What Americans need to know about taxes when moving abroad?
More Americans are leaving the U.S. in 2025, moving to Portugal, Spain, France, the UK and beyond. But one thing follows them everywhere: U.S. taxation. This is not a scare tactic, it’s the law.
Here’s a simple, clear overview of what every U.S. citizen needs to know before becoming an expat.
1. The U.S. taxes you no matter where you live
The U.S. is one of the only countries in the world withcitizenship-based taxation.
This means:
- You must file a U.S. tax return every year – even if you live abroad
- You must report your global income – even if it’s earned in another country
- You may still owe tax in the U.S., even after paying taxes abroad
Moving does not end your relationship with the IRS.
2. You also become a taxpayer in the country you move to
Most countries tax based onresidency. So, if you live in Portugal, the UK or France, you pay taxes there too.
So as a U.S. citizen abroad, you live in atwo-tax-system world.
3. Won’t that mean being taxed twice?
Sometimes – but tax treaties and foreign tax credits are designed to reduce or eliminate double taxation.
Still, it’s not as simple as “pay in one country, request credits in the other” It all depends on:
- The type of income (salary, pension, rental, dividends, Social Security, etc.)
- The treaty in place between the two countries
- Which country has the primary right to tax that income
- If there’s no treaty, you might end up paying tax in both countries
4. Tax residency is not just “where you spend 183 days”
People think tax residency is only about days. It’s not that simple.
You can be considered tax resident:
- In the U.S., because you’re a citizen
- In another country, because you spend time there or have a home there
- Inboth countries at once
When you’re deemed a tax residents in two jurisdiction, treaties decide where you are considered a resident for double taxation purposes using“tie-breaker rules”, based on permanent home, family, economic ties and center of life.
5. LLCs, S-Corps and U.S. companies become a problem abroad
This is one of the biggest surprises for Americans overseas.
- LLCs: taxed as a transparent/pass-through entity in the U.S., but could be treated differently in other countries, as Portugal or Italy.
- S-Corps: since the structure usually has a salary/compensation component linked to it, it could be problematic. Once you work from another country, that country may demand payroll tax, business registration and local accounting.
- Foreign companies you set up abroad: can trigger U.S. rules likeCFC (Controlled Foreign Corporation)– could lead to more filing and tax risk.
In short: the company structures that work in the U.S. do not always work overseas.
6. Bank accounts and reporting rules (FBAR / FATCA)
Bank reporting can also present challenges. If the total balance of your foreign bank accounts exceeds $10,000 at any point during the year, you’re required to file an FBAR.
Other assets - such as pensions, investments, business interests, or cryptocurrency - may also trigger FATCA reporting obligations.
Failing to file can result in severe penalties, so staying compliant and planning ahead is crucial.
7. Retirement accounts (401k, IRA, Roth IRA) abroad
- Traditional IRAs and 401(k)s are usually tax-deferred in both the U.S. and abroad
- Roth IRAs could present a challenge– tax-free in the U.S., but many countries do not recognize the exemption and may tax the growth of the account
- Some countries with wealth tax may tax the account value itself
Leaving the U.S. doesn’t end your U.S. tax obligations.
It adds another layer on top, a second country’s tax system.
So before moving, every American should understand:
- You still file U.S. taxes
- You also file local taxes
- Treaties and tax credits exist, but they’re not automatic
- U.S. company structures (LLC, S-Corp) can become a problem
- Bank accounts, pensions and retirements must still be reported
- Planning before moving is worth more than fixing mistakes later
