US Taxes for Citizens Living Abroad in 2026: What You Owe

Imagine you moved to London or Tokyo when you were just a little kid. You grew up there, you work there, and you pay your taxes to that country. You might not have stepped foot in the United States for thirty years. But because you have a U.S. passport, the IRS says you still owe them a report on every dollar you make. This is called Citizenship Based Taxation. It is a very rare system. In fact, out of nearly 200 countries in the world, only the U.S. and a small country in Africa called Eritrea do this. For the nine million Americans living abroad, this is more than just a bit of paperwork: it is a massive financial burden that never goes away.

Yes, US citizens and green card holders must file a US tax return on their worldwide income wherever they live, once their gross income reaches the normal filing threshold. For the 2025 return filed in 2026 that is $15,750 for single filers, $31,500 for married couples filing jointly, and only $400 of self-employment income. Filing does not always mean paying: many Americans abroad owe little or no US income tax because the Foreign Earned Income Exclusion ($130,000 for 2025 and $132,900 for 2026) and the Foreign Tax Credit offset income that is already taxed where they live.

Why does the US tax citizens living abroad?

The US taxes by citizenship, not by residence. The rule dates back to the Revenue Act of 1864 and was upheld by the Supreme Court in Cook v. Tait in 1924. Eritrea is the only other country with a comparable system, as the history below explains.

Do I have to file if I will not owe anything?

Usually, yes. The Foreign Earned Income Exclusion (Form 2555) and the Foreign Tax Credit (Form 1116) are claimed on the return itself, so you have to file to benefit from them. Even if your income is below the filing threshold, foreign account reports such as the FBAR can still be due.

What forms do Americans abroad file besides Form 1040?

The two most common are the FBAR (FinCEN Form 114), required when your foreign accounts together exceed $10,000 at any point in the year, and Form 8938, which for filers living abroad applies above $200,000 on the last day of the year or $300,000 at any time ($400,000 and $600,000 for joint filers). See FBAR vs Form 8938 for how the two differ.

When is my US tax return due if I live abroad?

The regular deadline is April 15, with an automatic two-month extension to June 15 if you live and work outside the US on that date; attach a statement explaining that you qualify. Interest on any tax you owe still runs from April 15, and you can request a further extension to October 15 with Form 4868.

What happens if I have not been filing?

If the lapse was non-willful, the IRS Streamlined Foreign Offshore Procedures let you catch up by filing the last 3 years of tax returns and the last 6 years of FBARs, without failure-to-file, accuracy or FBAR penalties for eligible taxpayers. You certify non-willful conduct on Form 14653 and must have been outside the US for at least 330 full days in one of the last three years.

Can I stop filing US taxes without renouncing?

No. The filing obligation lasts as long as you hold US citizenship or a green card. Formally renouncing ends it going forward, but it can trigger an exit tax for covered expatriates, such as people with a net worth of $2 million or more; our accidental American tax guide covers the options.

This whole system started during the American Civil War in the 1860s. Back then, the government usually got its money from trade taxes. But the war was incredibly expensive, and the government was running out of cash. William Pitt Fessenden, head of the Senate Finance Committee, became the architect of the first tax laws. He first tried to create an income tax in 1861, but it did not have any way to actually catch people or force them to pay, so it did not raise much money.

The real reason the U.S. started taxing people living in other countries was because of anger. During the war, many wealthy Americans moved to Europe, especially to Paris, to avoid being drafted into the army. Members of Congress were furious. They thought it was unfair that poor people were staying home to fight and die while the rich were living in luxury in a foreign capital. Senator Jacob Collamer was one of the loudest voices against these people. He famously argued that a man who drew money from U.S. property but stayed in Paris was skulking away from his duty. He believed these absentees should pay a much higher tax rate because they were not sharing the risks of the war.

By the time the Revenue Act of 1864 was passed, the law officially applied to every citizen of the United States residing abroad. Back then, the tax only hit the very wealthy because most regular workers did not make enough money to qualify. Decades later, the Supreme Court looked at this rule in a famous 1924 case called Cook v. Tait. The court decided the government has the legal right to tax you anywhere in the world. Their reason was that being a citizen gives you benefits like protection from the government and the right to come home whenever you want.

The most famous example of this system in the modern world involves Boris Johnson, the former Prime Minister of the United Kingdom. He was born in New York because his parents were working there for a short time. He moved back to England when he was only five years old. He always called his American citizenship an accident of birth and felt he had no real tie to the U.S..

In 2014, while he was the Mayor of London, he sold his house in north London. In the UK, you do not have to pay taxes when you sell the home you live in. But the IRS told him he owed them more than $50,000 in capital gains tax because he was still a U.S. citizen. In a famous interview with National Public Radio (NPR), he sounded very angry. He called the tax demand absolutely outrageous and asked why he should pay tax to a country he had not lived in since he was a toddler. He eventually paid the bill so it would not hurt his political career, but he was so fed up that he officially gave up his U.S. citizenship in 2016. He was one of a record 5,411 people who renounced that year to get away from the IRS forever.

