How to File United States Taxes as an Expat

The United States is one of only two countries in the world that taxes its citizens based on citizenship, not residence. That means American retirees who live in Mexico, Portugal, Thailand, or anywhere else still file a federal tax return with the Internal Revenue Service every year, even if they have not set foot in the United States in a decade. The rule applies to anyone with a United States passport or a green card who meets the income filing thresholds, which for most retirees include any year with more than a few thousand dollars in Social Security, pension, dividends, or interest. Most expat retirees end up owing little or no United States tax once they apply the available credits and exclusions, but the paperwork still has to be filed.

This guide is written for retirees who have at least a basic comfort with filing a tax return. Expat taxes are more complex than United States resident taxes, with extra forms, foreign account reporting, and treaty rules that interact in ways that confuse even experienced taxpayers. The most important advice up front: do not try to handle expat taxes alone unless your situation is unusually simple. Hire a tax professional who specifically advertises expat returns. The fee for a typical retiree return runs about $400 to $1,200 per year, depending on the complexity. A mistake on a single form can trigger penalties that dwarf the cost of doing it right, especially on foreign account reporting where penalties can reach tens of thousands of dollars per missed form.

The two biggest pieces of expat tax planning are the foreign earned income exclusion and the foreign tax credit. The exclusion lets a working expat exclude up to about $130,000 in wages from United States tax in 2026. Most retirees do not qualify because pension and Social Security income are not considered earned income. The foreign tax credit, on the other hand, applies to retirees who pay income tax in their country of residence, by giving them a dollar-for-dollar credit against United States tax on the same income. The interaction between the two systems and the tax treaty in your country of residence determines whether you owe taxes to both governments, only one, or neither.

This guide walks through the most common forms for retirees living abroad, the FBAR foreign bank account report, the Form 8938 statement of specified foreign financial assets, the foreign tax credit on Form 1116, the special rules for Social Security and pensions, the extended filing deadlines, and how to find an experienced expat tax preparer. Set aside several hours for a first read, and plan to spend a few weeks gathering documents before your first overseas return. After the first year, the process becomes routine.