As a US citizen, you will be taxed on your worldwide income. However, because of tax treaties and certain expat tax benefits, most Americans Official site living and working abroad don’t end up actually owing anything. But remember: Even if you don’t owe anything, you will still have to file an annual tax return.
Is There a Tax Exemption for US Citizens Living Abroad?
While there is no blanket tax exemption for Americans overseas, the IRS does provide several tax benefits that help you reduce your taxes. These include:
Foreign Earned Income Exclusion (FEIE): This benefit allows you to exclude a certain amount of foreign-earned income from US taxation. The total amount you can exclude changes every year. For 2024, the FEIE is capped at $126,500 per person. Earned income includes salaries, wages, and self-employment income.
Foreign Tax Credit: This is a dollar-for-dollar credit on any income taxes paid to a foreign government. For example, if you paid $10,000 in foreign taxes, you could reduce your US taxes by the same amount. This helps expats avoid double taxation.
Foreign Housing Deduction (or Exclusion): When renting a home in another country, the IRS lets you deduct certain expenses from your US taxes.
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