U.S. Tax Obligations for Expats and Foreign Property Owners

U.S. Tax Obligations

If you own property abroad, live outside the United States, or earn income from foreign sources, your U.S. tax obligations didn't go anywhere when you crossed the border. The United States is widely cited as one of the only countries in the world that taxes its citizens on worldwide income regardless of where they live. Here's what that means in practice.

Filing Requirements for Expats

U.S. citizens and green card holders living abroad are generally still required to file a U.S. federal tax return if their income exceeds the filing threshold. The deadline is automatically extended to June 15 for those living abroad, with additional extensions available. That extension applies to filing, not payment — interest still accrues on any unpaid tax balance from the original April 15 deadline, so it doesn't pay to wait if you owe. Non-filing is not a low-risk strategy.

The Foreign Earned Income Exclusion (FEIE)

If you live and work abroad, you may qualify to exclude a significant portion of your foreign earned income from U.S. taxation under the FEIE. For 2024, that exclusion amount is $126,500 (it rises most years — $130,000 for 2025). Qualifying requires meeting either the Physical Presence Test or the Bona Fide Residence Test — both have specific requirements.

FBAR and FATCA: Foreign Account Reporting

If you have foreign bank or financial accounts with an aggregate balance exceeding $10,000 at any point during the year, you're required to file an FBAR (FinCEN 114). Separate from this, FATCA requires reporting foreign financial assets on Form 8938 once you cross a threshold that depends on your filing status and where you live. For Americans living abroad, that threshold is $200,000 (single) or $400,000 (married filing jointly) on the last day of the year, or $300,000 / $600,000 at any point during the year. Those thresholds are much lower for taxpayers living in the U.S. — $50,000/$100,000 on the last day of the year, or $75,000/$150,000 at any point — which is a distinction worth knowing if you split time between countries. Failure to file either form carries severe penalties.

Foreign Property: Rental Income and Sale

Rental income from foreign property must be reported on your U.S. return. Expenses related to the property (maintenance, management fees, mortgage interest) are generally deductible. When you sell a foreign property, the gain is reportable as a capital gain — and currency fluctuation can affect the calculated gain even if the local currency price was unchanged.

Cross-border taxation is genuinely complex — but it's manageable with the right guidance. The goal is always the same: stay compliant, minimize your legitimate tax liability, and understand exactly where you stand.

📞 Kindred Financial Services provides cross-border financial advisory with deep experience in U.S. tax obligations for expats and foreign property owners. Reach us at www.kindredfinancialservices.com or www.kc-cr.com.