US Taxes on Foreign Income in 2026: Filing Requirements, Exclusions, and Deadlines

Living abroad doesn’t get you out of filing a US tax return. As a US citizen or resident alien, you’re required to report your worldwide income every year, no matter where you earned it or whether you already paid tax on it somewhere else.

The good news is the IRS gives you real tools — the Foreign Earned Income Exclusion, the Foreign Tax Credit, and a longer deadline if you live overseas — to avoid getting taxed twice on the same dollar. Here’s what actually applies for the 2025 tax year (filed in 2026).

Reporting Your Worldwide Income

Every dollar you earn abroad — wages, self-employment income, rental income, foreign bank interest and dividends — goes on your US return the same as it would if you’d earned it domestically. This is true even if you also pay income tax to the country you’re living in.

Your standard filing deadline is April 15, 2026. If you’re living outside the US on that date, you automatically get an extra two months — no form required — pushing your deadline to June 15, 2026. You can request a further extension to October 15 if you need it, same as domestic filers.

Forms You May Actually Need

• Form 2555 — This is the form that actually claims the Foreign Earned Income Exclusion and the housing exclusion/deduction, not just a reporting form.
• Schedule B — Required once your foreign (or domestic) interest and dividend income crosses relatively low thresholds, or if you have signature authority over a foreign account.
• Form 8938 (FATCA) — Discloses specified foreign financial assets once you cross the reporting threshold for your filing status and residency (see table below).
• FinCEN Form 114 (FBAR) — Reports foreign bank and financial accounts. This is filed separately from your tax return, directly with the Treasury’s Financial Crimes Enforcement Network — not attached to your 1040.

One correction worth making here: the old paper form for this last one, “TD F 90-22.1,” hasn’t existed in years. FBAR is now filed exclusively online through FinCEN’s BSA E-Filing System as FinCEN Form 114 — there’s no paper option anymore.

Do You Need to File an FBAR?

If the combined value of your foreign financial accounts — checking, savings, and certain foreign investment or pension accounts — exceeded $10,000 at any point during the year, you must file an FBAR. That threshold hasn’t moved in years and isn’t indexed for inflation, so it catches far more people than it sounds like it should.

The FBAR deadline lines up with your tax return: April 15, 2026, with an automatic extension to October 15, 2026 if you miss it — you don’t need to file anything to get that extension, it’s automatic.

Example: James is a US citizen working as a contractor in Portugal. He has a Portuguese checking account with $6,000 in it and a savings account with $5,000. Individually neither account looks alarming, but combined they total $11,000 — over the $10,000 threshold — so he must file an FBAR even though no single account exceeds the limit.

Form 8938: Do You Cross the FATCA Threshold?

Form 8938 has a similar purpose to the FBAR but different thresholds, a different filing location (it’s attached to your actual tax return, not filed separately), and it covers a broader range of assets, including foreign stock and certain foreign trust interests.

You may need to file both an FBAR and Form 8938 in the same year — they’re not a substitute for each other, since they go to different agencies and cover overlapping but distinct thresholds.

Subscribe or follow us for updates as these thresholds and exclusion amounts change each year.

Foreign Earned Income Exclusion (FEIE)

If you qualify under either the bona fide residence test or the physical presence test, you can exclude up to $132,900 of foreign earned income from US tax for the 2026 tax year ($130,000 for 2025). There’s also a separate housing exclusion/deduction, capped at $39,870 for 2026.

Married couples who both work abroad and both qualify can each claim their own exclusion — potentially excluding well over $260,000 combined between them.

Example: Lisa teaches English in South Korea and earns $95,000 a year. Because her entire salary is under the FEIE limit and she meets the physical presence test (330 full days abroad in a 12-month period), she can exclude all of it from US income tax — though she still needs to file the return and the FEIE forms to claim it; it isn’t automatic.

The FEIE only excludes earned income — wages and self-employment income. It does nothing for foreign bank interest, dividends, capital gains, or rental income, which is where the Foreign Tax Credit comes in instead.

Foreign Tax Credit or Deduction

If you paid income tax to a foreign government on income that isn’t covered (or fully covered) by the FEIE, you can generally claim a dollar-for-dollar Foreign Tax Credit against your US tax on that same income, using Form 1116. This is often the better option for higher earners whose income exceeds the FEIE limit, since the credit isn’t capped the same way the exclusion is.

You can’t double-dip the same income with both the FEIE and the Foreign Tax Credit — but you can use the FEIE for wages under the cap and the credit for anything above it or for non-wage income. Note that the FEIE doesn’t touch your tax bracket directly — excluded income is still used to figure the rate that applies to whatever income remains taxable, a quirk called the “stacking rule.”

If your foreign income includes investment gains — say, from a brokerage account you kept open abroad — those follow the same capital gains rates as domestic investments; the FEIE doesn’t apply to them at all.

Free Filing and Getting Help

If your adjusted gross income falls under the current IRS Free File threshold, you may still qualify for free e-filing software — though most consumer tax software handles the FEIE and foreign tax credit forms poorly or not at all, so expat-specific preparers or specialized software are worth considering once your situation gets complicated.

The IRS maintains staff at select US embassies and consulates to help with international filing questions, and its international taxpayer FAQ covers most common scenarios. For returns with more than roughly $10,000 in foreign income, or anything involving foreign trusts, foreign corporations, or PFICs (foreign mutual funds), an accountant who specializes in expat returns is usually worth the fee.

Common Issues to Watch Out For

• Assuming FBAR and Form 8938 are the same filing. They’re not — different agencies, different thresholds, and you may owe both in the same year.
• Thinking the FEIE means you don’t need to file at all. You still have to file a return and affirmatively claim the exclusion on Form 2555; it’s not automatic just because your income qualifies.
• Missing the FBAR entirely because no single account looks large. The $10,000 threshold is based on the combined total of all your foreign accounts, not any one account.
• Using consumer tax software not built for expat returns. Many popular platforms don’t support Form 1116 or Form 2555 well, leading to errors or missed exclusions.
• Forgetting state tax obligations. Moving abroad doesn’t automatically end your state tax residency — some states are notoriously difficult to formally exit (California and Virginia among them).

Looking Ahead: 2027 Outlook

The FEIE and housing exclusion amounts adjust for inflation every year, so expect another modest increase for 2027 when the IRS publishes its inflation adjustments later this year. The FBAR’s $10,000 threshold and the Form 8938 thresholds have stayed fixed for years with no indexing, and I’m not aware of any pending legislation to change that — worth watching if you’re close to those lines, since they don’t move even as your foreign account balances grow with normal investment returns.