New Year, New Rules: What Changed for Expat Taxes in 2026
Every new tax year brings adjustments, and for U.S. expats, 2026 introduces several important changes. As inflation adjustments take effect and enforcement efforts increase, understanding what has changed will help you avoid mistakes and take advantage of new opportunities. By staying informed early, you can file with confidence and reduce the risk of surprises later in the year.
Foreign Earned Income Exclusion Updates
Each year, the IRS adjusts the Foreign Earned Income Exclusion for inflation. In 2026, the exclusion amount increased, allowing qualifying expats to exclude more foreign earned income from U.S. taxation. As a result, expats in higher-paying overseas roles may see meaningful tax savings. However, eligibility rules remain strict, so you must still meet the Physical Presence Test or the Bona Fide Residence Test to qualify.
Foreign Tax Credit Refinements
At the same time, the Foreign Tax Credit continues to serve as a powerful tool for avoiding double taxation. However, the IRS has refined how it categorizes and applies foreign taxes. Because of these refinements, expats working in countries with complex tax systems should carefully review how they classify income. Doing so ensures that credits are calculated correctly and applied to the appropriate income categories.
Expanded Global Financial Reporting
Meanwhile, international financial reporting continues to expand. Foreign banks now report account information to U.S. authorities more frequently than ever before. Consequently, accurate FBAR and FATCA filings have become increasingly important. In 2026, the IRS is more likely to identify missing or incorrect filings, making careful reporting essential for expats with foreign accounts.
Increased Focus on Green Card Holders Abroad
In addition, green card holders living outside the United States face increased scrutiny in 2026. Filing errors or skipped returns can affect not only tax compliance but also long-term immigration plans. For this reason, green card holders should maintain consistent, accurate filings each year to protect both their tax and immigration status.
Digital Assets and Crypto Reporting
Another key change involves digital assets. Cryptocurrency reporting requirements continue to expand, particularly for expats using foreign exchanges or platforms. The IRS now places greater emphasis on cross-border crypto transparency, so expats who hold or trade digital assets must ensure proper disclosure to remain compliant.
Inflation Adjustments to Tax Brackets
Beyond reporting changes, inflation adjustments also affected standard deductions and tax brackets in 2026. While these updates benefit many taxpayers, expats with U.S.-source income or investment income should review how the new thresholds impact their overall tax liability. In some cases, these changes may alter planning strategies for the year ahead.
What Expats Should Do Now
To stay ahead, review your income sources, foreign accounts, and reporting obligations early in the year. By understanding the changes and taking action now, you can ensure compliance and avoid unexpected issues during filing season.
