Understand your first-year tax requirements
When you move overseas for the very first time, navigating “new expat tax essentials” can feel daunting. From understanding your tax obligation to gathering the right documents, your first year of filing as an American abroad might introduce a blend of excitement and anxiety. Rest assured that with the right guidance, you can meet these responsibilities and feel confident as you settle into your new life abroad.
U.S. citizens and resident aliens remain subject to federal income tax on worldwide income the moment you set foot on foreign soil. That means any wages, salary, freelance income, or other taxable earnings must be reported. According to the IRS, your responsibilities do not end simply because you have left the United States. If you earn more than the standard deduction for your filing status, you generally must file a U.S. tax return. For 2025, for example, the standard deduction for a single filer under 65 is set at $15,750.
Determining your filing threshold
You want to confirm whether your income surpasses the relevant threshold. This income threshold aligns with your filing status, age, and type of income. If your net self-employment earnings are over $400, you must file, even if your gross income does not exceed the standard deduction. Being aware of your threshold helps you decide whether you need to file or if you fall beneath U.S. requirements.
Common first-year documents
• W-2s or other employer-issued statements
• 1099 forms for contract or freelance work
• Bank statements for interest income
• Self-employment income statements
• Any relevant foreign tax statements
If you start by gathering these essentials, you will have fewer surprises when tax season arrives. You can explore more about responsibilities in your new situation in our guide on expat tax filing requirements.
Identify key tax benefits
One of the most important aspects of new expat tax essentials is understanding the unique benefits you can claim. The U.S. tax system is designed so you do not pay double taxes on the same income if you meet certain conditions. Specific exclusions and credits can substantially lower your taxable income or eliminate U.S. liability entirely.
Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion (FEIE) allows you to exclude up to $130,000 of foreign income for the 2025 tax year. This means if you are a qualifying expat and your taxable foreign earnings are below that threshold, your U.S. tax could be erased or significantly reduced. However, it is only applicable to earned income (like salaries, wages, and tips) and not to passive income (e.g., dividends or capital gains). You must pass either the Physical Presence Test or the Bona Fide Residence Test to claim it. These tests essentially verify that you really live and spend most of your time abroad.
Foreign Housing Exclusion or Deduction
On top of FEIE, you can also claim the Foreign Housing Exclusion if you are an employed expatriate, or a Foreign Housing Deduction if you are self-employed. This provision helps you deduct certain housing costs, including rent and utilities, though it has a base housing amount and a maximum limit. For 2025, the base allowance is $20,800, and the maximum expense limit is $39,000. If you live in a high-cost city abroad, exploring these housing benefits can bring substantial savings.
Foreign Tax Credit (FTC)
Instead of excluding your foreign income, you can choose to claim a Foreign Tax Credit (FTC). By choosing the FTC, you keep the income reported on your U.S. taxes but receive a credit for any foreign tax paid. This eliminates double taxation on the same income. For instance, if your foreign tax rate is higher than what you might pay in the U.S., the FTC often works better than the FEIE. This is particularly relevant if you want to remain eligible for certain tax credits tied to your income level, such as refundable child tax credits or continuing U.S. IRA contributions.
In deciding between FEIE and FTC, many new expats automatically pick FEIE without considering long-term planning. Yet sometimes, the FTC might yield a better outcome. If you want help figuring out the optimal route, check out our expat tax pre-move planning articles or speak to a qualified tax professional.
Prepare for important deadlines
Your first year of filing is not just about meeting standard deadlines. As an American abroad, you receive an automatic two-month extension beyond the standard April 15 due date. So, if you usually file by April, you have until June 15 to submit your federal tax return without needing a separate extension. Keep an eye on all relevant timelines though, because missing these dates may lead to penalties and additional interest.
Key dates and extensions
• April 15 – Usual U.S. federal income tax deadline if you reside stateside
• June 15 – Automatic two-month extension for U.S. expats
• October 15 – Possible extension if you file Form 4868 before June 15
If your first year abroad spans only part of the calendar year, calculate your foreign earned income carefully to distinguish it from U.S. income. This may require pro-rating certain exclusions or filing special elections.
Because deadlines can be confusing, especially when juggling life in a new country, it is wise to organize early. Set yourself reminders for each important date in your calendar or use a digital task manager. You can also read more about these timelines in our US expat tax deadlines resource.
Manage foreign accounts and compliance
As soon as you open a bank account in your host country, you step into a realm of additional reporting obligations. The U.S. government requires you to disclose your foreign financial accounts if the total value of those accounts exceeds $10,000 at any time during the year. This disclosure is handled through the Report of Foreign Bank and Financial Accounts (FBAR).
