U.S. and cross-border taxes, explained simply.

US citizens owe US federal income tax on worldwide income no matter where they live, so a US return stays due every year the income thresholds are met. Foreign wages, self-employment profit, investments, pensions and rental income all count. Separate reports cover foreign bank accounts and assets. Treaties, exclusions and credits reduce the bill rather than the filing duty.

The calendar abroad runs on two clocks

The regular due date for a calendar-year Form 1040 is 15 April. A US citizen living outside the United States and Puerto Rico, whose main place of business or post of duty is abroad, gets an automatic two-month extension to 15 June without requesting it. Publication 54 requires a statement attached to the return explaining which qualifying situation applies.

Those two months move the filing date and nothing else. Publication 54 states that even where an extension is allowed, interest is charged on any tax not paid by the regular due date — so 15 June sits on top of a 15 April payment deadline. Form 4868 filed by 15 June then carries the return to 15 October, with the line 8 box for being out of the country checked, and taxpayers still abroad can request a discretionary further two months, to 15 December, by letter sent before 15 October. Each step extends filing alone.

Host-country calendars rarely align with any of this. Portugal’s tax authority runs the IRS declaration for 2025 income from April to June 2026, with tax payable by 31 August 2026. Japan’s National Tax Agency sets the 2025 final return period at 16 February to 16 March 2026. A US return can fall due before the foreign tax it accounts for is even assessed.

Exclusion or credit, and why the answer moves with the map

The foreign earned income exclusion is claimed on Form 2555, with a maximum of $130,000 for tax year 2025. Qualifying runs through one of two tests: bona fide residence in a foreign country for an uninterrupted period covering an entire tax year, or physical presence abroad for at least 330 full days in any 12 consecutive months. A housing exclusion sits on top, capped for most locations at $39,000 for 2025 — 30 percent of the $130,000 maximum.

The exclusion reaches earned income only: wages, salaries, professional fees and other amounts paid for personal services. Investment income and pensions fall outside it. The foreign tax credit, claimed on Form 1116, works on a different axis, offsetting US tax with foreign income, war profits and excess profits taxes actually imposed. The two do not stack on the same dollar — where foreign earned income is excluded, no credit is available for the taxes paid on that excluded income.

That single rule is why the answer differs by country. Where the effective foreign rate on employment income sits above the US rate, the credit tends to absorb the whole US liability, while the exclusion strands the foreign tax paid on the excluded slice. In a low-tax jurisdiction there is little foreign tax to credit, and the exclusion carries the weight instead. Japan adds a wrinkle: a US citizen with a domicile or residence there for five years or less within the preceding ten is a non-permanent resident, taxed on income other than foreign-source income plus foreign-source income paid in or remitted to Japan. The Japanese tax available to credit shifts as the years accumulate.

Switching is not a costless annual toggle. The exclusion can be revoked by attaching a statement to the return, but re-electing the same exclusion within five tax years requires IRS approval through a ruling request to the Associate Chief Counsel (International), for which the IRS charges a fee.

• Self-employment tax is not removed by the exclusion, which operates on income tax alone.
• The additional child tax credit is unavailable to anyone claiming either exclusion or the housing deduction.
• Investment income and pensions sit outside the exclusion whatever the qualifying test.
• Foreign taxes paid on excluded income generate no foreign tax credit.

Two account reports, two agencies, two thresholds

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, is filed electronically through the BSA E-Filing System and is not filed with a federal tax return. It is triggered when a US person has a financial interest in, or signature authority over, foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year. The due date is 15 April, with an automatic six-month extension to 15 October.

Form 8938, the Statement of Specified Foreign Financial Assets, is attached to the annual return and due on that return’s date including extensions. Its thresholds run far higher for people abroad: more than $200,000 on the last day of the tax year or more than $300,000 at any time for single filers and married filing separately, and more than $400,000 or $600,000 filing jointly. The IRS states that Form 8938 does not replace or otherwise affect the obligation to file FinCEN Form 114.

The two reports therefore catch different populations. Modest balances across several foreign accounts can cross the $10,000 FBAR line while sitting nowhere near the Form 8938 thresholds. Signature authority over an employer account carries no beneficial interest yet still falls inside the FBAR definition, and Form 8938 reaches assets beyond accounts.

Why an ordinary local fund is treated as something else

A passive foreign investment company is defined by two tests, either of which is enough alone. The income test is met where 75 percent or more of the foreign corporation’s gross income for the tax year is passive income. The asset test is met where at least 50 percent of the average percentage of assets held during the year produce passive income or are held for producing it. A pooled vehicle sold by a bank or broker outside the United States generally meets both.

