Paying US Taxes While Living Abroad | Castro & Co. [2024]

Living abroad can be a thrilling experience, but it doesn't exempt US citizens or resident aliens from their tax obligations. In this high-level overview, we'll delve into the intricacies of paying US taxes while residing overseas, addressing common questions and providing essential information to help you navigate the complex world of international taxation.

Do US Citizens Have to Pay Taxes While Living Overseas?

The short answer is yes, US citizens are required to file and pay taxes on their worldwide income, regardless of where they reside. The United States employs a citizenship-based taxation system, meaning that your obligation to Uncle Sam doesn't diminish when you cross borders. This includes income earned from foreign employment, investments, and other sources.

Do US Resident Aliens Have to Pay US Taxes While Living Overseas?

Similar to US citizens, resident aliens are also subject to US taxation on their worldwide income, irrespective of their current place of residence. To determine your tax status, the Internal Revenue Service (IRS) uses the Substantial Presence Test. This test considers the number of days you've spent in the United States over a three-year period, determining whether you qualify as a resident alien or a non-resident alien.

How to Determine If I'm a US Resident Alien?

The Substantial Presence Test calculates your residency status by adding up the days you've spent in the US over the current year and one-third of the days from the previous year and one-sixth of the days from the year before that. If the total equals or exceeds 183 days, you are considered a resident alien. However, exceptions and specific conditions may apply, and seeking professional advice is crucial for accurate determination.

Is There Exemption for US Citizens Living Overseas?

While the US tax obligation persists, there are provisions that can mitigate the tax burden for citizens residing abroad. The Foreign Earned Income Exclusion (FEIE) allows eligible taxpayers to exclude a certain amount of their foreign-earned income from US taxation. In 2023, the exclusion amount is $112,000 per qualifying individual. Additionally, housing expenses can be considered for exclusion, providing further relief for expatriates.

Tax Treaties: A Path to Avoiding Double Taxation

To prevent double taxation and encourage cross-border commerce, the United States has entered into tax treaties with numerous countries. These treaties often provide relief by specifying which country has the primary right to tax specific types of income. Understanding the tax treaty between the US and your country of residence is crucial to optimizing your tax situation. However, interpreting these agreements can be complex, making it advisable to seek professional assistance.

Benefits of Using a Tax Attorney:

Given the intricate nature of international taxation, consulting a tax attorney can be invaluable for US citizens or resident aliens living abroad. Professionals, such as those at Castro & Co., specialize in navigating the complexities of tax law, ensuring that you meet your obligations while taking advantage of available exemptions and treaties. A tax attorney can provide personalized advice, help you optimize your tax situation, and represent you in case of IRS audits or disputes.


In conclusion, the obligation to pay US taxes does not end when you embark on an international adventure. US citizens and resident aliens must fulfill their tax duties, but various provisions and treaties can help ease the burden. Understanding your tax status, exploring exemptions, and leveraging tax treaties are essential steps in optimizing your financial situation while living abroad.

Castro & Co., with its team of experienced tax attorneys, stands ready to assist clients in navigating the complex landscape of international taxation. Whether you are seeking guidance on the Foreign Earned Income Exclusion, exploring tax treaties, or facing an IRS audit, our professionals are dedicated to providing the expertise needed to ensure compliance and maximize your financial well-being.

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Disclaimer: This article is intended for informational purposes only and does not constitute financial or tax advice. Readers are advised to consult with qualified tax professionals before making any financial decisions.

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