Expat Tax Prep 2025: The Survival Guide Every American Abroad Needs

The Ugly Truth: Expat Taxes Didn’t Disappear When You Moved

Josh here. Bad news: just because you swapped cheeseburgers for tapas doesn’t mean the IRS forgot you exist. If you’re a U.S. citizen or green card holder, you’re on the hook for taxes—no matter where your passport stamps come from.

Every year, millions of Americans abroad miss deductions, botch forms, or assume “I don’t live in the U.S., so I don’t owe anything.” That’s how you end up paying double tax or racking up FBAR penalties that could buy you a small yacht.

So let’s fix that.

Rule #1: You Still Have to File

If your income in 2025 is over the standard threshold ($14,600 single / $29,200 married filing jointly), you must file a U.S. return. Doesn’t matter if you’ve lived in Lisbon for five years, teach English in Tokyo, or freelance from a hammock in Bali. Uncle Sam wants the paperwork.

What’s Different for Expats?

• Foreign Earned Income Exclusion (FEIE): You can exclude up to $126,500 of earned income if you qualify.
• Foreign Tax Credit (FTC): Already paying taxes abroad? This credit can offset your U.S. tax bill.
• FBAR (FinCEN 114): Have over $10,000 total across foreign bank accounts at any point? You must report it.
• State Residency Traps: Some states (looking at you, California) don’t let go easily.

The FEIE: Your New Best Friend (Mostly)

The Foreign Earned Income Exclusion sounds like a cheat code. Earn up to $126,500 and—poof—no U.S. taxes! Except, of course, it’s not that simple.

To qualify, you need to pass one of two tests:

1. Physical Presence Test: 330 full days abroad in a 12-month period. Miss it by one day? Miles did last year. He thought “layover in Dallas doesn’t count.” Spoiler: it did.
2. Bona Fide Residence Test: Prove you’ve made a home abroad. Lease, taxes, bank accounts—basically receipts.

Edge tip: Sometimes FTC is better than FEIE. Why? Because FEIE only covers earned income. That rental in Austin? Your dividends? They’re still taxable. FTC can cover those.

The FTC: Credit Where Credit Is Due

The Foreign Tax Credit lets you subtract taxes paid abroad from your U.S. bill. Pay €20,000 in French taxes? Claim the credit and reduce your U.S. liability.

The Miles Mistake:

Miles once tried to claim both FEIE and the full FTC on the same income. IRS laughed, then sent a letter. You can use both, but only strategically—stack them so FEIE covers salary while FTC shields passive income.

FBAR: The $10,000 Question

If you’ve got more than $10,000 (combined) across foreign accounts, you file an FBAR. Doesn’t matter if it’s checking, savings, or your side crypto wallet on Binance Malta.

Penalties if You Skip It:

• Non-willful: Up to $10,000 per violation.
• Willful: 50% of the account balance. Yes, you read that right.

Don’t be a Miles. He thought “but the account was in euros, not dollars.” Wrong answer.

State Residency: The Ghost Tax

Think you escaped state taxes by moving abroad? Not so fast. Some states cling harder than your ex:

• California, Virginia, New Mexico, South Carolina → You may still owe if you didn’t properly sever ties.
• Edge tip: Close voter registration, driver’s license, and bank accounts tied to your state. Leave clean.

Expat Tax Deadlines in 2025

• April 15: Standard U.S. deadline.
• June 16: Automatic expat extension (since June 15 is a Sunday).
• October 15: File Form 4868 for an additional extension.
• FBAR: April 15 (auto-extended to October 15).

Miles likes to file on October 14. Don’t be Miles.

Practical Survival Tips (Edge-Style)

• Keep a travel log. Missed days abroad kill FEIE eligibility.
• Save foreign payslips & tax returns. You’ll need them for FTC.
• Watch your foreign pension plans—some aren’t treaty-friendly.
• Self-employed abroad? You still pay U.S. Social Security unless a Totalization Agreement saves you.
• Use one folder for all bank balances. FBAR season = stress-free.

The Bottom Line

Living abroad is incredible. Filing taxes abroad? Less so. But if you know the rules—FEIE, FTC, FBAR, state traps—you can save thousands and sleep easy.

👉 Best move? Reach out and let an expat tax pro (hi, that’s me) handle the forms before the IRS handles you.

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