US Expat Tax Guide 2026: FEIE, FBAR & June 15 Deadline

The June 15 Automatic Extension: What It Covers (and What It Doesn't)

The IRS grants qualifying expats an automatic two-month extension to file their federal return. No form required. If your tax home and abode were outside the United States on April 15, your filing deadline moves to June 15, 2026. When you file, attach a brief written statement confirming that your tax home and abode were outside the U.S. on the regular due date. That is the only formality.

What the extension does not cover: payment. This is the mistake that costs expats real money every year. If you owed taxes on your 2025 income, that payment was due April 15. The June 15 extension buys you more time to file the paperwork. It does not buy you more time to pay. Interest accrues at approximately 6% annually, compounded daily, from April 15 on any unpaid balance.

Extending further to October 15. File Form 4868 by June 15, not after. A Form 4868 submitted on June 16 is too late. Once filed, your deadline moves to October 15, 2026.

The December 15 extension. Not automatic. You write a letter to the IRS explaining why you need an additional two months. The IRS decides on a case-by-case basis. This is a last resort and not something to plan around.

Form 2350 — for new expats still qualifying. If you moved abroad recently and have not yet met the 330-day Physical Presence Test or completed a full year for the Bona Fide Residence Test, Form 2350 may extend your filing deadline until 30 days after you expect to qualify. File it before your original applicable deadline. It requires IRS approval. Consult a licensed CPA before filing Form 2350.

The FBAR deadline is completely separate. The FBAR (FinCEN Form 114) runs on its own April 15 deadline, with its own automatic extension to October 15. Your tax return extension has no effect on the FBAR, and the FBAR extension has no effect on your tax return.

Foreign Earned Income Exclusion (FEIE) — Form 2555

The FEIE lets qualifying Americans exclude foreign earned income from U.S. federal income tax, up to an inflation-adjusted annual limit. For the 2025 tax year, that limit is $130,000 per qualifying person. For the 2026 tax year, it rises to $132,900. Both spouses can each claim the exclusion if both independently qualify, doubling those figures for dual-income households.

What qualifies as earned income. Active earned income only: wages, salary, bonuses, and self-employment income earned from work performed abroad. Not dividends, not interest, not rental income, not pension distributions, not capital gains. Those remain taxable regardless of where you live.

How to qualify. You need to meet one of two tests.

The Physical Presence Test requires 330 full days in foreign countries during any 12-month period. The 12 months do not have to align with the calendar year. Days in transit and days in the United States do not count toward the 330.

The Bona Fide Residence Test requires genuine residency in a foreign country for an entire uninterrupted tax year. It involves less day-counting and more evidence of having established a genuine life abroad. Intention, social ties, and economic connections in the foreign country all factor into the analysis.

The FEIE must be actively elected. You claim it by filing Form 2555 with your return. The IRS does not apply it automatically. A client of ours, a Hackensack-based engineer who relocated to the Netherlands in early 2025, came to us after his previous preparer had filed his return without Form 2555. He had $118,000 in foreign salary for the year. Without the exclusion, he faced approximately $26,000 in unnecessary federal tax. We filed an amended return and recovered most of it. A correct original filing avoids that cost entirely.

Once you elect the FEIE, be careful about revoking it. If you revoke, you cannot re-elect it for five years without IRS approval.

The housing exclusion. Form 2555 also lets you exclude housing expenses above a base amount. The base for 2025 is $20,800 (16% of the $130,000 exclusion limit). Qualifying housing expenses above that amount, up to a location-specific ceiling, can be excluded from taxable income. High-cost cities like London, Singapore, Tokyo, and Hong Kong have higher location-specific ceilings than the standard limit.

FEIE vs. Foreign Tax Credit. The FEIE is not always the optimal choice. Expats in high-tax countries where foreign taxes paid exceed the U.S. tax on the same income often do better with the Foreign Tax Credit (Form 1116). Expats with children should carefully compare both: claiming the FEIE disqualifies you from the refundable Additional Child Tax Credit, which is $1,700 per qualifying child for 2025 under current law. A family with three children could forgo $5,100 in refundable credits by defaulting to the FEIE without analysis. This is a fact-specific planning decision. There is no universal right answer — consult a licensed CPA.

Self-employment tax. The FEIE shelters income from federal income tax. It does not shelter self-employment income from the 15.3% self-employment tax on Social Security and Medicare. If you are self-employed abroad, you owe SE tax on net earnings unless you live in a country with a U.S. Totalization Agreement and are covered under that country's social insurance system.

FBAR — FinCEN Form 114

The FBAR is not filed with the IRS. It is filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, through the BSA E-Filing System at bsaefiling.fincen.gov. Many taxpayers spend years unaware of this distinction. That confusion carries real financial consequences.

The trigger. $10,000 in aggregate, at any point during the year — not the year-end balance, and not the balance in each account independently. The peak combined value across all your foreign accounts at any single moment during the calendar year.

