Living Abroad? A Guide to Your U.S. Tax Filing

If you're a U.S. citizen or resident alien living abroad, you generally still need to report your worldwide income when you file a U.S. tax return. Tax you've paid to another country may reduce what you owe in the United States.

You may also need separate reports for foreign accounts and investments, even when no U.S. income tax is due. The main rules cover income, foreign accounts, investments, gifts, and trusts.

Report your income, wherever you earned it

Foreign wages, business income, rent, pensions, and investment income generally belong on the U.S. return. The foreign tax credit and foreign earned income exclusion are two provisions that can help reduce double taxation.

Question	Foreign tax credit	Foreign earned income exclusion
What does it do?	Reduces U.S. income tax for qualifying foreign income taxes.	Excludes qualifying earnings from U.S. income tax, up to $132,900 for 2026.
What income can qualify?	Wages, business income, pensions, and investments, subject to the credit rules.	Wages and self-employment income from work abroad. Not pensions or investment income.
Who can use it?	U.S. citizens and resident aliens with qualifying foreign income taxes.	Eligible taxpayers who meet the foreign tax home and time-abroad rules.
Does it reduce self-employment tax?	No.	No.

The foreign earned income exclusion requires a foreign tax home, generally your main place of work. You must also meet a qualifying residence test covering a full tax year or spend at least 330 full days in foreign countries during 12 consecutive months. The residence test has additional conditions for resident aliens.

The credit and exclusion must be coordinated. Foreign taxes on excluded income generally can't also support a credit. Revoking an exclusion election generally prevents choosing it again for five years without IRS permission.

For self-employed taxpayers, a social insurance agreement between the United States and another country may prevent paying into both systems. Coverage must be assigned to the foreign country, and proof of that coverage is generally attached to the U.S. return.

Foreign accounts may require separate reports

The Report of Foreign Bank and Financial Accounts, called the FBAR, generally applies to U.S. persons whose reportable foreign accounts exceed $10,000 in total during the year. Accounts with no interest income can still count, as can accounts over which you have signature authority.

For example, each person below owns just two reportable foreign accounts. These are their highest balances for the year, in U.S. dollars, and no reporting exception applies.

Account or result	Person A	Person B
Foreign checking account	$6,000	$6,000
Foreign savings account	$3,000	$5,000
Combined total	$9,000	$11,000
FBAR required?	No	Yes, report both accounts

The total uses each account's highest annual balance. The peaks don't have to fall on the same day, and accounts closed during the year can still be reportable.

The FBAR is filed separately with the Treasury Department's Financial Crimes Enforcement Network, known as FinCEN. Form 8938 is a different report, filed with your income tax return, that covers certain foreign financial assets. You may need both.

For individuals who meet the IRS definition of living abroad, Form 8938 generally applies above $200,000 at year-end or $300,000 at any time during the year. For a joint return, those limits are $400,000 and $600,000. The higher limits require a foreign tax home and the residence or physical-presence conditions specific to this form. If you aren't required to file an income tax return, you don't have to file Form 8938. The FBAR rules still apply separately.

Foreign investments and retirement accounts

Foreign mutual funds, ETFs, pensions, and savings plans can receive different tax treatment in the United States than in the country where they're held.

Many foreign funds fall under special U.S. rules for passive foreign investment companies, or PFICs. These can require a separate Form 8621 for each fund and can produce additional tax and interest. Some reporting exceptions apply, but a small balance alone doesn't establish an exception. Have the holdings reviewed before buying or selling.

Gifts, inheritances, and trusts

A genuine gift or inheritance generally isn't income to the recipient. A U.S. person may still need Form 3520 when gifts or bequests from a foreign individual who isn't a U.S. tax resident, or from a foreign estate, exceed $100,000 during the year. Related donors' gifts are added together. Gifts from foreign corporations or partnerships have a lower reporting threshold of $20,573 for 2026 and may have different tax treatment. Trust distributions follow separate rules.

Creating or funding a foreign trust, having an ownership interest, or receiving a trust distribution can trigger U.S. reporting.

Form 3520 is filed separately from your income tax return, although its deadline generally follows that return's due date, including extensions. A foreign trust with a U.S. owner may also need Form 3520-A, which has an earlier deadline. If the trust hasn't filed, its U.S. owner may need to attach a substitute Form 3520-A to Form 3520 by that form's deadline.

If a past filing missed something

A missed international information return can lead to a penalty even when no U.S. income tax is due. The available correction procedure depends on which filing was missed and why.

Missing report	Possible penalty
Form 8938	$10,000 initially. If the failure continues more than 90 days after IRS notice, additional $10,000 penalties apply for each 30 days or part of that period, up to $50,000 more.
Form 3520 for a foreign gift	5% of the unreported gift for each month, up to 25%.

Reasonable-cause relief may apply to these penalties. FBAR penalties follow separate rules. The IRS Streamlined Filing Compliance Procedures may help eligible taxpayers whose failures resulted from negligence, mistakes, or a good-faith misunderstanding of the rules. Taxpayers already under an IRS civil examination or criminal investigation aren't eligible.

Keep filing dates separate from payment dates

These are the usual annual deadlines for calendar-year filers. A weekend, legal holiday, or applicable disaster relief can change a due date.

Usual date	What to check
March 15	Form 3520-A for a calendar-year foreign trust. A timely Form 7004 generally extends filing to September 15.
April 15	Individual income tax return and payment. Interest generally starts accruing on unpaid tax after this date.
June 15	Automatic filing and payment extension for eligible taxpayers abroad. Interest still runs from the regular April due date.
October 15	Individual return with a filing extension. The FBAR receives an automatic extension to this date.

The automatic June extension generally applies if, on the regular due date, your tax home and main place of business or post of duty are outside the United States and Puerto Rico, or you're serving in the military abroad. Attach the required explanation to your return. A further extension to October gives more time to file, not more time to pay.

Ohio residency

Ohio residency depends on domicile, your permanent home for tax purposes. Moving overseas doesn't automatically end it. A permanent change during the year may make you a part-year resident. Ohio's resident credit doesn't cover income taxes paid to a foreign country.

Contact Schultz CPA, LLC if you have questions. Learn more about our tax preparation services.

This article provides general information. Your filing requirements depend on your circumstances.