What Americans actually need to know before leaving
Moving abroad as a US citizen is different from every other nationality. You have one of the strongest passports in the world for visa-free travel and one of the most complicated tax obligations. This page covers the things no generic relocation guide explains.
Tax obligations you keep when you leave
The US is one of only two countries in the world that taxes its citizens on worldwide income, regardless of where they live. You must file a federal tax return every year, even if you earn zero dollars in the United States.
The two main tools that prevent double taxation:
- Foreign Earned Income Exclusion (FEIE / Form 2555) — excludes approximately $126,500 of foreign-earned income from US federal tax in 2024. You qualify by passing either the Bona Fide Residence test (living in a foreign country for a full tax year) or the Physical Presence test (330 full days in foreign countries in any 12-month period).
- Foreign Tax Credit (Form 1116) — offsets your US tax dollar-for-dollar by income taxes paid to your host country. Generally better than FEIE if your host country has a higher tax rate than the US, or if you have passive income (dividends, rental income) that FEIE does not cover.
Do not use both on the same income. FEIE and FTC cannot both apply to the same dollars of income. Most expats use one or the other based on their situation. Get advice from a US expat tax specialist — not a regular domestic CPA — before your first year abroad.
Passive income (interest, dividends, rental income, capital gains) is not covered by FEIE. It may still be subject to US tax, offset by FTC if you paid local tax on it.
PFIC warning for investors: Foreign mutual funds, ETFs, and many investment vehicles are classified as Passive Foreign Investment Companies under US law. The PFIC tax rules are punitive. Do not invest in foreign funds without consulting a US tax advisor first. Keep your investments in US-domiciled accounts where possible.
FBAR and FATCA
FBAR — FinCEN 114
If your foreign accounts exceeded $10,000 in aggregate at any point during the calendar year, you must file FBAR (FinCEN Form 114) by April 15, with an automatic extension to October 15. This is not filed with your tax return — it goes directly to the Financial Crimes Enforcement Network (FinCEN) via the BSA E-Filing system.
- Covers bank accounts, brokerage accounts, certain pension accounts, and signature authority over employer accounts
- Non-willful failure: civil penalty up to $10,000 per violation
- Willful failure: civil penalty up to $100,000 or 50% of account balance per violation, plus potential criminal penalties
- The IRS has increased FBAR enforcement significantly in recent years
FATCA — Form 8938
FATCA requires you to report specified foreign financial assets on Form 8938 attached to your tax return if they exceed $200,000 on the last day of the year or $300,000 at any point (for taxpayers living abroad; lower thresholds apply for those in the US). FATCA and FBAR overlap but are not the same — you may need to file both.
FATCA also requires foreign financial institutions to report US account holders to the IRS. This is why many banks in Europe, Japan, and elsewhere simply refuse to open accounts for US persons — the compliance burden is not worth it to them.
State taxes that follow you
Federal taxes are unavoidable. State taxes are avoidable — but only if you formally cut ties before you leave.
Most states will stop taxing you when you establish domicile elsewhere. These four will pursue you aggressively:
The most aggressive. California considers you a resident if you have a driver's license, voter registration, professional license, spouse or child in-state, or substantial property there. Formally change every one of these before or immediately after leaving. File a part-year return the year you leave and do not return for extended periods within the first two years.
New York uses a "statutory residency" rule — if you spend more than 183 days in New York AND maintain a permanent place of abode there, you owe New York tax on your worldwide income. Keep a day count. Do not keep a New York apartment if you visit family.
Both are known to pursue former residents who claim to have changed domicile without following through. Change your driver's license, close local accounts, update your voter registration, and be consistent.
Before leaving: change your state driver's license to an international one or a license in a no-income-tax state (Florida, Texas, Nevada, South Dakota, Wyoming). Register to vote abroad using UOCAVA from your last state — this does not maintain state residency in most cases.
The banking problem Americans face abroad
FATCA compliance is expensive for foreign banks. Many simply refuse to accept US persons as clients because the reporting burden outweighs the value of the account. It is a compliance calculation, not a personal one. You may be rejected at multiple banks before finding one that accepts you.
What works:
- Charles Schwab International — the most expat-recommended US account. No foreign transaction fees, reimburses all ATM fees worldwide, works as your primary international account. Open before you leave.
- Fidelity — good for brokerage. Some ATM fee reimbursement.
- Wise (formerly TransferWise) — excellent for multi-currency holding and transfers. Not a full bank but handles most day-to-day international needs.
- Local bank once you have residency — once you have a local address and residence registration, many European banks will open accounts for US persons. N26 (Germany/EU), Millennium BCP (Portugal), and ING (Netherlands) accept US persons in most cases. Always call ahead and confirm before visiting.
What to avoid: Do not close your US bank account before establishing a foreign one. You will need a US account for tax refunds, Social Security deposits, and situations where US-based entities must pay you.
What to do before you leave
- IRS address change — file Form 8822 with the IRS to update your address. This ensures tax notices reach you and avoids missed correspondence that creates compliance issues.
- Open Schwab or Fidelity — before your last US address is gone, open the international-friendly accounts you need.
- Register to vote abroad — register through the Federal Voting Assistance Program at fvap.gov under UOCAVA. You vote in federal elections using your last US address. This does not maintain state residency in most states.
- State domicile change — if you are in California, New York, or another aggressive state, formally change your domicile. New driver's license, voter registration from abroad, close or reduce in-state ties.
- Passport validity — most countries require 6 months of validity beyond your intended stay. Renew before leaving if your passport expires within 18 months.
- Notify Social Security — if you are receiving benefits, notify the SSA of your new address and country of residence. Some countries have specific reporting requirements.
