Expat Tax Services
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FBAR Reporting
Foreign Bank Account Report requirements
FBAR (FinCEN Form 114, Foreign Bank Account Report) is required if you have signature authority or beneficial ownership over foreign financial accounts with aggregate balances of $10,000 or more at any time during the calendar year. File with FinCEN (not the IRS) electronically at fincen.gov by April 15 (automatic 2-month extension to June 15 for expats).
FBAR Threshold and Coverage
Any foreign account over $10k triggers FBAR requirement: aggregate threshold. Own $7k UK bank account + $5k Canadian savings = $12k (over $10k threshold, file). Include: bank accounts, savings, investment accounts, retirement accounts, insurance accounts with cash value. Exclude: foreign credit card accounts (no balance).
Report all foreign accounts on a single FBAR, even if individual accounts are under $10,000. Do not file FBAR with your tax return; file separately with FinCEN. Failure to file FBAR can result in civil penalty of 50% of the highest account balance during the year, per year of non-filing. Criminal penalties: up to 5 years imprisonment and $250,000 fine (if willful).
FBAR is separate from FATCA (see next section) and has no dollar exclusion. You must file FBAR even if using Foreign Earned Income Exclusion (FEIE) to zero out federal income tax liability. Failure to file is strictly enforced by FinCEN.
Willful FBAR Non-Filing Penalties
Willful non-filing: 50% of highest account balance per year, with no cap. Example: highest balance $5M, willful non-filing 2023-2025 (3 years) = $7.5M penalty (3 years × $5M × 50%). Criminal prosecution possible if pattern of willful evasion. FinCEN has increased enforcement; IRS criminal investigators work with FinCEN on major cases. File FBAR immediately if missed.
FATCA Compliance
Form 8938 filing requirements for expats
FATCA (Foreign Account Tax Compliance Act, Form 8938) requires U.S. citizens and residents with foreign financial assets above certain thresholds to report to the IRS. Thresholds for 2026: single filer living abroad $600,000; married filing jointly living abroad $1,200,000. U.S. residents have lower thresholds: $100k single, $200k married (higher on last day of tax year).
FATCA Threshold and Reporting
U.S. citizen in France: foreign assets $800k (over $600k threshold). Must file Form 8938. Report: bank accounts, brokerage accounts, retirement accounts, foreign real estate, stocks, bonds, insurance policies with cash value. Similar to FBAR but broader (includes real estate, investments). File with Form 1040 by April 15.
FATCA also includes specific reporting for CFCs (Controlled Foreign Corporations), FPHCs (Foreign Personal Holding Companies), and foreign trusts. If you own foreign business entities or hold foreign trusts, additional filings may apply (Forms 5471, 3520, etc.).
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Foreign Earned Income Exclusion
FEIE and the $132,900 limit
Foreign Earned Income Exclusion (FEIE, IRC 911) allows U.S. citizens abroad to exclude up to $132,900 (2026) of foreign earned income (wages, self-employment) from U.S. federal income tax. To qualify, you must pass the physical presence test: be outside the U.S. for at least 330 days in any 12-consecutive-month period.
FEIE Example: Significant Tax Savings
U.S. citizen in UK earning £95k (~$116k USD). No FEIE: $116k income, 37% federal tax = $42.9k. With FEIE: exclude $116k (under $132.9k limit), $0 federal income tax. Tax savings: $42.9k. Additionally: foreign housing cost exclusion (rent, utilities above base amount) can exclude additional ~$18k-$30k depending on country.
Physical presence test requires 330 days outside U.S. in a 12-month rolling period. Travel days to/from U.S. do not count as U.S. presence (departure date counts as outside, arrival date counts as outside). Brief U.S. visits (vacation) count as U.S. presence. You must maintain documentation (passport stamps, airline tickets, residence proof) to prove the 330 days.
FEIE Election Revocation Rules
Once you elect FEIE, you must maintain it for 5 consecutive years (unless IRS approves early revocation). If you claim FEIE in year 1 and want to switch to Foreign Tax Credit in year 2, IRS requires written approval (difficult to obtain). Plan your FEIE election carefully; consult CPA before claiming.
