Living abroad brings exciting opportunities, but U.S. tax obligations do not disappear when you move overseas. Unlike most countries, the United States taxes its citizens and green card holders based on citizenship rather than residency. This means that even if you live and work permanently in another country, you are still generally required to file a U.S. federal income tax return each year and report your worldwide income.
For Americans living abroad, 2026 (covering 2025 income) brings important reminders and procedural updates. From filing deadlines and IRS interest rates to digital-only refund procedures and expanded reporting requirements, staying informed can help you avoid penalties, reduce stress, and make smarter financial decisions.
Drawing on years of experience supporting Americans overseas, H&R Block Expatriate Tax Services outlines the most important developments and compliance reminders for this year.
U.S. tax deadlines still apply even if you live overseas
For the 2026 filing year (reporting 2025 income):
- The standard filing deadline is April 15, 2026
- Americans living abroad automatically receive an extension to June 16, 2026
- A further extension may be requested to October 15, 2026
The automatic June extension gives expats additional time to file and pay without late-payment penalties. However, interest begins accruing on unpaid balances starting April 15, even if you qualify for the extension.
IRS underpayment interest is generally calculated as the federal short-term rate plus 3%. In recent quarters, this has resulted in rates of around 8% annually, compounded daily. Rates are adjusted quarterly and can change.
The key takeaway: even without penalties before June 16, unpaid balances can grow quickly due to interest. Paying an estimated amount by April 15 can help reduce overall costs.
US government checks are going away – What you need to know
The IRS has initiated a multi-year plan to phase out paper checks for tax refunds and modernize refund delivery.
Beginning January 1, 2026, new procedures apply for taxpayers who do not provide direct deposit information. Taxpayers may still request a paper check, but the process has changed.
Key changes:
- Electronic filers missing banking information will receive alerts, but returns will still be accepted and processed.
- The IRS will issue a new notice, CP53, requesting direct deposit information or a waiver explaining why banking details cannot be provided.
- Taxpayers will have 30 days to respond.
- Banking details may be submitted through the IRS Individual Online Account
Refund timing under the new system:
- Refunds may be held for up to six weeks after the return is fully processed.
- If banking information is provided during that period, the refund will be released via direct deposit shortly after submission.
- If a waiver is requested, a paper check will be issued.
- If no action is taken after six weeks, a paper check will automatically be mailed.
For Americans abroad, this may result in longer delays if direct deposit information is not provided upfront, especially given international mailing times.
Taxpayers may still submit tax payments by paper check at this time, but additional guidance is expected as the IRS continues its digital transition.
H&R Block Expat Tax Services is actively developing a solution designed to facilitate electronic payment and refund deposits for Americans abroad. This option is expected to become available in the coming months and well before the June 15 filing deadline.
Key tax law updates that may affect Americans abroad
Several tax provisions have been made permanent, creating more predictability for long-term planning.
Permanent Individual Tax Rates
Federal tax brackets ranging from 10% to 37% remain in effect.
Standard Deduction (2025 tax year)
- $14,600 for single filers
- $29,200 for married filing jointly
Personal exemptions remain suspended.
Additional deduction for taxpayers aged 65+
Taxpayers aged 65 or older may claim an additional $6,000 deduction.
For married couples where both spouses are over 65, this may provide a combined additional $12,000 deduction on top of the standard deduction.
For retirees living abroad, this enhanced deduction can significantly reduce or eliminate U.S. tax liability when coordinated with foreign tax credits.
Estate and Gift Tax changes
Beginning in 2026, the federal estate and gift tax exemption increases to $15 million per individual, indexed for inflation.
Global tax data sharing is expanding
International tax transparency continues to increase. Due to the Foreign Account Tax Compliance Act (FATCA) reporting requirements and other global reporting frameworks, foreign financial institutions routinely share account information with the IRS.
This includes reporting of:
- Foreign bank accounts
- Investment accounts
- Pension holdings
- Account balances and identifying details
For Americans living abroad, this means the IRS may already receive data about foreign accounts, making accurate reporting more important than ever.
