US Expat Tax Guide 2026: FBAR, FATCA Form 8938, FEIE & Tax Treaties

US Citizenship-Based Taxation

The United States is one of only two countries in the world (along with Eritrea) that taxes its citizens on worldwide income regardless of where they live. If you're a US citizen or green card holder living abroad, you must file US taxes and report foreign income - even if you've lived overseas for decades.

This creates a unique burden for the estimated 9 million Americans living abroad. You're subject to:

Annual US income tax filing requirements
Foreign bank account reporting (FBAR)
Foreign asset reporting (FATCA/Form 8938)
Complex rules around foreign investments
Potential double taxation scenarios

Who Must File US Taxes From Abroad

Category	Filing Required?	Notes
US citizens	Yes	Regardless of residence
Green card holders	Yes	Until formally abandoned
Former citizens (exit tax)	Possibly	If "covered expatriate"
US expats born abroad	Yes	If US citizen by birth
Dual citizens	Yes	US citizenship triggers filing

2026 Filing Thresholds for Expats

Filing Status	Under 65	65 or Older
Single	$14,600	$16,550
Married Filing Jointly	$29,200	$30,750 - $32,300
Married Filing Separately	$5	$5
Head of Household	$21,150	$23,100

Note: Self-employed individuals must file if they have $400 or more in net self-employment income, regardless of other thresholds.

Extended Filing Deadline for Expats

US expats receive an automatic 2-month extension to file (June 15 instead of April 15). However, interest on any tax owed still begins April 15. You can request an additional extension to October 15 using Form 4868.

FBAR: Foreign Bank Account Reporting

The Report of Foreign Bank and Financial Accounts (FBAR) is one of the most important - and most commonly missed - requirements for Americans abroad.

FBAR Basics

Requirement	Details
Form	FinCEN 114 (filed electronically)
Threshold	$10,000 aggregate at any point during year
Filing deadline	April 15 (automatic extension to October 15)
Where to file	FinCEN BSA E-Filing System
Record retention	5 years

What Accounts Must Be Reported

Account Type	Report on FBAR?	Notes
Bank accounts	Yes	Checking, savings
Securities accounts	Yes	Brokerage accounts abroad
Mutual fund accounts	Yes	Including foreign mutual funds
Retirement accounts	Yes*	Foreign pension plans
Insurance with cash value	Yes	Foreign life insurance policies
Signature authority accounts	Yes	Employer accounts you can access
Cryptocurrency on foreign exchanges	Yes*	IRS position still evolving

FBAR Penalties

FBAR penalties are severe and separate from IRS penalties:

Violation Type	Penalty	Notes
Non-willful violation	Up to $16,117 per violation	Per account, per year
Willful violation	Greater of $161,170 or 50% of account balance	Criminal penalties possible
Criminal penalties	Up to $250,000 and/or 5 years prison	For willful violations

The $10,000 threshold is aggregate. If you have 5 accounts with $3,000 each (totaling $15,000), you must file FBAR for ALL accounts, not just those over $10,000.

FBAR Example

Account	Maximum Balance During Year
French checking account	$4,500
French savings account	$3,200
UK brokerage account	$8,000
Total	$15,700
FBAR Required?	Yes (over $10,000)

FATCA and Form 8938

The Foreign Account Tax Compliance Act (FATCA) requires reporting of foreign financial assets on Form 8938 - separate from FBAR.

Form 8938 vs FBAR Comparison

Feature	Form 8938	FBAR (FinCEN 114)
Filed with	IRS (with tax return)	FinCEN (separately)
Threshold (US residents)	$50,000 year-end / $75,000 any time	$10,000 any time
Threshold (expats)	$200,000 year-end / $300,000 any time	$10,000 any time
What's reported	Broader - includes foreign stocks, partnership interests	Bank and financial accounts only
Penalty for non-filing	$10,000 per violation	$16,117 - $161,170+

Form 8938 Thresholds for Expats

Filing Status	Year-End Value	Any Time During Year
Single (abroad)	$200,000	$300,000
Married Filing Jointly (abroad)	$400,000	$600,000
Single (in US)	$50,000	$75,000
Married Filing Jointly (in US)	$100,000	$150,000

