Five reasons why planning ahead for your US taxes abroad pays off

Picture the scene: you’ve left the US and are settling into life overseas, meeting new people over an aperitif, mastering a new language and figuring out local life.

It’s bliss, until the paperwork arrives. Moving abroad means navigating your new country’s bureaucracy – and for Americans, there’s the added responsibility of filing taxes for back home.

It can be tricky to know the best way to manage this, especially when you’re not sure how your individual situation – such as income, marriage, having children, investing abroad or saving for retirement – impacts how you file.

But it doesn’t have to be stressful. Tools like MyExpatPlanning – a digital dashboard service designed by the team behind MyExpatTaxes for Americans living abroad – can help you make informed choices as well as saving you time and money. 

Avoid paying more than you should

Even when you’ve put down roots overseas, the IRS (sadly) doesn’t forget about you. The United States is one of the few countries where taxes are based on citizenship rather than residency. It means you have to report global income, whether earned in Paris, Berlin or the Amalfi Coast, to the US every year.

But it’s not just about filing punctually: getting your affairs in order all year round allows you to get the best outcome from your taxes, and avoid falling foul of the rules.

“Planning ahead means you have time to navigate unpleasant surprises – for example, if you are contributing to an IRA retirement account, but find out your contributions were more than legally allowed,” Nathalie Goldstein, CEO of MyExpatTaxes and an Enrolled Agent, tells The Local.

“Taking the time to map out your taxes ahead of time can help prevent larger tax bills than expected and help you make the right financial decisions."

Navigate life changes with confidence

Perhaps you’ve taken the plunge and bought a new home in the countryside or you’re getting ready to welcome a baby. Or maybe you’ve received a bonus at work. Congratulations! These are all significant milestones.

The last thing you want to think about is the IRS, but these changes may have an impact on your tax reporting duties. Planning gives you peace of mind so you don't have to worry about tax implications.

“Many Americans are caught off guard by how moving abroad can complicate their US taxes,” says Goldstein, who founded MyExpatTaxes in 2018.

“For example, selling property overseas can still trigger a taxable event in the US, even if it’s not taxable locally.”

Another surprise that catches Americans out is the result of moving to a country with a lower tax rate than the US.

"While that might sound like a win, it can actually result in a higher US tax bill,” says Goldstein.

“The IRS allows you to use the Foreign Tax Credit (FTC) to offset your American taxes with the foreign taxes you’ve paid, but if your new country’s tax rate is lower, the credit won’t cover the full amount. In that case, you may end up owing the difference to the IRS.”

It's essential to plan for your taxes. Image by Rahul Pandit from Pixabay

It’s also important to keep on top of what receiving bonuses from a foreign employer can mean for your US tax reporting duties.

“Many countries tax bonuses differently, or at different times, than the US does,” says Goldstein. “This timing mismatch can cause issues when claiming the Foreign Tax Credit and may mean the bonus is taxed on the American side before you can offset it with foreign taxes.”

Americans settling down overseas are often unaware of how foreign investments – such as mutual funds, ETFs or local retirement plans – impacts their taxes.

“What’s considered a ‘tax-favoured’ retirement plan or savings account abroad often doesn’t receive the same treatment under US tax law,” says Goldstein.

“Some are treated as foreign trusts or Passive Foreign Investment Companies (PFICs), which come with complex reporting rules and potential double taxation if not handled carefully.”

Learn more about MyExpatPlanning and how it can help you prepare for life changes abroad.

Don’t miss out on savings

Getting your paperwork in order early is good for your wallet.

For instance, Americans who have children abroad may find it tricky figuring out how to secure US Social Security Numbers (SSNs) for them – but it's essential.

“Without an SSN, you cannot claim your child on your US tax return, and if you don’t have it by your tax return’s due date (including extensions), you may forfeit the refundable portion of the Child Tax Credit which is worth up to $1,700 per child,” says Goldstein. 

There are also ways to save strategically. As an American abroad, you can potentially make savings “by gifting property to a non-resident alien (NRA) spouse before a sale”, says Goldstein.

“By transferring partial ownership, you can allocate capital gains between you and your spouse, potentially reducing the taxable amount reported to the IRS.”

Retirement planning also deserves attention.

“Understanding your IRA contribution limits is extremely important for retirement planning abroad,” says Goldstein.

“Depending on your income and whether you qualify for the Foreign Earned Income Exclusion, which is $130,000+ for tax year 2025, your ability to contribute may be limited.”

Goldstein adds that higher-income earners can still benefit from a backdoor Roth IRA conversion: contributing to a traditional IRA and then converting it to a Roth for long-term savings advantages.

Getting to grips with this helps build a “smart, compliant, and optimised expat tax strategy," says Goldstein.

The MyExpatPlanning dashboard allows you to choose from a range of specialist topics, such as family changes, education planning, pensions, property, inheritance and investing.

For users who have extra queries, the service allows you to ask a real tax expert – no chatbots in sight here –  three questions to help with your personal situation.

You can also upgrade for a 1:1 call with a tax professional for complex cases, or for in-depth tax forecasting.

Explore MyExpatPlanning’s plans to see which option fits your needs.

Nathalie Goldstein, CEO of MyExpatTaxes and an Enrolled agent. Photo: MyExpatTaxes

Battle the jargon

Most US citizens abroad know about the risk of double taxation: being taxed by both the US and your host country. But many are caught out by foreign account reporting laws. 

If the total value of your foreign bank accounts, including checking accounts, savings accounts, joint accounts and even certain pension accounts held outside the US, tops $10,000 at any point in the year, you have to report it under Foreign Bank Account Report (FBAR) rules.

And if your foreign assets rise above a certain threshold, which varies based on your residency and filing status, Foreign Account Tax Compliance Act (FATCA) reporting kicks in too.

These forms don’t always mean you owe more tax, but missing them can result in costly penalties.

Tools like MyExpatPlanning simplify complex bureaucracy, helping you understand exactly what you need to report.

Furthermore, the built-in Planning Calculator checks if your foreign accounts meet the FBAR or FATCA reporting thresholds, while flagging up any potential red flags.

Relieve stress 

The good news is that you don’t have to figure everything out by yourself. Using a service like MyExpatPlanning helps you plan ahead with confidence and avoids any last-minute shocks and stress. 

And most importantly, it allows you to spend more time on the things that really matter while you’re building a life abroad in Europe: like immersing yourself in a new culture, exploring Alpine trails with friends and, of course, eating mountains of pasta.

Want to stay ahead of tax season? Sign up directly here for the MyExpatPlanning dashboard for $59 per year, or it's automatically included in the MyExpatTaxes Premium plan.