Totalization Agreements
Avoiding double Social Security taxation
Totalization agreements are treaties between the U.S. and foreign countries to prevent double Social Security taxation. If you work abroad in a totalization agreement country, you contribute to the foreign country's Social Security system (not U.S.) and avoid paying both U.S. and foreign SS taxes simultaneously.
Totalization Benefit Example
U.S. citizen working in Canada (totalization agreement). Employer withholds Canadian Pension Plan (CPP) contribution (~5.95% employee + employer). Without totalization: would also owe U.S. SE tax (~15.3%) on top. Totalization: waives U.S. SE tax, saves 15.3% on income. Example: $100k income, saves $15.3k in U.S. SE tax.
To claim totalization benefits, you must be covered under the foreign country's Social Security system and have a Certificate of Coverage (issued by your country's Social Security administrator). You will submit this to your employer to stop U.S. SE tax withholding and instead contribute to the foreign system.
Foreign Tax Credit
Offsetting foreign taxes against U.S. liability
Foreign Tax Credit (FTC, Form 1116) allows a dollar-for-dollar credit for foreign income taxes paid to other countries. If you pay foreign income tax to one country and U.S. federal tax to the IRS, FTC offset prevents double taxation. Credit is limited to the lesser of foreign taxes paid or U.S. tax on that foreign income.
FTC Example: Excess Foreign Tax Credits
U.S. citizen in France earning €100k (~$110k). U.S. tax owed: $110k × 37% = $40.7k. France tax: 45% × €100k = €45k (~$49.5k). FTC: credit $49.5k foreign tax (limited to $40.7k U.S. tax). Excess credit: $49.5k - $40.7k = $8.8k. Excess FTC carries forward 1 year (or back 1 year), reducing future U.S. tax liability.
Foreign taxes must be income taxes (not sales tax, property tax, or VAT) to qualify for FTC. You must file Form 1116 with Form 1040 to claim FTC. FTC is complex; consult CPA to determine whether FEIE or FTC is superior.
Tax Treaties
Income tax treaties and their benefits
The U.S. has income tax treaties with 60+ countries. Treaties prevent double taxation by allocating taxing rights: usually, country where income is earned has priority. U.S. allows credit for foreign taxes paid (FTC). Treaties also may provide reduced withholding rates on dividends, interest, royalties, and other investment income.
Treaty Withholding Rate Reduction
U.S. company pays U.S. citizen dividend (resident in France). Without treaty: 30% withholding. With U.S.-France treaty: 15% withholding. U.S. citizen recovers withheld 15% on French return or via U.S. Form 1116 credit. Treaty rates vary (typically 5-15% on dividends, 0-15% on interest, 0-30% on royalties). Consult treaty summary for your country.
Treaty provisions vary by country. Some treaties provide FEIE alternative (use treaty provisions instead of IRC 911 FEIE). Some provide social security totalization (discussed above). Always consult the specific treaty for your country of residence.
State Residency and Taxes
State income tax obligations for expats
While abroad, you may still owe state income tax if you maintain residency in your home state (or earn income from a state). States determine residency based on: domicile (intent to make state your permanent home), active presence, maintaining a home. If you move abroad but keep a home in your home state, many states deem you a resident and impose income tax.
State Tax Residency Planning
If living abroad, consider establishing tax residency in a no-income-tax state (Florida, Texas, Nevada, Wyoming, South Dakota, Washington, Tennessee). Move your primary residence, update driver's license, voter registration, bank address. Many states defer to domicile; establishing domicile in no-tax state can avoid state tax entirely while abroad.
