Review Your Worldwide Income – What Every Expat Needs to Know
If you’re a U.S. citizen or green card holder living abroad, it’s easy to assume that your income earned overseas doesn’t need to be reported to the IRS. After all, you’re paying taxes where you live, right? Unfortunately, that’s not how the U.S. tax system works.
The United States is one of only two countries in the world that taxes based on citizenship and residency — not location. That means U.S. citizens and lawful permanent residents must report worldwide income each year, regardless of where it’s earned.
At Expatriate Tax Returns, we help expats around the world navigate these complex rules, ensuring full compliance while minimizing their tax burden.
What Counts as “Worldwide Income”?
Worldwide income includes all earnings, from both U.S. and foreign sources. You’ll need to report:
- Wages, salaries, and tips from foreign or U.S. employers
- Self-employment or freelance income abroad
- Rental income from property overseas
- Dividends, capital gains, and interest from foreign investments
- Foreign pensions or social security benefits
- Cryptocurrency transactions and digital asset gains
Even if you’re taxed in your host country, the IRS still requires you to report it. Fortunately, there are ways to avoid double taxation.
The Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion allows qualifying expats to exclude up to $130,000 of foreign earned income in the 2025 tax year. To qualify, you must meet one of these tests:
- Physical Presence Test – You lived outside the U.S. for at least 330 full days in a 12-month period.
- Bona Fide Residence Test – You’ve established residence in another country for a full tax year.
This exclusion applies only to earned income (like wages or self-employment income) — not to investment or rental income.
The Foreign Tax Credit (FTC)
If you pay income taxes to a foreign government, you may be eligible for the Foreign Tax Credit, which provides a dollar-for-dollar credit against your U.S. tax liability.
This is especially useful if you live in a high-tax country such as Canada, the U.K., or Germany. It can completely eliminate your U.S. tax owed — but you must still file your U.S. return to claim it.
Common Mistakes Expats Make
- Assuming foreign income isn’t taxable in the U.S.
- Forgetting to file a U.S. return while abroad.
- Misunderstanding what qualifies for FEIE.
- Not reporting investment or rental income from foreign sources.
At Expatriate Tax Returns, our experts ensure all your income is reported correctly while maximizing exclusions and credits to minimize what you owe.
Stay Compliant with Confidence
Worldwide income reporting can be confusing — but it doesn’t have to be stressful. Our CPAs and IRS Enrolled Agents specialize in expat tax preparation for individuals in over 190 countries.
We’ll review your income, apply the right tax benefits, and keep you compliant — wherever you call home.
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