Foreign, International Income by U.S. Citizens
Understanding how foreign or international income is taxed can be complex for U.S. citizens. This page simplifies the essentials, explaining what qualifies as foreign income, the reporting requirements, and available tax credits. Whether you’re living abroad or earning from international sources, this guide helps you navigate your tax responsibilities with clarity.
Do U.S. citizens living and working abroad need to file a U.S. tax return?
U.S. Citizens living and working abroad often wonder if they need to file a return or a previous year U.S. tax return. The simple and basic answer is this: as a U.S. Citizen, your worldwide income is subject to U.S. income tax, regardless of where you live or where you earned your taxable income. Thus, as a citizen of the United States, you have to file an income tax return if you work and/or live abroad. If you're still unsure, use this free FILEucator tax tool to determine if you have to file or not.
On the other hand, you might be exempt from a tax return if you relinquish your green card holder alien status - Form I-40, U.S. Citizen & Immigration Service - or you renounce your United States citizenship altogether as outlined in the expatriation tax provisions.
What are the tax filing deadlines and extension options for U.S. citizens or resident aliens living abroad?
If you are a U.S. citizen or resident alien living abroad on the regular tax return due date, you are eligible for an automatic two-month tax extension to file your federal income tax return and pay any taxes owed. This means you generally have until June 15 to file. However, interest on any unpaid taxes will accrue from the original due date, and late payment penalties may apply after June 15.
If you need additional time, you can request another extension until the following October by filing before the April tax due date. Note that this extension does not give you extra time to pay; late payment penalties will still apply if you owe taxes. For personalized tax guidance, use eFile.com’s tax calculators or tools. If you need help reporting foreign earned income, eFile.com’s tax preparation service can assist you through an easy-to-follow tax interview.
Filing instructions:
Foreign Income Types
Foreign earned income has the source of the income as the place you performed the services for which you received the income, such as a foreign country. For example, if you do work for a U.S. employer in Spain and receive payment to your U.S. bank in Florida, your income is considered foreign earned income as the location on where the work is performed is the main consideration. Had you performed the same work in the U.S., you would report it as U.S. sourced income.
In the table below, find samples of foreign earned income, unearned income, and variable income generated by U.S. citizens abroad. The lists are not all inclusive, but show several more common examples.
Earned Income as the result of personal services
Salaries and wages, commissions, professional fees, tips, bonuses, non-cash (allowances, reimbursements, lodging, meals, use of vehicle). Allowances or reimbursements are amounts paid to you for:
- Family
- Education
- Quarters
- Cost of living
- Home leave
- Moving.
Variable Income
Business profits, scholarships and fellowships, royalties, and rents.
Other Income
Income from stock options, sole proprietorships, and partnerships or corporations.
NOT Included in Foreign Earned Income
- Payment from a U.S. Government as government employee (military, etc.)
- U.S. Pension, Social Security, or annuity payments
- Quarters (see Foreign Housing Exclusion)
- Expense reimbursement on behalf of your employer under an accountable plan
- Employer contributions to a nonexempt employee trust or to a nonqualified annuity contract
- Payments received after the end of the tax year following the tax year in which you performed the earned income services (e.g. if you performed work one year, but did not receive payment until the following year).
You might not be able to clearly determine how much of your paid work or income is done in the United States. It may have been done partly in the United States and partly in a foreign country, so it is important to determine the amount of U.S. source income using the method that most correctly shows the proper source of your income.
With a free eFile.com account, we help you make the decision that best suits your tax situation. In most cases, you can make this determination on a time basis. U.S. source income is the amount that results from multiplying your total pay (including allowances, reimbursements, and noncash fringe benefits) by a fraction. The numerator (top number) is the number of days you worked within the United States. The denominator (bottom number) is the total number of work days you were paid for. See details on the bona-fide residency and physical presence test which help determine your eligibility based on your living situation for the tax year.
More Foreign Income and Tax Information
See important subjects regarding foreign earned income are: foreign tax deductions and breaks plus foreign tax credits. Read these IRS publications on U.S Citizens and Aliens Abroad and the Foreign Tax Credit for Individuals.
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