There is a growing and sad trend of people giving up their U.S. citizenship. Most of them are not trying to avoid taxes: they are trying to protect their children. Many American parents living abroad realize that if they pass their citizenship to their kids, they are also passing down a huge headache.

If a child is a U.S. citizen, they have to file complicated IRS forms every single year of their life, even if they never live in America. Two of the most common are the FBAR and Form 8938, which have different thresholds and different filing systems; see FBAR vs Form 8938 for a side-by-side breakdown. It can cost thousands of dollars just to hire an accountant who understands the rules. Even worse, a law called FATCA makes many foreign banks afraid to have American customers. Banks often refuse to let Americans open simple savings accounts or get a mortgage because the bank does not want to deal with the U.S. government. Parents are now renouncing their own citizenship to ensure their kids can have a normal life and be treated like regular citizens in the country where they actually live.

There is finally a serious plan in Congress to fix this problem. It is called the Residence Based Taxation for Americans Abroad Act (H.R. 10468). It was introduced by Representative Darin LaHood and Senator Todd Young.

The Residence Based Taxation for Americans Abroad Act is a plan that would let U.S. citizens living in other countries choose to be treated like non residents for their taxes. To use this new rule, a person would have to prove they have lived in another country for at least three of the last five years and that they have followed all U.S. tax laws in the past. Once they sign up, they would only have to pay U.S. taxes on money they make inside America, like from a rental property or a U.S. company. Their foreign paychecks would finally be left alone by the IRS, which would help them compete for jobs against people from other countries. The bill includes rules to make sure the super rich do not use it to hide money, including a one time departure tax for people with a lot of wealth. It also removes the need to file many of the most annoying forms that currently make it hard for expats to get bank accounts. Supporters say this bill is the best way to help regular families without costing the U.S. Treasury much money. You can read the full text of the bill here

There are several groups working very hard to convince Congress to pass these new rules. Here are some of the the organizations you should know about:

• Tax Fairness for Americans Abroad (TFFAA): This group is run by volunteers who worked directly with Representative LaHood to write the new bill. They collect stories from regular people to show Congress that the current system hurts the middle class and accidental Americans.
• American Citizens Abroad (ACA): This is a non profit group based in Washington D.C. that has been around for 45 years. They do scientific research to prove to the government that changing the tax laws will not lose the U.S. any money.
• Association of Americans Resident Overseas (AARO): Based in Paris, this group represents Americans in more than 180 countries. They focus on many issues, including making sure expats can still vote and that their Social Security is protected.
• Democrats Abroad (Taxation Task Force): This is the official arm of the Democratic Party for people living outside the U.S. They run webinars and surveys to help expats understand the laws and lobby politicians to make things easier.
• Association of Accidental Americans (AAA): This group is famous for fighting in court. They represent people who are only U.S. citizens because of where they were born and are currently challenging the IRS in European courts over privacy rules.

The fight for a residency based tax system is closer than it has ever been, but it needs your help to get across the finish line. Lawmakers need to know that this is an important issue for regular families, not just the wealthy. Here are three things you can do right now to help:

1. Contact your representative in Congress. Even if you live abroad, you are still represented by the person in the district where you last lived in the U.S.. Call or write to their office and tell them you support the Residence Based Taxation for Americans Abroad Act (H.R. 10468). Ask them to sign on as a co-sponsor to show their support.
2. Share your personal tax story. Groups like Democrats Abroad and TFFAA look for real life examples of how these laws hurt regular people. If you have been denied a bank account or had to pay thousands of dollars in accounting fees, your story can help humanize the problem for politicians in Washington.
3. Support advocacy organizations. Groups like American Citizens Abroad and TFFAA are run by people who volunteer their time, but they need donations to pay for professional research and legal advice. Joining these groups or making a small donation helps them continue the hard work of lobbying Congress for a fairer system.

The U.S. tax system for expats is a leftover from a war that ended 160 years ago. Back then, it was meant to punish people for running away. Today, it mostly punishes regular people who just happened to move for a job or for a better life. By moving to a residency based system, the U.S. could finally treat its citizens abroad like people instead of suspects.

Historical Context

• National Archives: Civil War Tax Records
• IRS Historical Documents: Revenue Act of 1864 Report

News and Case Studies

• The Guardian: Boris Johnson Renounces U.S. Citizenship
• Tax Notes: Understanding the Accidental American
• The Brussels Times: Accidental Americans and Belgian Data Privacy

Legislative Text

• Full Draft of H.R. 10468