Foreign financial reporting requirements: FBAR and FATCA
Americans living abroad must comply with two separate foreign financial reporting regimes: the Report of Foreign Bank and Financial Accounts (FBAR) and Form 8938 under FATCA. Although they overlap, they have distinct requirements with different thresholds and filing systems.
FBAR (FinCEN Form 114)
If the total value of your foreign financial accounts exceeded $10,000 at any point during 2025, you must file an FBAR.
This includes:
- Foreign bank accounts
- Brokerage accounts
- Certain foreign pension accounts
- Joint accounts with a non-U.S. spouse
The FBAR is filed with the Financial Crimes Enforcement Network division of the United States Department of the Treasury and is filed separately from your tax return through the FinCEN system.
FATCA (Form 8938)
Form 8938 is filed with your federal income tax return and applies when foreign financial assets exceed higher thresholds.
For taxpayers living abroad:
- Single filers: $200,000 at year-end or $300,000 at any time
- Married filing jointly: $400,000 at year-end or $600,000 at any time
Specified assets may include foreign investment accounts, foreign entities, and certain pension plans.
Why this matters
You may need to file, FBAR only, Form 8938 only or both. Penalties can be substantial. FATCA failure-to-file penalties may begin at $10,000, with additional penalties if noncompliance continues. Given expanded global data-sharing agreements, foreign financial institutions frequently report account information directly to the IRS. This makes accurate reporting critical.
The Foreign Tax Credit vs. the Foreign Earned Income Exclusion – What are tradeoffs
Americans abroad may use either the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC) to mitigate double taxation. The foreign earned income exclusion allows eligible taxpayers to exclude a portion of earned income. The foreign tax credit provides a dollar-for-dollar credit against U.S. tax for foreign income taxes paid.
The FTC may provide broader flexibility in higher-tax jurisdictions, particularly for investment income or income above FEIE limits. If you have dependent children with valid Social Security numbers, using the foreign tax credit could result in a refund if you qualify for the Additional Child Tax Credit (ACTC). Also, the FTC is helpful for those who would like to participate in a US-based Individual Retirement Arrangement (IRA)
However, switching from FEIE to FTC should be approached carefully. If you revoke the FEIE, you generally cannot re-elect it for five tax years without IRS approval. This can create planning challenges if you move to a different county, or your income changes significantly. Before changing elections, it is important to evaluate long-term implications with an advisor familiar with expatriate tax.
Retirement and pension income requires careful cross-border planning
Retirement income is one of the most complex areas of expat taxation.
If you receive:
- U.S. Social Security
- IRA or 401(k) distributions
- Roth IRA withdrawals
- Foreign pension income
You may face tax obligations in both the U.S. and your country of residence. Retirement accounts may also involve:
- U.S. withholding requirements
- Early withdrawal penalties
- Required Minimum Distributions (RMDs)
- Foreign tax credit interactions
Tax treaties may help determine taxing rights, but do not always eliminate taxation. Before taking distributions, expats should consider how the income will be taxed locally, how foreign tax credits will apply, and whether withholding elections should be adjusted.
New IRS Crypto Reporting Rules for 2026
Beginning with the 2025 tax year, digital asset brokers must issue Form 1099-DA reporting gross proceeds from cryptocurrency sales and exchanges. The IRS receives a copy of this form.
For 2025 transactions, the form reports gross proceeds but not cost basis. Taxpayers remain responsible for calculating gains or losses using their own records. Even if you use foreign exchanges or private wallets and do not receive a form, crypto transactions remain taxable and must be reported.
Final thoughts
Living abroad does not eliminate U.S. tax responsibilities — it changes how they apply. Staying informed about deadlines, reporting rules, enforcement trends, and legislative updates can help reduce risk and avoid unnecessary penalties.
With thoughtful planning and expert guidance, managing cross-border tax obligations becomes far more manageable. H&R Block Expatriate Tax Services specializes in helping Americans overseas file accurately and confidently and is currently offering the lowest prices of the year.
Reach out today, and let's make sure you're ready for what's ahead.
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