Over 9 million Americans live outside the United States right now, with thousands more making the move each year.
Moving abroad opens up real opportunities = new adventures, career growth, and better finances. But here’s the catch: your US tax obligations follow you everywhere.
Why Americans are moving out of the US
Remote work changed everything. You can now earn a US salary while living somewhere your money goes three times further. A $4,000 rent in San Francisco? That gets you a nice apartment, meals out every night, and a cleaning service in Thailand.
Retirees figured this out years ago. Their savings stretch way further in places like Ecuador, where healthcare costs a fraction of US prices.
Here’s what’s pushing people out:
- Political chaos that never seems to end
- Housing costs that make no sense
- Healthcare bills that bankrupt families
- Student loans hanging over their heads for decades
Many Americans abroad say they’re finally hitting goals that felt impossible back home. Paying off debt. Actually saving money. Living without that constant money stress.
But here’s what catches people off guard: Thousands move abroad without realizing they still owe US taxes. They discover this years later—sometimes after the IRS has already noticed. That’s when many end up using streamlined domestic offshore procedures to catch up on missed filings and avoid the worst penalties.
Top countries for Americans to move to
Mexico is the #1 choice, with over 800,000 Americans already there. You can drive home for the holidays, your dollar goes far, and cities like Guadalajara are becoming tech hubs.
Portugal has become huge with Americans lately. They offer tax breaks through the NHR program – you pay way less tax for your first 10 years. Plus, you get European living at a fraction of the price.
Costa Rica has a stable government, good, cheap healthcare, and stunning nature. They even have a special pensionado visa for retirees – show them $1,000 monthly pension income and you’re basically in.
Spain exploded after launching digital nomad visas. Barcelona and Valencia are packed with American expats. The lifestyle is all about family dinners and actually enjoying life instead of grinding 24/7.
Canada makes sense if you want something familiar – same language, similar culture, but with universal healthcare.
How to move to another country: Essential steps
Figure out your visa situation first
Every country has different visa types – work, retirement, digital nomad, student, or family visas. Start researching early. Some take weeks, others take months.
Learn some of the language
Even just the basics. Knowing how to order food or chat with your neighbor changes everything. Apps like Duolingo or Babbel are free or cheap.
Rent before you buy
Most expats rent for at least the first year. Try different neighborhoods and see what real life is like before committing to a purchase.
Open a local bank account
This makes daily life way easier – paying rent, getting your salary, buying groceries. But here’s the catch: opening a foreign bank account triggers US reporting requirements. Thousands of Americans don’t know this until it’s too late. Miss this, and you’re looking at serious penalties.
The tax reality Americans living abroad can’t ignore
The US is one of only three countries that taxes based on citizenship, not where you live. That means you still owe US taxes even if you haven’t set foot in America for 10 years.
Thousands of expats get blindsided by this. They find out after years of not filing, and by then penalties have piled up.
Here’s the threshold: If you’re self-employed and make over $400, you need to file. For everyone else, it’s around $15,000 for single people and $30,000 for married couples.
If you have foreign bank accounts totaling over $10,000 at any point during the year, you need to file an FBAR (Foreign Bank Account Report). Miss this, and the IRS can hit you with penalties of $10,000+ per year. Per account.
FATCA makes you report foreign financial assets over certain amounts. The penalties? Brutal. Even if you just forgot about an account.
Common situations leading to tax non-compliance
Digital nomads fall behind while moving every few months. Many think their freelance income isn’t “real” since they’re working from laptops. Wrong. The IRS doesn’t care where you sit.
Expats working for foreign companies think their employer handles US taxes. Nope. Your company in Germany isn’t withholding US taxes. That’s 100% on you.
Retirees assume updating their Social Security address = done with taxes. It doesn’t work that way. You still need to file full returns every year.
Tax benefits that can eliminate or reduce your US tax bill
Most Americans abroad end up owing little or nothing in US taxes.
Foreign Earned Income Exclusion (FEIE) is huge. For 2024, you can exclude up to $126,500 of foreign income – just gone, not taxed.
To qualify, pass one of two tests:
- Physical Presence Test: Be outside the US for 330 days in a 12-month period
- Bona Fide Residence Test: Actually live abroad as a resident for a full tax year
If you’re married and both qualify, you can exclude over $250,000 combined.
Foreign Tax Credit prevents double taxation – you get dollar-for-dollar credit for taxes paid to other countries. This is amazing if you live in high-tax countries like Germany or France.
Foreign Housing Exclusion gives you extra deductions for rent, utilities, and insurance if you qualify for the FEIE.
Here’s the thing: Even if you owe $0 after all these benefits, you still have to file. The IRS wants those forms submitted every single year.
The path back to compliance: Streamlined filing procedures
Haven’t filed US taxes in years? Don’t panic. The IRS created a program for people exactly like you.
Streamlined Filing Compliance Procedures help Americans who didn’t know they needed to file or got overwhelmed. The IRS knows most people aren’t trying to cheat.
Streamlined Foreign Offshore Procedures (for Americans living abroad)
This is the good one – no penalty if you qualify.
Requirements:
- You were outside the US for at least 330 days in one of the last three years
- You complete everything correctly
- You can prove your non-compliance wasn’t on purpose
Streamlined Domestic Offshore Procedures (for Americans in the US)
This has a 5% penalty on your highest foreign account balance. But normal FBAR penalties can hit $100,000+ per account, per year. So 5% is way better than getting caught later.
Both programs require:
- Last 3 years of tax returns
- Last 6 years of FBARs (if you had foreign accounts)
- A signed statement saying you didn’t do this on purpose
- Any taxes owed, plus interest
For step-by-step instructions, check out comprehensive guidance on streamlined domestic offshore procedures.
Practical considerations for living abroad
Healthcare varies dramatically. Some countries have amazing public healthcare costing almost nothing. Others make expats pay for private insurance. Even private insurance abroad usually costs hundreds instead of thousands per month.
Culture shock is real. The first few months are amazing, then reality hits. This is normal – you’re not failing. Join expat groups, take language classes, and give yourself permission to feel frustrated.
Research the cost of living before you go, using sites like Numbeo. Yeah, you might earn less abroad, but if your rent drops from $2,500 to $600, who cares?
Build your support network early through Facebook groups, Meetup.com, and expat forums. These people become your lifeline.
Taking action before you move
Start planning at least 6 months out for visa applications, selling stuff, closing bank accounts, and filing any missing tax returns.
Already moved and haven’t filed taxes? Fix this now. The longer you wait, the messier it gets.
Get an expat tax pro – not your regular tax guy back home. Cross-border taxes are complicated, and one mistake can cost thousands.
Think about your long-term plan. Are you moving temporarily or pursuing permanent residence? Your answer changes everything – the visa you need, your tax strategy, your finances.
Living your best life abroad – responsibly
Moving abroad opens up possibilities most Americans never experience. New cultures. Better work-life balance. Adventures you’ll talk about forever.
But your US tax obligations follow you everywhere. The IRS has gotten really good at finding Americans with unreported foreign income through international agreements.
If you haven’t filed, use the streamlined procedures while they’re still available. Fix it before the IRS finds you. Once they come knocking, your options shrink, and penalties get worse.
Your life abroad should be about amazing experiences – not lying awake at night worried about tax problems catching up with you.
Take care of it now. Then go enjoy your adventure with peace of mind.
