The IRS doesn't care
where you live.
The US is one of two countries on earth that taxes citizens by passport, not address. Move to Lisbon, Mexico City, Chiang Mai — you still file every April.
Most retirees don't end up owing much. The trouble is the forms you've never heard of — and the penalties that aren't proportionate to a paperwork mistake.
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Updated · Published
This page is educational. It explains how US expat taxes work for retirees — not what you specifically owe. Tax situations vary based on your income, country of residence, and treaty status. For your actual returns, work with a qualified expat tax CPA.
Most retirees have a simpler situation than they think.
If you're a typical retiree — Social Security plus an IRA or pension, no foreign business, no foreign mutual funds — here's the whole picture:
- You still file a 1040 every year (deadline is automatically extended to June 15 abroad)
- If your foreign bank accounts ever cross $10,000, you also file an FBAR
- The Foreign Tax Credit usually zeros out US tax on income you've already paid tax on locally
- Most people don't owe much more than they would in the US
Three things turn that simple picture complicated. If any of them apply to you, jump straight to the deeper page:
I have investments — or might open a foreign account
Foreign mutual funds, ETFs, and local pension accounts each carry their own tax traps. PFIC rules can push effective tax rates above 50%.
Foreign investments & PFIC → Situation 02I'm leaving California, NY, VA, NM, or SC
Five states are notoriously sticky — they keep taxing you after you leave. Establish domicile elsewhere first.
State residency → Situation 03I'm already abroad and behind on filing
The Streamlined Foreign Offshore Procedures let you catch up on 3 years of returns and 6 years of FBARs without standard penalties.
Catching up → Situation 04I'm not moving — I'm traveling full-time
SD domicile, no foreign address, day counts managed. Done right, no foreign government has a claim on your income.
Traveling abroad tax rules → Situation 05I'm doing a trial year — or going permanently
How Spain, Portugal, Italy, Greece, and France decide when you become their taxpayer. The 183-day rule, the secondary tests, and the traps retirees hit.
Foreign tax residency rules →
Do you even have
to file?
Most retirees do — but the threshold creeps up at 65. For 2026, if Social Security is your only income, you generally don't need to file a federal return. The moment you add an IRA distribution, rental income, pension payment, or dividend on top of it, you almost certainly cross the line.
Anyone with savings, investments, or pension income on top of Social Security — that's almost everyone — will need to file.
Two tools
do most of the work.
Before the paperwork, the good news. Two mechanisms prevent most retirees from paying the same income tax twice. Used together, the worst case for most retirees in a high-tax country is owing the US almost nothing on that income.
Used together, you typically owe the US almost nothing on income already taxed locally.
Foreign Tax Credit
Pay income tax in your country of residence on the same income you're reporting to the IRS, and you can claim a dollar-for-dollar credit against your US tax liability. For retirees in high-tax countries (France, Germany, the UK), this typically eliminates US tax on that income entirely.
Tax Treaties
The US has tax treaties with about 65 countries that modify how specific income types are taxed. Treaties don't eliminate your filing requirement, but they can reduce what you owe.
IRS treaty list → (opens in new tab)Totalization agreements ≠ tax treaties.
A country can have a US income tax treaty (which reduces double taxation on income) without having a totalization agreement (which prevents double Social Security taxation on self-employment earnings). Mexico, for example, has the first but not the second. Confusing the two is one of the more expensive assumptions people make when picking countries.
Four forms.
One trap.
Your annual filing obligation living abroad usually comes down to four forms. One of them — the FBAR — isn't even filed with the IRS, and missing it has consequences out of proportion to the form itself.
1040
US individual income tax return
FBAR
FinCEN Form 114
8938
Foreign account reporting
3520
Foreign gifts & trusts
Three income types,
three pictures.
Quick orientation. For the actual rules, brackets, and worked examples, the retirement income page has the full breakdown.