States have begun claiming residents based on credit card transactions or driver's license address. If working abroad, carefully manage state residency: change address, update voter registration, establish clear intent to become non-resident. Otherwise, risk state income tax claim while living abroad.
| Metric | Fbar | Fatca | Fcie | Totalization |
|---|---|---|---|---|
| Reporting Requirement | FinCEN Form 114 (foreign bank accounts $10k+) | Form 8938 (foreign financial assets $600k+ single, $1.2M married living abroad) | Form 2555 (foreign earned income exclusion) | Form 8288 (FICA equivalency determination, varies by country) |
| Tax Benefit | No tax benefit (reporting only); compliance obligation | No tax benefit; reporting only (though can lead to FTC/FEIE planning) | Exclude $132.9k earned income (saves ~37% × $132.9k = $49.2k federal tax) | Waive U.S. SE tax (saves 15.3% × income, up to SS wage base) |
| Deadline | April 15 (extended, no further extension) | April 15 (with Form 1040) | June 15 (for expats, or April 15 if U.S. resident) | Vary by country agreement; consult CPA |
| Penalty for Non-Filing | 50% of highest account balance per year (civil); criminal up to 5 years + $250k | 5% per month non-filing, max 25%; accuracy penalties | Accuracy penalties (20%); if fraudulent, criminal | Loss of totalization benefit; subject to U.S. SS tax |
| Account Types Covered | Bank, savings, brokerage, insurance, retirement accounts | Same as FBAR, plus real estate, hedge funds, etc. | Only earned income (wages, self-employment); excludes investments | Only SS tax impact (not income tax) |
| Foreign Tax Credit (FTC) | No connection; FBAR is reporting only | No connection; FATCA is reporting only | Cannot use FEIE + FTC on same income; choose one | Can combine with FTC (totalization affects SS tax, not income) |
| Self-Employment Tax Impact | No impact; FBAR is bank account reporting | No impact; FATCA is asset reporting | Does NOT exclude from SE tax (~15.3% still owed); unless totalization applies | Waives U.S. SE tax (entire benefit of agreement) |
| Physical Presence Requirement | No requirement; filing requirement based on account balance | No requirement; filing requirement based on asset threshold | 330 days outside U.S. in 12-month period required | Depends on country; typically continuous employment in foreign country |
| Exclusion/Credit Amount (2026) | No amount; reporting only | No amount; reporting only | $132.9k earned income + housing cost exclusion (varies) | Full SE tax waived (no dollar limit, but SS wage base applies) |
| Best Use Case | U.S. citizens abroad with foreign accounts $10k+ | U.S. citizens abroad with substantial foreign assets | U.S. citizens abroad with earned income under $132.9k (excludes all) | U.S. citizens working in treaty country (saves SE tax) |
Frequently Asked Questions
10 key expat tax questions
What is FBAR and when do I need to file it?
FBAR (Foreign Bank Account Report, FinCEN Form 114) is required if you have foreign financial accounts totaling $10,000+ at any time during the year. File by April 15 (extended deadline, no extension). Report all foreign bank accounts, savings accounts, brokerage accounts, insurance accounts. File electronically via FinCEN (fincen.gov). Failure to file: 50% civil penalty (of highest account balance during year, per year) or criminal prosecution (up to 5 years, $250k fine).
What is FATCA and what is the difference from FBAR?
FATCA (Foreign Account Tax Compliance Act, Form 8938) is IRS filing requirement for U.S. citizens/residents with foreign financial assets over certain thresholds (single filer living abroad $600k; married $1.2M; higher thresholds for U.S. residents). File with Form 1040 by April 15. Report foreign financial accounts, stock, real estate. FBAR vs FATCA: FBAR is FinCEN (Treasury), no exemption; FATCA is IRS, has exemptions for certain treaties. Both apply if accounts over thresholds.
Can I use the Foreign Earned Income Exclusion (FEIE)?
FEIE (IRC 911) allows U.S. citizens abroad to exclude foreign earned income (wages, self-employment) from U.S. income tax. 2026 limit: $132,900. Example: U.S. citizen living in UK, earning £90k (~$110k). FEIE: exclude $110k, no U.S. income tax on wages. Caveat: must pass physical presence test (330 days outside U.S. in 12-month period). Housing costs can be excluded additionally (housing exclusion, higher limit). File Form 2555 with 1040.
What is the physical presence test for FEIE?
Physical presence test: must be outside U.S. at least 330 days in any 12-consecutive-month period. U.S. presence includes travel to U.S., even if brief. Counting days: travel days (departure/arrival) exclude both; full days in U.S. count as presence. Example: January 1 leave U.S., July 1 return. 181 days abroad in calendar year = insufficient (less than 330). Must have 330 days abroad in any rolling 12-month window. Penalties for false claim: $5k + interest + accuracy penalties.