Assets Reported on Form 8938

Foreign bank accounts
Foreign brokerage accounts
Foreign stock certificates
Foreign partnership interests
Foreign mutual funds
Foreign hedge funds
Foreign pension accounts
Foreign deferred compensation plans
Foreign life insurance with cash value

FATCA Impact on Foreign Banks

FATCA also requires foreign financial institutions to report US account holders to the IRS. This has caused many foreign banks to refuse American customers entirely due to compliance costs. Common challenges:

Banks refusing to open accounts for Americans
Existing accounts closed
Investment options limited
Higher fees for US persons

Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion (FEIE) lets qualifying expats exclude foreign wages from US taxation.

2026 FEIE Limits

Exclusion Type	2026 Limit	Notes
Foreign Earned Income Exclusion	$130,000	Per person (indexed for inflation)
Housing Exclusion	Variable by location	16% of FEIE base + high-cost adjustment

Qualifying for FEIE

You must meet ONE of two tests:

Test	Requirements	Best For
Bona Fide Residence Test	Full tax year as resident of foreign country with no intention to return	Long-term expats, established abroad
Physical Presence Test	330 full days in foreign country during any 12-month period	Contractors, digital nomads

What Qualifies as Foreign Earned Income

Income Type	Eligible for FEIE?	Notes
Foreign wages/salary	Yes	Primary use
Self-employment income	Yes*	*Still subject to SE tax
Foreign bonuses	Yes	If for foreign services
Investment income	No	Dividends, interest, gains
Rental income	No	Passive income
Social Security	No	Not earned income
Pension distributions	No	Not earned income
US employer wages for foreign work	Yes	If physically abroad

FEIE Example Calculation

Item	Amount
Foreign salary	$150,000
FEIE exclusion (2026)	$130,000
Housing exclusion (London, estimated)	$18,000
Taxable in US	$2,000

Self-Employment Tax Warning

Even with FEIE, self-employed expats still owe US self-employment tax (15.3%) unless covered by a totalization agreement with their country of residence.

Foreign Tax Credit

The Foreign Tax Credit (FTC) prevents double taxation by allowing you to offset US taxes with taxes paid to foreign governments.

FTC vs FEIE Comparison

Feature	Foreign Tax Credit	FEIE
Reduces US tax by	Dollar-for-dollar credit	Excluding income
Applies to	All income types	Earned income only
Income limit	None	$130,000 (2026)
Carryover	Yes (10 years)	No
Best for	High-tax countries	Low-tax countries

When to Use FTC vs FEIE

Situation	Best Choice	Why
Living in high-tax country (UK, France, Japan)	FTC	Foreign taxes often exceed US tax
Living in low/no-tax country (Dubai, Singapore)	FEIE	No foreign taxes to credit
Income over $130,000	FTC + FEIE combo	FEIE has limits
Significant investment income	FTC	FEIE doesn't cover investments
Retirement	FTC	No earned income for FEIE

FTC Calculation Example

Item	Amount
Foreign salary	$200,000
Foreign tax paid (40%)	$80,000
US tax on same income (est. 30%)	$60,000
FTC allowed (limited to US tax)	$60,000
US tax after FTC	$0
Excess FTC to carry forward	$20,000

US Tax Treaties

The US has income tax treaties with about 70 countries. These can provide relief from double taxation and sometimes reduce withholding rates.

Key Treaty Provisions

Provision	Benefit	Countries
Reduced withholding on dividends	Often 15% instead of 30%	Most treaty countries
Pension exemption	Pensions taxed only in residence country	UK, Germany, Canada, others
Social Security provisions	Avoid double social security tax	Totalization agreement countries
Teacher/researcher exemption	2-3 year tax exemption	Many countries
Student exemption	Income from services often exempt	Many countries

Totalization Agreements

These agreements prevent double social security taxation. The US has totalization agreements with:

Region	Countries
Europe	UK, Germany, France, Italy, Spain, Netherlands, Belgium, Ireland, Sweden, Norway, Finland, Denmark, Austria, Switzerland, Portugal, Poland, Czech Republic, Slovakia, Hungary, Greece, Luxembourg
Asia-Pacific	Japan, South Korea, Australia
Americas	Canada, Chile, Brazil, Uruguay
Other	Israel

Investment Considerations for Expats

PFIC Rules - The Expat Investment Trap

Passive Foreign Investment Companies (PFICs) are subject to punitive US tax treatment. Most foreign mutual funds qualify as PFICs.

