Overseas Tax Services

US Income Tax Preparation for Americans Living Abroad

First Year Overseas

If this is your first year living overseas, you probably have a number of questions about how to deal with the whole “overseas tax thing.” The Overseas Tax Q&A and Foreign Earned Income Exclusion pages will give you a more thorough explanation of some of the issues you need to know, but following is a quick synopsis of the key issues for first-time overseas filers.

  1. You do need to file a tax return. You may have heard that your salary is all or partly “tax free.” If you meet certain requirements, it is true that you may not owe any US income tax on your foreign earned income. However, you are still required to file a US tax return every year, even if you owe no taxes.
  2. For 2021, up to $108,700 of foreign earned income may be excluded from US income tax. (For 2022, the limit will be $112,000.) (See Qualifying for the Foreign Earned Income Exclusion on the Overseas Tax Q&A page.) If you only lived overseas for part of the year, this amount is prorated to the proportion of the year in which you lived and worked overseas.
  3. When you live overseas, you are allowed an automatic two-month extension to file your tax return, until June 15th. You do not need to make a special request for this.
  4. If you expect to qualify for the exclusion, your first year abroad you will often need to request a lengthier extension until you have passed either the Bona Fide Residence Test (living overseas a full calendar year and meeting some other requirements) or the Physical Presence Test (being overseas 330 days in a 12-month period). See the Overseas Tax Q&A page for more complete details. The extension request should be filed as early as possible, and definitely before June 15.
  5. In some situations, or if you don’t qualify for the exclusion, it may be preferable to claim the Foreign Tax Credit instead of or in addition to the Foreign Earned Income Exclusion. If you are subject to foreign income tax, particularly in a country whose tax rates are higher than in the US, you may be able to offset some or all of the US tax on your foreign income.

Read the Overseas Tax Q&A and Foreign Earned Income Exclusion pages to get more of your questions answered.