind without willful intent. Coming forward before the IRS contacts you generally gives you the best options. A CPA can tell you quickly which path fits your facts.

Can one CPA handle both my US and foreign situation?

A US CPA handles your US filing obligations, including the FEIE, Foreign Tax Credit, FBAR, and Form 8938. We coordinate with the foreign side as needed so the two returns line up. You can schedule a free intro consultation to map out your specific situation, and our flat-fee pricing is quoted before any work begins.