Investment Type	US Tax Treatment	Recommendation
US-based index funds (VTI, VOO)	Normal capital gains	Generally best for expats
Foreign mutual funds	PFIC - punitive	Avoid
Foreign ETFs	PFIC - punitive	Avoid
Individual foreign stocks	Normal capital gains	OK, but reporting burden
Foreign pension contributions	May not be tax-deferred in US	Check treaty

PFIC Tax Consequences

Gains taxed at highest ordinary income rate (37%) regardless of holding period
Interest charged on "deemed" distribution over holding period
Complex annual reporting on Form 8621
No step-up in basis at death

The PFIC rules essentially make foreign mutual funds toxic for US persons. Stick with US-domiciled funds and ETFs wherever possible, even if living abroad.

Recommended Investment Approach for Expats

Investment Need	Recommended Vehicle	Why
Stock exposure	US-domiciled ETFs (VT, VTI, VXUS)	Avoids PFIC
Bond exposure	US-domiciled bond funds	Avoids PFIC
Retirement savings	US IRA/401(k) if eligible	Treaty protection varies
Cash	US bank or FDIC-insured	Avoids FBAR complexity

Expat Tax Compliance Checklist

Annual Filing Requirements

Form	Due Date	Who Must File
Form 1040 (Tax Return)	June 15 (auto extension)	All US citizens with income above threshold
FBAR (FinCEN 114)	April 15 (auto extension to Oct 15)	Foreign accounts over $10K aggregate
Form 8938 (FATCA)	With tax return	Foreign assets over $200K (expat threshold)
Form 2555 (FEIE)	With tax return	To claim foreign earned income exclusion
Form 1116 (FTC)	With tax return	To claim foreign tax credit
Form 8621 (PFIC)	With tax return	If you own foreign mutual funds
Form 3520/3520-A	With tax return	Foreign trust beneficiaries
Form 5471	With tax return	Owners of foreign corporations

Key Deadlines Summary

Deadline	What's Due	Extension Available?
April 15	Tax payment due (no extension)	No - interest accrues
April 15	FBAR due	Auto to Oct 15
June 15	Tax return (expats auto extension)	Can extend to Oct 15
October 15	Extended tax return deadline	Final deadline

Common Expat Tax Mistakes

Not filing at all: Believing you don't owe taxes means you don't need to file
Forgetting FBAR: Separate from tax return, severe penalties
Investing in foreign funds: PFIC rules create tax nightmares
Not claiming FEIE or FTC: Paying tax you could have avoided
Missing Form 8938: Additional penalties on top of FBAR
Using foreign financial advisors: Often unfamiliar with US tax rules
Contributing to foreign pensions without US tax analysis: May not be deductible in US

Getting Into Compliance

If you've been non-compliant, options include:

Program	Best For	Penalties
Streamlined Foreign Offshore	Non-willful expats	0% (no penalties)
Streamlined Domestic Offshore	US residents, non-willful	5% of foreign assets
Delinquent FBAR Submission	Only missed FBAR, otherwise compliant	Usually none
Quiet disclosure	Some practitioners recommend	Risk of audit, penalties

US expat taxation is among the most complex in the world. The combination of citizenship-based taxation, multiple reporting requirements, and anti-deferral rules for foreign investments creates a significant compliance burden. Working with a tax professional experienced in expat issues is strongly recommended.

This is educational content, not tax or legal advice. Expat tax situations are highly complex and vary by country. Consult a qualified tax professional specializing in US expat taxation for advice specific to your situation.