Just Relocated? Don’t Let Your First Year Overseas Be Your Most Expensive

U.S. citizens and green card holders are taxed based on citizenship, not location. If your income exceeds IRS filing thresholds, you are still required to submit a federal tax return even if all earnings come from outside the United States.

This obligation applies from your first year overseas forward.

Once abroad, you must report income from all global sources, including:

• Foreign employment or contract work

• Self-employment or freelance earnings

• Rental income and investments

• Interest, dividends, and pensions

Track amounts in local currency and retain documentation so everything can be accurately converted into U.S. dollars later.

Many new expats qualify for tax relief, but only if rules are applied correctly. Common options include:

• The Foreign Earned Income Exclusion, which may allow you to exclude a significant portion of foreign wages

• The Foreign Tax Credit, which can offset U.S. tax with income taxes paid abroad

First-year filings often involve partial-year calculations and residency tests, making professional guidance especially valuable.

Foreign financial accounts come with separate reporting requirements, even if no tax is owed.

You may need to file:

• FBAR (FinCEN Form 114) if foreign accounts exceed $10,000 at any point during the year

• Form 8938 if foreign assets exceed IRS thresholds

Tracking balances early prevents penalties later.

Moving overseas does not automatically end state tax obligations. Some states continue to assert residency unless you take clear steps to sever ties.

Items such as voter registration, mailing address, property ownership, and driver’s licenses can affect whether a state still considers you taxable.

All foreign income, expenses, and taxes must be reported in U.S. dollars. The IRS allows specific exchange rate methods, but consistency and documentation are critical.

Using the correct rates reduces errors and avoids unnecessary IRS follow-ups.

Americans living abroad receive special timing relief:

• An automatic filing extension to June 15

• The option to extend further to October 15

Keep in mind that extensions apply to paperwork, not payment. Any tax owed still accrues interest after April 15.

Your first expat return sets the tone for future years. Strong habits now make future filings simpler and safer:

• Track travel days if qualifying for exclusions

• Save foreign tax payment records

• Maintain organized financial files

• Review changes in residency or income promptly

Planning early helps prevent costly corrections later.

At Mertz International Limited, we focus on more than filing forms. We help Americans abroad structure their tax situation correctly from the beginning, reduce long-term exposure, and stay compliant across borders.

If this is your first year overseas, the right guidance can make a lasting difference.