Here is the trap. If Account A briefly held $7,000 and Account B held $4,500 at the same time, you have crossed $10,000 and the FBAR is required, reporting both accounts. We have had clients come to us after receiving IRS correspondence about FBARs they did not know existed. The most common trigger in our practice: a UK pension that briefly held the equivalent of £8,000 when the pound strengthened against the dollar enough to push the USD value over $10,000. The client had no idea the pension was a reportable foreign financial account.

It is.

The deadline. April 15, with an automatic extension to October 15. No form is required for the automatic extension. This deadline runs entirely separately from your income tax return deadline.

Cryptocurrency. Current FinCEN guidance does not require FBAR reporting for foreign accounts holding only virtual currency. Accounts holding both cryptocurrency and fiat currency may be reportable if the total crosses $10,000. This area continues to evolve; confirm current FinCEN guidance before filing.

If you have unfiled FBARs. Options exist before the IRS contacts you. The Delinquent FBAR Submission Procedures allow late filing without penalty if you properly reported income from those accounts on your tax returns and the IRS has not yet contacted you about the failure. For expats with unreported foreign income, the Streamlined Filing Compliance Procedures reduce penalties for non-willful situations. Do not quietly file late FBARs without understanding which program fits your situation first. Getting the approach wrong can forfeit relief you would otherwise qualify for. Consult a licensed CPA or tax attorney before taking action.

Form 8938 — FATCA Foreign Asset Reporting

Form 8938 is filed with your federal income tax return, attached to your Form 1040. It is the IRS's FATCA disclosure form under IRC Section 6038D, and it covers a broader category of assets than the FBAR.

The FBAR captures foreign financial accounts. Form 8938 captures "specified foreign financial assets" — a category that includes foreign accounts but also extends to directly held foreign stocks and bonds, interests in foreign corporations and partnerships, foreign pension plans, and foreign life insurance policies with cash surrender value.

In our practice, we calculate FBAR and Form 8938 independently for every expat client. The thresholds differ, the assets covered differ, the filing agencies differ, and the consequences of missing either one are significant. Form 8938 does not relieve you of the FBAR obligation, and the FBAR does not relieve you of the Form 8938 obligation.

The statute of limitations concern. If you are required to file Form 8938 and do not, the statute of limitations on your entire tax return does not begin to run under IRC Section 6501(c)(8). The IRS retains the ability to audit that entire year's return indefinitely. This applies to your whole return — not just the foreign asset disclosures. This is one of the most significant practical risks of missing Form 8938.

Penalty for non-filing. $10,000 for failure to file. An additional $10,000 per 30-day period the failure continues after IRS notice, up to a maximum continuation penalty of $50,000. These penalties are in addition to any tax liability or other penalties.

Form 5471 — Controlled Foreign Corporations

Most expats do not encounter Form 5471. But those who own or co-own a business abroad often do, and they frequently discover the obligation only when something has already gone wrong.

A Controlled Foreign Corporation is a foreign corporation in which U.S. shareholders collectively own more than 50%. Any U.S. shareholder owning at least 10% of a CFC must file Form 5471 annually with their tax return, regardless of whether the company earned income or made distributions during the year.

A business owner we advise in New Jersey owns 15% of a foreign joint venture in Germany. His 15% stake triggered a Form 5471 filing obligation that his prior tax preparer had never identified. The form is due each year, reporting the company's financial statements, earnings, and intercompany transactions.

Why disclosure matters beyond compliance. CFCs are subject to U.S. anti-deferral rules. Subpart F income (certain types of passive and mobile income earned by the CFC) may be taxed to U.S. shareholders in the year it is earned, even if the company never makes a distribution. GILTI (Global Intangible Low-Taxed Income) creates similar current-year inclusion for certain categories of CFC earnings. Leaving money inside a foreign company does not necessarily defer U.S. tax the way many business owners assume.

Form 8858 — Foreign Disregarded Entities

Solo entrepreneurs who set up a foreign LLC or operate a foreign branch to run their business abroad frequently have a Form 8858 obligation. If that entity is a single-member foreign LLC treated as a disregarded entity for U.S. tax purposes, the operating results flow directly through your U.S. tax return, and Form 8858 is the required annual information disclosure.

The form is filed with your tax return, due by the same deadline as your Form 1040 (including any extensions you file).

Form 8621 — Passive Foreign Investment Companies (PFICs)

This form surprises people who consider themselves conservative investors. A PFIC is a foreign corporation that derives at least 75% of its income from passive sources (interest, dividends, royalties, gains) or holds at least 50% of its assets in passive income-producing investments. Many investment vehicles available through local brokerages in the UK, Germany, Australia, Canada, and other countries qualify under this definition.

An expat who opens a UK Stocks and Shares ISA and invests in index funds through it is almost certainly holding PFICs. The ISA wrapper is not recognized for U.S. tax purposes, and the underlying foreign-domiciled funds typically meet the PFIC definition.

The default tax treatment is punitive. Under the "excess distribution" regime, any gain or distribution is taxed as if it had been received in equal installments over the entire holding period, with an interest charge on the deferred tax for each prior year. The result can be an effective tax rate well above ordinary income rates on gains that may have accumulated gradually over many years.

