Year-End Tax Checklist for U.S. Expats: What to Do Before December 31
As the year draws to a close, U.S. expats face a unique set of financial and tax considerations that domestic taxpayers often never encounter. Navigating worldwide income reporting, foreign account disclosures, treaty benefits, and changing country-specific tax rules can be overwhelming — but taking a few smart steps before December 31 can dramatically reduce your tax liability and prevent costly mistakes. Whether you’re living abroad long-term or working overseas temporarily, this year-end tax checklist will help you stay compliant and fully prepared for the 2026 filing season.
1. Review Your Worldwide Income
U.S. citizens and green card holders must report all income, regardless of where it’s earned. That includes foreign wages, freelance work, rental property overseas, investment gains, and even cryptocurrency transactions on foreign exchanges. Before year-end, summarize all income sources and gather documentation such as pay statements, bank records, and investment reports. This ensures accuracy when determining eligibility for the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC).
2. Confirm Foreign Tax Payments
If you pay taxes to a foreign country, obtain proof of payment before the year ends. You may need tax assessments, payment receipts, or year-end statements to claim the Foreign Tax Credit. This credit can offset U.S. tax on foreign-source income, often eliminating double taxation entirely.
3. Check Foreign Bank Account Balances
The FBAR (FinCEN 114) requires reporting if the total value of your foreign accounts exceeded $10,000 at any point in the year. Likewise, Form 8938 (FATCA) may apply if foreign assets surpass higher thresholds. Year-end is the perfect time to review balances and collect details like account numbers, maximum balances, and institution information.
4. Evaluate Your Eligibility for the FEIE
The FEIE allows qualifying expats to exclude up to $130,000 of foreign earned income for the 2025 tax year. To qualify, you must meet either the Bona Fide Residence Test or the Physical Presence Test. Confirm where you stand as the year closes, especially if you’ve moved, changed jobs, or traveled extensively — your days abroad matter.
5. Maximize Deductible Expenses
Depending on your situation, you may qualify to deduct business expenses, healthcare costs, charitable contributions, or retirement contributions made by December 31. Expats who run businesses abroad should also review deductible expenses such as equipment purchases, office supplies, and professional fees.
6. Address State Residency Issues
Some states, like California and New York, maintain aggressive residency requirements. If you moved abroad this year, ensure you’ve taken the necessary steps to sever ties such as updating your driver’s license, voter registration, and mailing address.
7. Plan Currency Conversions
The IRS requires U.S. taxpayers to convert all foreign income and expenses to U.S. dollars using approved exchange rates. Gather year-end exchange data, as this will simplify reporting during tax season.
8. Schedule Your Early 2026 Tax Prep
The earlier you prepare, the easier the filing process will be. At Expatriate Tax Returns, our CPAs and IRS Enrolled Agents help expats stay compliant, maximize refunds, and avoid penalties — all while filing from anywhere in the world.