- Set up a US mail forwarding service — Earth Class Mail, Anytime Mailbox, or a trusted family member. You will continue to receive IRS correspondence, bank statements, and other official US mail.
- Find a US expat tax professional — not a regular CPA. Find someone who specialises in expat returns: FEIE, FBAR, FATCA, foreign pension reporting. The first year abroad is the most complicated.
Best destinations for Americans in 2026
NHR/IFICI regime: 10% flat tax on foreign income for 10 years for new residents who qualify. English widely spoken in Lisbon and Porto. Strong US expat community. D7 visa (passive income, minimum ~1× the Portuguese national minimum wage demonstrated), D8 digital nomad visa (minimum 4× the national minimum wage — verify the current figure with AIMA before applying). Lisbon cost: €2,000–2,800/month for a couple. Outside Lisbon is significantly cheaper.
US-specific note: Portugal has a tax treaty with the US but it is not a full totalization agreement for Social Security purposes. The NHR regime can interact with your US tax obligations in complex ways — get specific advice before relying on it.
Freelance/Job Seeker Visa for those without a job offer yet. Skilled Worker Visa and EU Blue Card for those with employer sponsorship. Free public university tuition (for programmes taught in German). Strong healthcare system. Requires German for daily life outside major cities. Credential recognition (checked via the ANABIN database, evaluated by the relevant state authority) can take 3–6 months — start early.
US-specific note: Germany has a tax treaty with the US and a totalization agreement. German income tax rates are high (up to 45%) but FTC typically offsets US federal liability entirely.
Digital Nomad Visa requires proven remote income of at least 200% of the Spanish national minimum wage (figure changes annually — verify with the consulate before applying). Non-Lucrative Visa for those with passive income or savings (approximately €28,800/year demonstrated, verify current threshold). The Beckham Law offers a flat 24% tax rate for the first 6 years for qualifying workers, but the interaction with US FEIE is complex — get specific advice before relying on it.
0% personal income tax. Large US expat community, particularly in Dubai. Golden Visa available for investors and skilled professionals. High cost of living in Dubai but salaries are typically commensurate. No public healthcare system — private insurance required. UAE income is still reportable to the IRS but with 0% local tax, FTC provides no offset — FEIE becomes the relevant tool.
LTR (Long-Term Resident) Visa targets remote workers earning $80,000+/year and retirees with $80,000+/year pension income. 10-year renewable visa, work permit included for the LTR Work-from-Thailand category. Very low cost of living. Strong expat infrastructure in Bangkok and Chiang Mai.
Temporary Residency Visa via financial solvency: approximately $2,700/month in income or $43,000 in savings (2024 figures — verify with consulate). Permanent residency after 4 years. No language barrier in expat areas. Mexico City, Oaxaca, and San Miguel de Allende have large US communities. Proximity to the US makes travel home straightforward. Mexico–US tax treaty covers many situations.
FAQ
Can I renounce US citizenship to avoid taxes?
Yes, but it is a significant and largely irreversible decision. It triggers an exit tax if your net worth exceeds $2 million or your average annual net income tax for the 5 years before expatriation exceeds the covered expatriate threshold (approximately $190,000 for 2023 — the IRS adjusts this figure annually). Renunciation also requires a second citizenship first. Most expats pay close to zero in US tax using FEIE and FTC and do not renounce.
Do I need to file taxes if I earn nothing in the US?
Yes, if your gross worldwide income exceeds the filing threshold (approximately $14,600 for single filers in 2024). Even if you owe no US tax after FEIE and FTC, you must file. Failure to file carries penalties. The filing deadline is automatically extended to June 15 for Americans living abroad, with a further extension to October 15 available on request.
What happens to my 401k and IRA when I move abroad?
Your 401k and IRA stay as they are. You can keep contributing to an IRA if you have US-source earned income (self-employment in the US, or income not excluded under FEIE). Early withdrawal rules (10% penalty before age 59.5) still apply. Some countries tax withdrawals from US retirement accounts differently — check the tax treaty for your specific destination. Do not roll over into foreign pension plans without specific advice.
Can I vote from abroad?
Yes. Under UOCAVA (Uniformed and Overseas Citizens Absentee Voting Act), US citizens living abroad can vote in federal elections using their last US address. Register through VOTE FROM ABROAD (votefromabroad.org). You vote in the federal races for the state of your last domicile. In most states this does not create state income tax residency.
Do I need an international driver's license to drive abroad?
An International Driving Permit (IDP) is a translation of your US license recognised in most countries. Get it from AAA before you leave — it is valid for 1 year. After that, most countries require you to exchange your US license for a local one (some countries allow direct exchange, others require a driving test). Check your specific destination's rules — this varies significantly. Germany, Portugal, and most EU countries allow exchange without a test for a period after you establish residency.
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Social Security and Medicare abroad
Social Security
You can collect Social Security benefits while living in most countries abroad. The US has totalization agreements with 30+ countries — these agreements prevent double Social Security taxation and may allow you to combine work credits from both countries. Countries with totalization agreements include: Australia, Austria, Belgium, Brazil, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, and the UK.
Social Security payments cannot be made to residents of Cuba or North Korea. Certain other restrictions may apply in specific countries.
Medicare and Medicaid
Medicare does not cover medical care received outside the US in almost all cases (limited shipboard exceptions apply). If you move abroad and cancel Medicare Part B, re-enrollment penalties apply when you return. Many expats keep Part A (which is free if you paid Medicare taxes for 10+ years) and buy local or international health insurance for abroad.
ACA (Affordable Care Act) marketplace plans do not cover international care. Before you leave, get private international health insurance or ensure your destination's public health system will cover you once you have residency.