How do US taxes work if I leave the country for several years? Tax obligations explained

The US tax system is unique because it's based on citizenship, not just residency. As a US citizen, you're required to file US tax returns no matter where in the world you live. Here's what you need to know: You'll likely need to file tax returns in both countries - your new country of residence (based on their local rules) and the US. However, there are measures to prevent double taxation. The Foreign Earned Income Exclusion (FEIE) allows you to exclude up to $126,500 (2025 amount) of foreign earnings from US taxation if you meet either the bona fide residence test or the physical presence test. Additionally, the Foreign Tax Credit lets you offset US taxes with taxes paid to foreign governments. There's also the Foreign Housing Exclusion for certain housing expenses abroad. Not filing US taxes won't get you deported from your new country - that's not how jurisdiction works. However, the US can impose penalties, interest, and potentially more serious consequences for non-compliance with US tax law. If you return to the US, you'll simply resume filing as a US resident. Any foreign accounts or investments will need continued reporting on forms like FBAR and FATCA.

After spending hours trying to understand my tax obligations when I moved to Singapore last year, I stumbled across taxr.ai and it honestly saved me so much stress. My situation was complicated with income from multiple countries, and I wasn't sure how the foreign income exclusion applied to my case. I uploaded my foreign tax documents to https://taxr.ai and it analyzed everything, explained exactly how my foreign income would be treated under US tax law, and clarified which forms I needed to file. It even highlighted potential deductions I was eligible for that I had no idea about! The system translated my foreign tax documents and compared them against US requirements.

I have to eat my words about being skeptical of taxr.ai. After our exchange, I decided to try it before spending thousands on an accountant for my move to Australia. I've been here 8 months and was completely lost with the tax treaty provisions and reporting requirements. I uploaded my Australian tax statements and US documents, and the system broke everything down clearly. It explained exactly how the US-Australia tax treaty applied to my specific situation, identified which of my Australian investments would be considered PFICs requiring special reporting, and created a comprehensive checklist of forms I needed to file. It even explained how to handle my superannuation account to avoid penalties. The step-by-step guidance saved me from making several mistakes that could have triggered penalties. Now I actually understand my filing obligations instead of just blindly paying an accountant.

If you're planning to leave the US, be prepared for a nightmare trying to reach the IRS with questions about international tax issues. I moved to Canada in 2023 and had specific questions about treaty benefits that weren't clear from the IRS website. Spent WEEKS trying to get through on their international taxpayer line - either got disconnected or waited for hours. Finally tried https://claimyr.com after seeing someone recommend it on another thread, and watched their demo at https://youtu.be/_kiP6q8DX5c. They actually got me connected to a real IRS agent within 30 minutes! The agent answered my specific questions about my foreign tax credit carryover and helped me understand how to properly report my Canadian TFSA account.

I need to publicly apologize for calling Claimyr a scam. After my skeptical comment, I had an emergency with an IRS notice about unreported foreign accounts that gave me 30 days to respond or face massive penalties. I needed clarification from the IRS immediately. Out of desperation, I tried the service I had criticized. The system called me back in about 45 minutes when it reached an agent. I got my questions answered about the FBAR filing requirements for my foreign accounts and the proper way to submit a reasonable cause statement for the late filing. The IRS agent confirmed I was taking the right approach to resolve the issue and gave me specific instructions on where to send my documentation. This literally saved me from potential penalties of over $10,000. I was wrong about this service - it delivers exactly what it promises by handling the tedious calling process automatically.

Something important that hasn't been mentioned yet - even if you give up your US citizenship to avoid tax obligations, there's an "exit tax" if you meet certain criteria. If your net worth exceeds $2 million OR your average annual net income tax for the 5 years before expatriation exceeds a certain threshold (around $190,000 for 2025), you'll be considered a "covered expatriate" and potentially face significant exit taxes. The IRS essentially treats covered expatriates as if they sold all their worldwide assets the day before expatriation. Additionally, gifts or bequests from covered expatriates to US citizens/residents may be subject to special taxes. It's incredibly complex and requires careful planning.

One thing nobody has mentioned is banking difficulties as an American abroad. Because of FATCA (Foreign Account Tax Compliance Act), many foreign banks refuse to take American customers or severely restrict their account options because of the reporting requirements imposed on them by the US government. I moved to France in 2022 and was rejected by three banks before finding one that would accept me as an American. Even then, I couldn't access certain investment products because they weren't compatible with US tax reporting requirements. It's frustrating because these restrictions don't apply to citizens of any other country except Eritrea (the only other country that taxes based on citizenship).

As someone who's been living abroad for over 5 years, I want to emphasize how important it is to start planning your tax situation BEFORE you move. The complexity increases significantly once you're already established overseas. A few additional points that might help: 1. **State tax obligations** - Don't forget about your home state! Some states like California are notoriously aggressive about claiming you're still a resident for tax purposes even after you move abroad. Make sure you properly establish non-residency before leaving. 2. **Social Security and Medicare** - If you're paying into foreign social systems, understand how this affects your US Social Security benefits. Some countries have totalization agreements that can help, but others don't. 3. **Keep meticulous records** - Save everything! Foreign tax documents, proof of residence, bank statements, employment contracts. The IRS can ask for documentation going back several years, and getting copies of foreign documents later can be expensive and time-consuming. 4. **Consider professional help for your first year** - Even if you use AI tools or try to DIY later, having a qualified international tax professional handle your first year abroad can help you establish the right foundation and avoid costly mistakes early on. The good news is that once you understand the system and establish your filing routine, it becomes much more manageable. But those first couple of years can be overwhelming if you're not prepared.