FBAR essentials
You must file your FBAR electronically using FinCEN Form 114 by April 15 each year. If you need extra time, there is an automatic extension to October 15. The FBAR is separate from your tax return and focuses only on the aggregate maximum values in your foreign accounts. Whether or not your foreign account produces income, if it crosses the $10,000 threshold, you must file. Noncompliance could lead to hefty penalties.
Additionally, certain taxpayers must file Form 8938 under the Foreign Account Tax Compliance Act (FATCA) if they meet specified asset thresholds. Think of FATCA as similar to FBAR but with additional detail about these foreign assets. You can read more about staying compliant in our US expat tax compliance article.
Protecting your identity with an IP PIN
Another compliance topic to remember is your Identity Protection PIN (IP PIN). According to the IRS, you need a correct IP PIN to electronically file your return. The IRS never requests this number via phone or email. Keep it confidential and use it only for filing. Rely on official IRS channels and always remain vigilant against phishing or scam attempts.
Plan your move with confidence
Before you move, it is beneficial to design a strategy around taxes, finances, and cost-of-living differences. This includes choosing the right time to leave, how you handle your housing or property in the U.S., and whether you need to restructure your assets.
Timing your move
If you know you will be abroad for 330 days or more in a 12-month period, consider how leaving earlier or later in the year affects your qualifications for FEIE or the Bona Fide Residence Test. For instance, if you move in mid-year, your foreign earned income for that partial year might qualify for a pro-rated exclusion. However, ensuring you meet the thresholds can be easier if you have a longer stretch outside the U.S.
Handling U.S. ties
If you keep a U.S. bank account, house, or car, these items do not prevent you from qualifying for foreign exclusions, but they can complicate your situation if you rent them out for profit or receive income on any of them. Be mindful of how any U.S.-based income might interact with your new host-country taxes.
Planning effectively could help you save money and cope better with the complexities of living overseas. You can read more pre-departure tips in our pre-move expat tax strategy and moving abroad tax tips resources. If you prefer a broader look at the entire expat tax process, our US expat tax guide has a wealth of information for each stage of your journey.
FAQs about new expat tax essentials
1. What if I don’t earn enough to file?
Whether or not you must file depends on your total income. If your income is below the standard deduction (and you have no self-employment income above $400), you might not be required to file. However, there are scenarios where filing voluntarily might give you access to certain credits or maintain important records. Always confirm your threshold is accurately calculated.
2. Do I need to worry about state taxes?
State tax requirements vary. Some states consider you a resident until you establish domicile elsewhere. Others are more flexible once you leave the country. Investigate your state’s guidelines before you fully assume state taxes no longer apply. State residency rules may complicate your overall plan, so consult a professional if unsure.
3. How do I choose between FEIE and FTC?
It depends on your earnings, your foreign tax rate, and whether you want to preserve eligibility for certain credits or retirement contributions. If you pay high foreign taxes, the FTC is often more beneficial. If you pay no or minimal foreign taxes, the FEIE could be more advantageous. A reputable tax professional or a detailed review of both options can help you select the best path.
4. Are extensions always automatic for expats?
Yes. If you live abroad, you usually qualify for an automatic two-month extension until June 15. If you need even more time, you can file Form 4868 before June 15 to request an extension up to October 15. Keep in mind that if you owe taxes, interest still applies from April, even though the filing deadline is extended.
5. What is the FBAR penalty for late filing?
FBAR penalties can be severe, ranging from non-willful penalties starting around $10,000 to willful penalties that can be far higher. Even if you do not owe tax, failing to file an FBAR when required can lead to steep fines. It is worth staying on top of your filing obligations to protect both your finances and your peace of mind.
Key takeaways
• You are still subject to U.S. tax on all worldwide income. Report any foreign income that pushes you above the standard deduction for your filing status.
• The Foreign Earned Income Exclusion (FEIE) can exclude up to $130,000 of income in 2025. Alternatively, the Foreign Tax Credit (FTC) might be a better fit if you pay substantial taxes abroad.
• As an American abroad, you receive an automatic filing extension until June 15, but you can request additional time until October 15.
• If you have foreign bank accounts exceeding $10,000, file an FBAR, and consider Form 8938 if you hold assets above certain thresholds.
• Smart pre-move planning, such as timing your relocation and adjusting your U.S. ties, helps optimize your tax strategy in your first year.
We understand that dealing with taxes while settling in a new country can feel overwhelming. With the right knowledge, however, you will build a strong foundation for your expatriate life. For detailed assistance, consider reaching out to a specialized firm like American Pacific Tax for personalized, empathetic guidance. Their expertise can help you handle new expat tax essentials, from filing deadlines and forms to beneficial exclusions and credits.
If you want to bolster your preparation even further, take a look at our expat tax preparation checklist so you can step into the tax season fully equipped. By managing these responsibilities early, you will enjoy more energy for exploring your new surroundings and embracing the vibrant experiences of expat life. Here’s wishing you a smooth and rewarding first year abroad!
