US Expat Taxes: Updated Figures for 2025

It’s a core belief here at Nomad Capitalist that the US tax system is unfair in many ways. 

While most people agree, there are still quite a few who think that the US tax system is justified.

That’s fair enough – each to their own and all that – but we’re not about to shift our position any time soon. After all, the United States is one of only two countries where you have to pay taxes no matter where you live.

In a way, it can feel like you’re being taxed for your citizenship. 

If this is true (because certainly, no one is admitting this), it buys into the notion that the United States is the greatest country in the world, and that’s a completely different topic.

But surely, if the United States truly were as great as it used to be, there wouldn’t be so many US expats living overseas. 

But that’s an indisputable fact, with many of those US citizens overseas also actively seeking ways to legally reduce their taxes.

And they shouldn’t feel as though they’re doing anything wrong by wanting that. After all, less than 10% of the population of the United States has to pay most of its tax bill – how is that fair?

At Nomad Capitalist, we’ve developed strategies you can implement to bring your tax obligations down from more than 40% to as low as 1%. It’s all completely legal, so get in touch to learn more.

Do Expats Pay US Taxes?

Before we look at the numbers, let’s address something that a lot of people have questions about. 

First of all, the most common question from US citizens living abroad is whether they have to pay taxes, even if none of their income is based in the United States.

The answer is yes; you have to pay taxes no matter where you are in the world. In addition to the tax you’re paying to the US government, depending on where you live, you may be subject to additional taxes in your resident country as well.

There are quite a few taxes that you may find yourself paying. From rental income to local taxes to state taxes and more, it’s quite common for expats to be paying a range of taxes.

Especially US expats. 

You’ll probably find yourself paying a lot more taxes on the same income compared to your non-US counterparts. It doesn’t matter if you’re an entrepreneur or if you have a foreign employer or work in a foreign corporation.

Why?

Because you have to – there’s no way around it if you have a net worth of more than US$1 million.

That’s not all. If you live in a country with a high tax rate or stricter foreign income taxes, you might find yourself paying worldwide income tax as well.

Therefore, it’s highly recommended that you reach out to Nomad Capitalist so we can help you create a financial plan that will work best for you.

Why Does the US Tax Expats?

The US expat tax is something that only Americans have to deal with. Only one other country in the world (Eritrea) has a tax law that requires citizens who haven’t been in the country for decades to pay taxes.

In fact, in most countries, you don’t have to pay taxes the moment you leave with no income left behind. Some countries go a step further and don’t care about taxing income in that particular country because you’re not there.

Similarly, you’ll see plenty of countries with many foreign-earned income exclusion options. Of course, to be fair to the United States, there is a foreign-earned income exclusion policy, but it’s pretty nominal.

In general, as a US citizen, you’ll see that a foreign country is nicer to you than your own country. Because of US taxes, you’re likely to be a victim of double taxation.

But why are there such US expat taxes?

1. Paying for Services

According to the United States government itself, you’re essentially paying for the benefits of your citizenship. After all, there are many ‘free’ utilities offered to you because of your status as a US citizen.

From the moment you’re born (even if you’re born to foreign parents), you cost the government something. A better way to imagine this is as social security payments.

You’re granted various social security benefits throughout your life as a US citizen. The government can’t pay for every 300-something-million US citizens, so they’re taxing those who can afford it.

Even if you’re not using those services, this leads to another argument.

You’ve been abroad for many, many years. You’re not using any of the ‘services’. So, why do you have to pay a US expat tax when you’ve got nothing in the United States?

2. Paying for Your Privilege

By now, like almost every other US citizen abroad, you’ve started asking the question: why am I paying US expat tax when I have nothing to do with the United States?

If this is you, you’ll be happy to know the government has an answer for that. Mind you, you won’t be happy with the answer.

Their reasoning behind taxes for expats is that your citizenship is a privilege. If you ask us, it sounds a lot like you’re being asked to file taxes for your citizenship.

No one’s going to admit that, but if you read between the lines, that’s what’s happening here.

According to the US government, you have a tax obligation because what you do, who you are, and any greatness you might achieve is all due to the all-mighty US government.

Yes, as per the official reasoning, the only reason you’ve got to where you are in life is because of the government and the services available to you since you were born a US citizen.

3. Paying Other People’s Tax Returns

Another reason why you’re subjected to the US expat tax is that back home, other people aren’t paying enough taxes.

The US government likes to pretend to be very egalitarian. You’ve probably noticed that there’s been a surge of anti-rich sentiment in the United States in recent years. 

Particularly since the election of Donald Trump, we’ve seen a rise in people wanting to increase tax filing obligations, but only for the wealthier people.

Similarly, there’s been an increase in the demand for social security taxes for only the wealthy. We find this one to be outrageous because no one should pay social security taxes, to begin with, but why the rich in particular?

That’s rather discriminatory. But what can you do about it?

It seems as though politicians are willing to do anything as long as it gets them re-elected. You could, in theory, pay a lobbyist to work with these politicians and make a ‘donation’ to stop your people from having to pay taxes.

But that’s not right.

Not everyone wants to mess around with politics anyway.

If you’re an entrepreneur or investor looking for ways to build your wealth, why should you waste your money on politics? 

It’s clear that politicians aren’t reliable. They’re all corrupt and it’s apparent from their election funds. They’re corrupt and want you to pay for what they should be able to do on their own. So, no, paying social security taxes is not your responsibility.

As the government, they should’ve come up with a better plan. But they’re not going to. So, being part of the ‘elite’, you have to pay for your and others’ federal tax returns.

How Much Tax Do American Expats Pay? 

