Do you still pay US taxes if you move abroad? What FEIE actually covers

By Skyler Bissell · July 13, 2026 · 5 min read

Yes, technically. And that one word talks a lot of people out of moves that would have worked fine. The US is one of the only countries on earth that taxes its citizens on worldwide income no matter where they live, so the passport follows you to Oslo, Lisbon, or Singapore, and the IRS comes along for the ride. Here is the part the panic skips over: you keep filing a US return, but filing and owing are two different things. The gap between them is where almost everyone gets the math wrong.

Filing is not the same as owing

Every US citizen with income over the filing threshold sends the IRS a return every year, whether you live in Seattle or Stavanger. That obligation does not go away when you board the plane. What changes abroad is the second question: once the return is filed, do you actually owe the US anything on top of what you already paid your new country?

For most people earning a salary in a country with normal income taxes, the answer on that salary is little or nothing. Two mechanisms do the work, and they stack on top of each other.

What FEIE actually covers

The foreign earned income exclusion lets you lift a large chunk of your earned income off your US taxable total. Picture a large, inflation-indexed exclusion, roughly $120,000 and up, and higher in recent years. Do not treat any number you read (here or anywhere) as this year's figure. The amount is reset for inflation every year, so pull the current one from the IRS or your accountant before you plan around it.

Two catches are worth knowing up front. First, you have to qualify by passing one of two tests: the bona fide residence test (you genuinely live abroad across a full tax year) or the physical presence test (you are outside the US for at least 330 full days in a 12-month window). Second, FEIE only touches earned income, meaning wages and salary. Dividends, interest, and capital gains sit outside it. There is also a separate foreign housing exclusion that can pull part of your rent and utilities out of the taxable pile when your costs run high, which matters if you land somewhere pricey.

The foreign tax credit covers the rest

FEIE handles a band of income. What about the salary above that band? This is where the foreign tax credit comes in, and for anyone moving to Europe it is the piece that matters most. The credit subtracts the income tax you already paid to your new country from the US tax owed on the same income, close to dollar for dollar.

Run the logic. Norway, Germany, or the Netherlands taxes your salary at a rate that meets or beats the US rate on the same money. You pay that foreign tax. The credit then hands you a matching offset against your US bill. When the foreign rate is higher, which across most of Western Europe it is, the offset covers the whole US tax on that income and you often carry leftover credits forward for later years. So a US citizen on a normal salary in a normal-tax European country usually owes the IRS nothing extra on those wages. You still file. You just do not pay twice.

Where it does get complicated

The clean story above is for a straight paycheck. Step outside a W-2 salary and the corners get sharp:

• Self-employment. FEIE can exclude the income tax, but US self-employment tax (Social Security and Medicare) can still apply unless a totalization agreement between the US and your country says otherwise. Freelancers get surprised by this one constantly.
• US investment income. Dividends, interest, and US-source capital gains are not earned income, so FEIE does nothing for them. They follow their own rules, and some accounts (looking at you, non-US mutual funds) carry genuinely ugly reporting.
• State tax that will not let go. The IRS is federal. Your old state is a separate creature, and a few of them (California is the famous one) are slow to agree you have actually left. Cutting state residency cleanly before you go can matter more than the federal question.
• Equity vesting across the move. RSUs and options granted while you worked in the US but vesting after you land abroad get sourced between both countries, and the split can get hairy fast. If a chunk of your comp is stock, read RSUs when you move abroad before you assume anything.

None of these are reasons to cancel the move. They are reasons to spend one hour with a cross-border accountant instead of guessing.

What this means for your move

Here is the whole point. The double-taxation fear is loud, and for a salaried person moving to a normal-tax country it mostly evaporates once FEIE and the foreign tax credit do their thing. Your US filing gets more annoying. Your US bill on wages usually barely moves.

So the tax question rarely decides the move. What decides it is the equivalent salary: what your new gross actually buys after that country's own taxes, childcare, healthcare, and rent. That swing dwarfs any US tax wrinkle, and it is the number worth obsessing over. If you want the full menu of relocation incentives (plenty of countries roll out real perks to pull you in), we break those down in expat tax breaks. When you are ready to see the actual dollars, run your two cities through the calculator and let the take-home settle it.

FAQ

Do US citizens pay taxes when living abroad?

You keep filing a US return on your worldwide income, yes. Whether you owe extra is a separate question. Between the foreign earned income exclusion and the foreign tax credit, most people on a normal salary in a normal-tax country end up paying the IRS little or nothing beyond the tax they already paid locally.

What is the foreign earned income exclusion (FEIE)?

It lets qualifying US citizens abroad exclude a large, inflation-indexed slice of earned income (wages and salary) from US tax, roughly $120,000 and up, and higher in recent years. You qualify by passing the bona fide residence test or the physical-presence test. The exact amount changes every year, so confirm the current figure before you rely on it.

Will I be double taxed if I move to Europe?

On wages, rarely. The foreign tax credit subtracts the income tax you already paid to your new country from your US tax on the same income, and most Western European rates meet or beat US rates, so the offset usually wipes out the extra US bill. Investment income and self-employment follow different rules, which is where a cross-border accountant earns their fee.

Do I still have to file a US tax return from abroad?

Almost certainly. Filing follows your citizenship rather than your address, so if your income clears the normal threshold you file every year no matter where you live. FEIE and the foreign tax credit are things you claim on that return, so you have to file to get them. Filing and owing are separate events: plenty of expats file and owe the US nothing.

This post is general information about US taxation abroad and how it feeds a relocation decision. It is not tax advice, and the thresholds, tests, and treaty terms above change from year to year and depend on your own situation, so confirm the current figures and your specific case with a cross-border accountant before you act. Cost and equivalent-salary figures come from cityparity's per-city engine and were current at publication. See the methodology.