U.S. tax rules, FBAR filing and key deadlines

For young Americans who turn a study-abroad experience into a move overseas, taxes can become an added challenge.

Living abroad does not necessarily mean paying tax twice, but Americans may have to navigate filing requirements in both the U.S. and their country of residence.

Erin Collins, who leads the Taxpayer Advocate Service, an independent organization within the IRS, said in her latest annual report to Congress that the challenges facing taxpayers living abroad are among the “most serious problems” confronting American taxpayers. 

“As U.S. citizens, taxpayers abroad remain subject to U.S. tax laws, even though they must also comply with the tax requirements of the country in which they live and work,” Collins wrote to CNBC in an email. “Failing to comply with U.S. tax and foreign information reporting requirements can result in large penalties.”

College student Reese Charron tells CNBC that tax issues weren’t top of mind when she was studying in Valencia, Spain, earlier this year.

Charron, a 21-year-old senior at the University of Virginia, said the study-abroad experience gave her an opportunity to immerse herself in Spanish culture and a different way of life.

“I already speak the language, and I just loved how slow-paced [and] community-based the entirety of my experience was there,” Charron said. “I could very much see myself living there.”

However, that was before Charron learned about the tax obligations for Americans living abroad. Now, she said, she has more factors to consider before making a move.

U.S. citizens who are required to file a federal income tax return generally must report their worldwide income to the IRS, even if they live and work in another country, tax experts said.

However, that doesn’t necessarily mean they’ll face double taxation.

“Filing a U.S. return, especially if you are fully living abroad, does not mean that you necessarily are going to have to pay U.S. taxes and taxes to the country that you’re living in,” said Sheneya Wilson, a certified public accountant and CEO of Fola Financial, based in New York.

One provision that may help some Americans abroad is the foreign earned income exclusion.

For the 2026 tax year, eligible taxpayers may be able to exclude up to $132,900 of foreign earned income from U.S. federal income taxes.

However, the exclusion isn’t automatic. Taxpayers must meet specific requirements and generally must file a U.S. tax return to claim it.

To qualify, the IRS says you must be a “bona fide resident” of a foreign country or countries for an uninterrupted period that includes an entire tax year or be “physically present” for at least 330 full days during a 12-month period.

Depending on their circumstances, Americans abroad should also consider the foreign tax credit for income taxes paid to another country if they owe U.S. tax on the same earnings, tax experts said.

This break allows qualifying consumers to take either a credit or itemized deduction for foreign taxes paid. However, if you use the foreign earned income exclusion, you cannot claim the foreign tax credit. You must file a U.S. income tax return to claim this credit.

U.S. citizens living abroad who meet certain requirements generally get an automatic two-month extension to file their federal income tax return and pay federal income tax, according to the IRS. However, interest on unpaid tax generally accrues from the regular April federal return deadline. 

Opening an everyday checking or savings account in another country could introduce a reporting obligation expats never encountered while living in the U.S., tax experts said.

For example, Americans may be required to file a Report of Foreign Bank and Financial Accounts, or FBAR, with the Financial Crimes Enforcement Network, a bureau within the U.S. Treasury Department. An FBAR is generally required when the combined value of a person’s foreign financial accounts exceeds $10,000 at any point during the calendar year.

“You don’t necessarily pay taxes on the money that you have in this foreign bank account,” Wilson said. “It’s just a U.S. filing requirement.”

The FBAR is generally due April 15 after the calendar year the taxpayer is reporting, with an automatic extension to Oct. 15 if that deadline is missed.

A single U.S. taxpayer living in a foreign country must also generally file a separate form directly with the IRS as part of their annual federal income tax return to report specified foreign financial assets worth more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the year.

Before accepting an overseas job or making a move, Americans should understand how living in another country could affect their income taxes, bank and investment accounts, and other financial obligations, experts said. 

Tax rules in the country where an American lives or works vary, so the filing and payment requirements will depend on the jurisdiction and individual’s circumstances.

Wilson said she recommends consulting tax professionals familiar with the rules in both the U.S. and the country in which they plan to live.

Understanding where you’ll need to file, what you’ll need to report, and how the two countries’ tax systems interact can help prevent an unexpected tax problem.

“I don’t think I really ever thought about it,” Charron said. “And now that I am thinking about it, it’s like, okay, so how much tax? What would it look like?”

— CNBC’s Stephanie Dhue contributed reporting.

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