Absent an election, PFIC holdings fall under the section 1291 excess distribution regime: excess distributions and gains on disposal are allocated across the holding period, and amounts allocated to prior years in which the corporation was a PFIC are taxed as ordinary income and carry an additional interest charge computed under section 1291(c). Two elections change that. A qualified electing fund election requires annual inclusion of a pro rata share of ordinary earnings and net capital gains, which depends on the fund supplying the figures. A section 1296 mark-to-market election, for marketable stock, recognizes unrealized gain as ordinary income each year.

Reporting runs on Form 8621, the Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. A narrow exception covers holdings worth $25,000 or less at year end, or $50,000 or less on a joint return, where no excess distribution was received and nothing disposed of. Above that, a separate form is due for each PFIC.

The state that never signed off

Leaving the country settles a federal question and leaves a state one open. States tax on their own definitions, and those definitions usually turn on domicile: the place voluntarily established with the present intention of making it a true, fixed, permanent home and principal establishment. Domicile persists until another is genuinely established, so a move abroad that leaves a house, a license and a mailing address behind can leave the old state still treating the person as its own.

California shows how narrow the exit can be. Its Franchise Tax Board treats as a resident anyone present in the state for other than a temporary or transitory purpose, and equally anyone domiciled there but outside it for a temporary or transitory purpose. A safe harbor exists for those leaving under employment-related contracts: someone domiciled in California who is outside the state under such a contract for an uninterrupted period of at least 546 consecutive days is treated as a nonresident, and return visits totaling no more than 45 days in any taxable year covered by the contract count as temporary.

That safe harbor is built around an employment contract, so a self-employed move or an open-ended relocation sits outside its terms. Each state writes its own rules, but the pattern repeats: the burden falls on the person who left.

Filing when there is nothing to pay

A US return is required for any year in which worldwide gross income reaches the threshold for the filing status. For 2025 those thresholds are $15,750 for a single filer under 65, $31,500 for a married couple filing jointly both under 65, and $23,625 for a head of household under 65. For married filing separately the threshold is $5 — a figure that matters to Americans married to a non-US spouse, since that status makes filing effectively unavoidable.

A second trigger sits alongside the income charts: net earnings from self-employment of at least $400 require a return whatever the gross income figure. Because the exclusion does not reach self-employment tax, freelancers abroad can face a US bill on income carrying no US income tax at all. Relief comes from a totalization agreement instead. The United States has Social Security agreements in force with Portugal since 1 August 1989, Spain since 1 April 1988 and Japan since 1 October 2005, each written to eliminate dual Social Security taxation, with exemption documented by a certificate of coverage from the country that continues to cover the worker.

Information reporting is indifferent to whether tax is owed. The $10,000 FBAR aggregate, the Form 8938 thresholds and the Form 8621 requirement all key off assets and accounts rather than liability, so a year with a zero balance due can still produce several separate filings.

• Worldwide gross income at or above the threshold for the filing status — $5 for married filing separately.
• Net earnings from self-employment of at least $400, regardless of gross income.
• FinCEN Form 114 where foreign accounts exceed $10,000 in aggregate at any point in the calendar year.
• Form 8938 where foreign financial assets pass the abroad thresholds of $200,000 or $300,000, and $400,000 or $600,000 jointly.
• Form 8621 for each PFIC held, unless the narrow $25,000 and $50,000 exception applies.

1. Internal Revenue Service, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad — https://www.irs.gov/publications/p54 — checked 28 August 2026
2. Internal Revenue Service, Foreign earned income exclusion — https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion — checked 28 August 2026
3. Internal Revenue Service, Foreign tax credit — https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit — checked 28 August 2026
4. Internal Revenue Service, Revoking your choice to exclude foreign earned income — https://www.irs.gov/individuals/international-taxpayers/revoking-your-choice-to-exclude-foreign-earned-income — checked 28 August 2026
5. Internal Revenue Service, Comparison of Form 8938 and FBAR requirements — https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements — checked 28 August 2026
6. Internal Revenue Service, Instructions for Form 8621 — https://www.irs.gov/instructions/i8621 — checked 28 August 2026
7. Social Security Administration, U.S. International Social Security Agreements — https://www.ssa.gov/international/agreements_overview.html — checked 28 August 2026
8. National Tax Agency of Japan, Income Tax Guide — https://www.nta.go.jp/english/taxes/individual/index.htm — checked 28 August 2026
9. California Franchise Tax Board, Guidelines for Determining Resident Status — https://www.ftb.ca.gov/forms/2025/2025-1031-publication.pdf — checked 28 August 2026