What is a tax treaty and how does it help?
U.S. has income tax treaties with 60+ countries. Treaties prevent double taxation: allocate taxing rights between countries. Example: U.S.-UK treaty: each country taxes its residents. If U.S. citizen works in UK, both countries could tax (double taxation). Treaty resolves: UK taxes as earned income (since earned there); U.S. allows foreign tax credit (pay UK tax, credit against U.S. tax). Treaty also has FEIE alternative (use whichever is more favorable).
What is the Foreign Tax Credit (FTC)?
FTC (Form 1116) allows credit for foreign income taxes paid to other countries. Example: U.S. citizen, $100k income in France. France taxes at 45% (€45k). U.S. owes 37% federal tax ($37k). FTC: credit France's $45k tax (limited to $37k U.S. tax). Net U.S. tax: $0 (excess foreign tax credit carries forward). FTC vs FEIE: FTC is credit (dollar-for-dollar), FEIE is exclusion (reduces income). Use whichever is better (cannot use both on same income).
Can I claim FEIE and FTC on the same income?
No. You must elect FEIE (Form 2555) or claim FTC (Form 1116), not both, on the same foreign earned income. Choose based on tax situation: FEIE better if $132.9k earned (excludes all), low-tax country (no foreign tax to credit). FTC better if high foreign taxes paid, high total income (FTC not limited by earned income amount). Consult CPA to compare under your circumstances. Once elected, must revoke prior election to switch methods.
What about self-employment tax (FICA) for expats using FEIE?
Foreign self-employment income is still subject to U.S. self-employment tax (Social Security + Medicare, ~15.3% total). FEIE only excludes from income tax, NOT from SE tax. Example: self-employed abroad, $132.9k earnings. FEIE: excludes from income tax. But SE tax: 15.3% × $132.9k = ~$20.3k still owed. Some foreign countries have totalization agreements with U.S. (avoid double SS tax). Consult CPA on totalization rules for your country.
What is a totalization agreement?
Totalization agreement is treaty between U.S. and foreign country to prevent double Social Security taxation. U.S. nationals working abroad can be covered by foreign country's Social Security system (instead of U.S.). Example: U.S. citizen working in Mexico. U.S.-Mexico totalization agreement: Mexican employer withholds Mexican SS (not U.S. SS). U.S. recognizes the payment as equivalent. Saves ~15.3% SE tax. Countries with totalization: Canada, UK, France, Germany, Japan, Mexico, etc. Check FICA.gov for list.
Do I owe U.S. taxes on foreign real estate?
Yes. U.S. citizens owe tax on worldwide income, including foreign rental real estate. Rental income from foreign property is taxable; depreciation deductible (same as U.S. property). Foreign real estate appreciation is capital gain (taxable on sale). FIRPTA (Foreign Investment in Real Property Tax Act) requires non-residents to file returns on U.S. property. Conversely, expats must report foreign property (FATCA if over $1.2M threshold). Treaty provisions may apply for favorable treatment in some countries.
How do I file taxes as an expat?
File Form 1040 with IRS by April 15 (automatic 2-month extension to June 15 for U.S. citizens abroad, Form 4868 for additional extension). Report worldwide income (wages, foreign income, investment income). File Form 2555 (FEIE) if claiming exclusion. File FinCEN Form 114 (FBAR) by April 15 if foreign accounts $10k+. File Form 8938 (FATCA) if assets over threshold. Consider state taxes (if home state maintained, may owe state tax even if living abroad). Consult CPA specializing in expat taxes (complex filing, many potential penalties for non-compliance).
Optimize Your Expat Tax Strategy
Expats face complex filing: FBAR, FATCA, FEIE, totalization, FTC, and state taxes. Wrong choices can cost $10,000-$50,000+ annually. FEIE vs FTC decision, totalization agreements, state residency planning all require expert guidance. Get personalized expat tax strategy from our CPA team.
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