Depending on your net worth and your occupation, you may have to pay the US expat tax as well as additional taxes on foreign financial assets, rental income and any other foreign taxes you have to pay in your country of residence (if it has foreign taxes at all, that is).

As you can see, this is double taxation at its finest. The cost adds up, and many Americans abroad are tired of it. 

Just think about it – after you’ve paid your foreign taxes (if the country you live in has such taxes), you’d want to rest. It’s not just about the money you’re paying. It’s the process, too. 

There’s so much paperwork, especially with income taxes. If your income exceeds a certain tax bracket, you’ve got a lot to do. And if you’re in a foreign country, you’ve got foreign financial institutions to deal with.

It’s ridiculous.

Some people would say that it’s a necessary evil, but it’s not.

It’s unnecessary.

So, you have to start paying taxes if your taxable income is at least US$15,000 and the tax rate goes up depending on your net worth. 

If you’re married to another US citizen and filing together, you have to pay taxes if your minimum income is US$30,000.

All of this information is subject to change depending on your net worth, your foreign assets, your foreign income, your income earned abroad and more.

Are All US Citizens ‘Tax Residents’? 

Unfortunately, yes. All US citizens and Green Card holders have to pay the US expat tax if they live abroad. 

No matter where you are, you have to file your US federal tax return. You might think that you can get away with paying taxes abroad, but you’re mistaken.

Your expat status will be measured by the physical presence test, which measures how many days you have spent outside the United States. 

It’s not easy getting around the physical presence test. What’s more, if you get caught tampering with the physical presence test, you may face charges. 

On top of that, there’s the bona fide residence test, which measures how well you’ve integrated into your new country. These are all examples of the measures the government takes to know your location.

But the good news is that there are ways around these taxes.

How to Avoid Paying US Expat Taxes Overseas

There are many options available to avoid paying taxes in the US if you live in a foreign country. There’s a way of avoiding tax on your foreign-earned income as well. You just have to be proficient with your tax return.

Trust us; we strongly recommend getting a consultant or lawyer who is well-versed in filing taxes. If you don’t know where to start, get in touch with us.

1. Foreign Earned Income Exclusion 

You can cut back on your taxes legally by taking advantage of the foreign-earned income exclusion. 

Under this rule, you have a foreign tax credit, which you can use to claim exemptions from your income tax obligation. For example, you can get a foreign housing exclusion based on housing expenses, foreign source income exclusion and more.

But, again, you’ll have to be careful with foreign tax credits because it’s easy to mess it up. Be sure that you have the correct and up-to-date information about the foreign tax credit and how to utilise it. 

2. Transfer to Non-US Spouse

There’s a massive loophole when it comes to taxes for expats, and that is your non-US spouse. On the off chance that you have a spouse without a US Green Card or passport, you can transfer your property and your other investments in their name and not pay expat taxes at all.

This is an entirely legal strategy people use to avoid the US expat tax, and honestly, it’s hassle-free compared to the other methods on this list. 

Earnings from assets in your spouse’s name will be considered excluded income, so you can reduce your tax bill dramatically by transferring as much as possible. 

Many people do this to pay the least amount of tax. If your spouse is from a country that readily grants income tax treaties, this can be a particularly smooth strategy to avoid tax legally.

3. Renunciation of US Citizenship 

Renouncing your US citizenship could be a smart move if none of the above options work.  However, you’ll have to pay an exit tax to the US government, which, depending on your net worth, could land you with a five or six-figure bill. 

This is a drastic step, we’ll admit. You’ll lose all the ‘privileges’ that US citizenship supposedly gives you. But it’s better than worrying about your foreign tax credit, interest dividends, tax liability and everything else.

Sadly, the US government will not make things easier for you. In fact, you need to make sure that you have paid all your taxes, checked your exit tax and all other remaining ties to the United States before you give up your US citizenship.

How to Live Without Paying United States Expat Taxes 

If you’ve decided to renounce your US citizenship, here are some ways to ensure you never have to pay any sort of tax again.

Move to a Country With No Income Tax 

There are several jurisdictions that charge no taxes whatsoever. These countries will offer you a second residence permit for investing a lump sum into their economy or simply transferring your money into their banks.

Eliminate Your Personal Taxes by Getting a No-Tax Second Citizenship

It’s possible to get a second passport quickly without even living in the country. 

There are several countries offering citizenship-by-investment schemes that you can use to get citizenship in less than six months. These include tax-friendly Caribbean islands like St Kitts and Nevis or Antigua and Barbuda. 

Each of these programs has its own pros and cons, so we encourage you to learn more about them in our full guide. 

Obtain Tax Residency in a No-Tax Country 

After your citizenship applications have been approved, you can then begin the process of moving to a country where you don’t have to pay any tax on foreign income. 

There are many countries that want your money to be spent on their economy and are willing to accommodate you.

For example, if you could get your hands on an EU passport, you could move to Malta, which doesn’t tax foreign-earned income if it’s not remitted to the island.   

Of course, once you’ve got a new passport and gotten rid of any extra foreign tax you’d have to pay, you can begin the process of renouncing your US citizenship. 

After you’re done with that, you can refine your options and go after other convenient residence permits and passport programs in countries where you can expand your wealth and protect your freedom.

US Expat Taxes: Updated Figures for 2025 – FAQs

Develop Your Tax Reduction Strategy With Nomad Capitalist

Taxation can be complicated, especially if you’re a US citizen. It’s best to ensure that your tax affairs are in order so that tax season isn’t too problematic. 

At Nomad Capitalist, we understand the importance of tax preparation and developing a strategy to combat it.

At Nomad Capitalist, we help wealthy investors and entrepreneurs to ‘go where they’re treated best’, whether that’s by moving their investments overseas, gaining a second citizenship or moving to a tax-friendly country.