Timing elections can help. The QEF (Qualified Electing Fund) election allows current-year taxation on the PFIC's income, avoiding the punitive default rules — but it requires the fund to provide annual PFIC statements, which many foreign funds do not produce. The Mark-to-Market election taxes the annual change in fair market value as ordinary income each year for publicly traded PFICs. Both elections must generally be made in the first year of PFIC ownership. Retroactive remediation exists but is costly. Consult a licensed CPA experienced in PFIC matters before investing in any foreign fund.

Low-value exemption. If the total fair market value of all PFIC holdings is below $25,000 (or $50,000 for married filing jointly), Form 8621 is generally not required for that tax year. Confirm this threshold applies to your situation with a licensed CPA.

No fixed dollar penalty for missing Form 8621, but failure to file keeps the statute of limitations open on your entire return under IRC Section 6501(c)(8). And the interest charges under the excess distribution regime, for positions held for years without a timely election, can dramatically exceed the investment's value.

Form 1116 — Foreign Tax Credit

The Foreign Tax Credit provides a dollar-for-dollar reduction in U.S. income tax for income taxes paid to a foreign government on the same income. If you paid $18,000 in UK income tax on employment income, you can reduce your U.S. income tax by up to $18,000 on that same income.

When the FTC is more beneficial than the FEIE. Expats in high-tax countries often pay foreign income taxes that exceed what the U.S. would charge on the same income. In those cases, the FTC may reduce U.S. tax liability to zero with credits available to carry forward or back. The FEIE, by contrast, caps at $130,000 regardless of the foreign tax rate, and income above that limit remains fully subject to U.S. income tax.

Families with children should model both options carefully. Electing the FEIE disqualifies you from the refundable Additional Child Tax Credit ($1,700 per qualifying child for 2025 under current law). Choosing the FTC instead may preserve that refundable credit, producing a better overall result for families with multiple children living in countries with moderate or high income tax rates.

Carryovers. Foreign tax credits that exceed your U.S. tax liability in a given year can be carried back one year or carried forward ten years. Maintaining clean, accurate records of foreign taxes paid each year preserves this flexibility.

Using both credits together. For expats with both earned income and passive foreign income, it is sometimes possible to use the FEIE on the earned income component and the FTC on the passive income component (such as foreign dividends or interest). This requires careful structuring on the return. Consult a licensed CPA before attempting this approach.

The FEIE vs. FTC decision is the single most common planning question we field from clients who have recently moved abroad. The right answer depends on your income level, your host country's tax rates, your family situation, and your long-term residency plans. There is no universal correct answer.

The NY and NJ Expat Trap: Your State May Still Tax You

This is the most consistently overlooked tax obligation we encounter in our practice for expats who previously lived in NJ or NY. Most national expat tax services focus exclusively on federal obligations and do not address state domicile rules. We do, because New Jersey is our primary market and New York is directly adjacent.

Both states may impose income tax on worldwide income for individuals who remain legally domiciled in the state, even after physically relocating abroad. The Federal FEIE provides no relief from state income tax obligations. Claiming the full FEIE on your federal return eliminates your federal liability on excluded foreign earned income. It has no effect on New York or New Jersey tax liability.

New Jersey. New Jersey imposes its Gross Income Tax on NJ domiciliaries on their worldwide income. Moving abroad does not terminate NJ domicile unless a taxpayer takes deliberate, documented steps to abandon it — including establishing legal residency elsewhere, severing meaningful property and business ties to NJ, and demonstrating a genuine intent not to return. A retained mailing address or family ties in NJ can complicate domicile termination analysis. Tax obligations depend on specific facts; consult a licensed CPA or tax attorney for advice regarding your NJ domicile status.

New York. New York State and New York City also impose income tax on worldwide income for individuals domiciled in New York. New York has specific statutory residency rules and the state has historically conducted audits of high-income individuals claiming to have changed domicile. The analysis involves multiple factors including the location of a permanent place of abode, social and economic ties, and time spent in New York. [Publisher note: Confirm current NY domicile statutory residency standards at tax.ny.gov before this section publishes. Do not assert specific day-count thresholds without current verification.]

The planning implication. If you are planning to move abroad and currently reside in NJ or NY, the timing and documentation of any domicile change matters significantly. Establishing domicile in a state without an income tax — such as Florida or Texas — before moving abroad can eliminate state income tax exposure on foreign income. This requires genuine relocation, not merely updating a mailing address. The steps required to establish new domicile take time and should be done correctly. Consult a licensed CPA or tax attorney regarding your specific situation before and shortly after relocating abroad.

We have worked with NJ business owners who moved abroad, correctly reported their federal return with a full FEIE election, and subsequently received NJ income tax notices for multiple years of unreported worldwide income. The federal filing was compliant. The state planning had not occurred. Get this conversation started before you leave, not after a notice arrives.

Your Pre-June 15 Action Checklist