Up to 85% taxable
Your benefit follows you abroad. How much is taxable depends on your combined income. Most retirees with any other income land in the 85% bracket.
How Social Security is taxed abroad →Ordinary income
Distributions are taxable as ordinary income, same as stateside. RMDs don't change. Foreign Tax Credit handles double taxation if your new country also taxes them.
IRA and pension distribution rules abroad → Roth IRA abroad — the tax-free account that isn't →Doesn't shelter retirement income
Foreign Earned Income Exclusion is for wages and self-employment only. It does not apply to Social Security, pensions, or IRA withdrawals. The single most common misconception.
Why this matters →What happens, and when.
Most expat tax surprises come from doing the right thing at the wrong time. Here's the rhythm.
Set the table
- —Establish domicile in a no-tax state if you're leaving a sticky one
- —Audit your investments for foreign-domiciled (PFIC) holdings
- —Have your first conversation with an expat CPA
- —Confirm your brokerage will keep serving you abroad
The transition return
- —File a part-year state return for your old state
- —FBAR kicks in if foreign accounts cross $10k at any point
- —June 15 federal deadline applies once you're abroad
- —Don't open foreign retirement or investment accounts until you've checked the rules
The annual rhythm
- —1040 by June 15 (Oct 15 if you extend)
- —FBAR by Apr 15 (auto-extends to Oct 15)
- —Foreign Tax Credit on income taxed locally
- —Re-verify thresholds and FEIE limits each fall
Taxes for Expats.
25 years. 50,000 clients.
Every return CPA-reviewed.
We send people to TFX because their work matches what we'd do ourselves — not just FEIE-focused like a lot of "expat tax" firms, but built for retirees abroad with Social Security, IRA distributions, foreign pensions, and treaty work. They handle streamlined filings routinely.
- CPA-reviewed returns — not software-only filing
- Retirement income expertise — SS, IRA, pensions, not just FEIE
- FBAR & FATCA — handled together with your return
- Treaty knowledge — for your target country
- Streamlined procedure experience — if you're behind
Affiliate link — we earn a commission if you sign up, at no cost to you.
Form 1116 (Foreign Tax Credit) and Form 8938 (FATCA) are included in the base return. PFIC (Form 8621) is $200 first / $150 each additional. Streamlined catch-up: $1,450 (under $100k income) or $1,650.
Frequently Asked Questions
Do I have to file US taxes if I move abroad?
Does the Foreign Earned Income Exclusion (FEIE) apply to Social Security or IRA distributions?
What is FBAR and do I need to file it?
Can I invest in mutual funds or ETFs in my new country?
Does moving abroad end my state tax obligation?
I'm years behind on US filing. Am I in serious trouble?
Can my regular US tax preparer handle my expat return?
What to re-verify each fall
All numbers reflect 2026; reverify when the IRS publishes the following year's adjustments.
- Filing thresholds — indexed to inflation
- FEIE exclusion — indexed to inflation annually
- Enhanced senior deduction — set through 2028; confirm it wasn't modified
- FBAR threshold — $10k for years; monitor FinCEN for updates
- TFX pricing — reverify on their fees page each spring
Three things to do, in this order.
-
Fix your state residency — if you're in a sticky one
California, NY, VA, NM, or SC. This is the only step with a hard time constraint — you need to do it before you depart.
State residency guide → -
Audit your investments for foreign-domiciled holdings
Check the first two letters of every fund's ISIN code. Any non-US fund triggers PFIC rules and 50%+ effective tax rates on gains.
PFIC trap → -
Have your first conversation with an expat CPA
Six to twelve months before you move is ideal. The first consult is free at TFX, and a typical retiree return runs about $535/year.
Why we recommend TFX →
Your brokerage account may not follow you abroad.
Since 2024, Fidelity, Vanguard, Schwab, and others have restricted or closed accounts for clients with foreign addresses — policies that continue to shift. Our investing guide covers current status, which brokerages still work, and how to move before yours doesn't.
Read the investing guide