More than 6.8 million Americans (excluding military personnel) live abroad in more than 160 countries, according to the U.S. State Department. In this article, you'll learn the tax rules and regulations that affect U.S. citizens and resident aliens residing ✱overseas.

Filing Requirements

The Internal Revenue Service (IRS) requires American citizens and resident aliens who live outside of the Uni🐬ted States to file income tax returns if their gross incomeღ is greater than or equal to the applicable exemption and standard deductions. It is also recommended that those whose income is less than the applicable exemption and standard deduction also file for income tax return. U.S. tax filing requirements apply equally to Americans regardless of the country in which they currently reside. Thus, citizens and resident aliens working🌸 overseas may be subject to double taxation (from both local and U.S. tax authorities), but individuals should check with a tax professional or the IRS because not all situations are the same.

Foreign Financial Assets

Americans who have foreign financial assets exceeding $50,000 for individuals and $100,000 for married couples filing jointly must report these assets. Qualifying assets include bank accounts, any stock, security or financial instrument issued by a non-U.S. entity/person, and any interest in a foreign entity. If you qualify, you'll need to submit Form 8938 along with your tax return.

Physical Presence Test

You must live in a foreign country (or countries) for at least 330 full days in a 12-month period. According to the IRS, expatriates are allowed to reside and work in more than one foreign country. However, they must be physically present in those countries for at least 330 days over a calendar year.

Foreign-Earned Income Exclusion

The foreign-earned income exclusion is designed to reduce the effect of Uncle Sam's double taxation policy. For 2025, Americans can exclude up to $130,000 annually in foreign wages. Taxpayers claiming this exclusion will pay tax at the rates that would have applied had they not claimed the foreign-earned income exclusion. This means that instead of applying the lowest possible rate, expatriates will be taxed starting at their normal tax bracket (had they not used the exclusion) after using up the initial $130,000.

Foreign Housing Exclusion

Expatriates can exclude amounts paid by their employer for housing-related expenses. These employer-paid benefits do not have to be reported as part of your foreign-sourced income. Americans cannot exclude the same amounts twice (i.e., sources rooted from both foreign wages and housing-related benefits). Additionally, self-employed individuals do not qualify for the foreign housing exclusion. To prevent abuses, expatriates can claim a maximum foreign housing exclusion up to 16% of the foreign-earned income exclusion. Also, independent contractors cannot claim the foreign housing exclusion. Instead, independent contractors must select the foreign housing deduction on Form 2555.

The IRS considers the following as qualifying amounts for the foreign housing conclusion: rent, repairs, utilities other than telephone, homeowners and renters insurance, occupancy taxes, nonrefundable security deposits or lease payments, furniture rental, residential parking fees and tax equalization payments paid by your employer.

Due Dates

Americans residing and working abroad typically have until April 15 to file and pay their taxes. However, the IRS provides an automatic extension for expatriates who have until June 15 to file their U.S. income tax returns. By filing Form 4868 by June 15, taxpayers can request an additional extension up to Oct. 15. A letter request to the IRS can further push back the extension until Dec. 15.

The Bottom Line

Paying taxes while living overseas requires U.S. citizens and residents to continue filing tax returns with the IRS, reporting worldwide income regardless of where it is earned. Taxpayers can benefit from the Foreign Earned Income Exclusion and th💮e Foreign Tax Credit to reduce their U.S. tax liability.