By Victor Gersten, EA, CFP®, MS, MPAS™
Filing a U.S. tax return from abroad is not simply a domestic return with a foreign address on it. The deadlines are different, several of the largest deductions work differently, and a handful of rules exist only for people living outside the country.
This is the 2026 and 2027 version of a piece I first wrote years ago. Enough has changed since then, particularly after the legislation signed in July 2025, that most of the old article no longer applied. Below is what actually matters now for a U.S. citizen filing from abroad, with the figures for tax year 2026 and a note on what has not been announced yet for 2027.
You Still Have to File
The United States taxes its citizens on worldwide income regardless of where they live. Moving abroad does not end the filing obligation, and neither does paying tax in another country. If your income exceeds the filing threshold for your status, you file.
What changes is not whether you file, but which mechanisms you use to avoid being taxed twice on the same income, and which additional forms come along for the ride.
The Deadlines Are Not What You Think
This is the most useful thing on the page, and the thing most people get wrong.
- April 15, 2027 is the regular due date for a 2026 return. It is also the FBAR due date and the last day to make a 2026 IRA or Roth IRA contribution. That contribution deadline does not extend, no matter what else you extend.
- June 15, 2027 is an automatic two month extension if your tax home is outside the United States and Puerto Rico on the regular due date. You do not file a form for it. You attach a statement to the return explaining that you qualify.
- October 15, 2027 is the extended date if you file Form 4868. Note the arithmetic: the six month period runs from April 15, not from June 15, so Form 4868 buys you four additional months, not six.
- December 15, 2027 is available as a further discretionary extension. It is not automatic. You request it by letter to the IRS before October 15 and explain why you need it, and the IRS can say no.
- Form 2350 is a separate route, for someone who needs more time to qualify for the foreign earned income exclusion under the bona fide residence or physical presence test.
Every one of these is an extension of time to file, not time to pay. Interest runs from April 15 on anything unpaid, including during the automatic extension. This catches people every year.
Estimated payments for 2027 fall on April 15, June 15, September 15 and the following January. The fourth quarter 2026 payment is due January 15, 2027, and you can skip it if you file your 2026 return and pay in full by February 1, 2027.
The 2026 Numbers
Standard deduction: 16,100 dollars single or married filing separately, 32,200 dollars married filing jointly, 24,150 dollars head of household.
Ordinary brackets run from 10% to 37%, with the top bracket beginning at 640,600 dollars for single filers and 768,700 dollars for joint filers.
Long-term capital gains and qualified dividends: the 0% rate ends at 49,450 dollars for single filers and 98,900 dollars for joint filers. The 15% rate ends at 545,500 dollars and 613,700 dollars respectively, above which the rate is 20%.
Foreign earned income exclusion: 132,900 dollars for tax year 2026.
Foreign housing: the base amount is 21,264 dollars and the standard limitation is 39,870 dollars. Spain has two city-specific limits: Madrid at 59,700 dollars and Barcelona at 40,600 dollars. Everywhere else in Spain uses the standard figure.
Net investment income tax: 3.8% on the lesser of net investment income or modified adjusted gross income over 200,000 dollars single, 250,000 dollars joint, 125,000 dollars married filing separately. These thresholds are not indexed and have not moved since 2013.
Additional Medicare tax: 0.9% above the same style of thresholds, also not indexed.
Social Security wage base: 184,500 dollars for 2026.
Retirement contributions: 401(k) elective deferral 24,500 dollars, with an 8,000 dollar catch-up at 50 and 11,250 dollars for ages 60 through 63. IRA and Roth IRA 7,500 dollars, with an 1,100 dollar catch-up at 50. That catch-up figure is worth noticing, since it had been fixed at 1,000 dollars since 2006.
Gift and estate: the annual gift exclusion is 19,000 dollars and the lifetime exclusion is 15,000,000 dollars for 2026. The sunset that would have cut the lifetime figure roughly in half on January 1, 2026 was removed.
Exclusion or Credit: The Decision That Matters Most
Most Americans abroad arrive assuming the foreign earned income exclusion is the answer. If you live in Spain, it frequently is not, and the reasons are structural.
The exclusion covers earned income only. Dividends, interest, capital gains, rents, pensions and retirement distributions all fall outside it. It caps out at 132,900 dollars. And critically, income you exclude cannot generate a foreign tax credit. Spanish combined marginal rates commonly reach the forties, which means the credit alone often eliminates U.S. tax on that income and leaves carryforward capacity on top. Claiming the exclusion instead surrenders creditable tax you already paid.
There is also a stickiness problem. Revoking a section 911 election generally locks you out for five years without IRS consent, so this is not a decision to flip back and forth year to year.
The full comparison, with the mechanics of both forms, is in Double Taxation: Foreign Earned Income Exclusion and Foreign Tax Credit Simplified.
What Changed in the 2025 Legislation
The bill signed in July 2025 made several changes that first bite in tax year 2026. These are the ones that matter to someone filing from abroad.
A new limitation on itemized deductions. Starting in 2026, itemized deductions are reduced once taxable income exceeds the 37% bracket threshold. The reduction is two thirty-sevenths of the lesser of your total itemized deductions or the excess over that threshold, which works out to an effective 5.4% haircut. This replaces the old Pease limitation, which does not return. It matters particularly to Americans abroad who itemize large foreign taxes.
Charitable giving changed in two directions
If you itemize, you can now only deduct charitable contributions above 0.5% of adjusted gross income. If you do not itemize, there is a new above-the-line deduction of 1,000 dollars, or 2,000 dollars filing jointly, for cash gifts to qualifying organizations. Both are permanent, and both start in 2026. Worth remembering that U.S. charitable deductions generally do not carry over to a Spanish return, and Spanish donation credits generally do not carry to a U.S. one.
A senior deduction. An additional 6,000 dollars per qualifying individual aged 65 or over, or 12,000 dollars if both spouses qualify, phasing out from 75,000 dollars of modified adjusted gross income for single filers and 150,000 dollars filing jointly. It is available whether or not you itemize. It applies for tax years 2025 through 2028 and then expires.
The state and local tax cap rose to 40,400 dollars for 2026, phasing down above 505,000 dollars of modified adjusted gross income with a floor of 10,000 dollars. This is largely academic if you have no remaining U.S. state filing obligation, but it can matter in the year you leave.
The deductions for tips, overtime and car loan interest exist for 2025 through 2028 but are structured in ways that generally do not reach someone living in Spain. The car loan deduction, for instance, requires a U.S.-assembled vehicle and a loan originated after 2024.
The clean energy and clean vehicle credits are gone. The vehicle credits ended September 30, 2025 and the residential energy credits ended December 31, 2025.
Four Things That Only Affect Americans Abroad
1. A new 1% remittance transfer tax. Effective January 1, 2026, there is a federal excise tax on money sent from the United States to a recipient abroad, but only where the transfer is funded with cash, a money order, a cashier’s check or a similar physical instrument. Transfers funded from a bank account, wires and card-funded transfers are not covered. If you move money to Spain from a U.S. bank or brokerage account, this does not apply to you. The implementing regulations are still in proposed form.
2. Paper refund checks are being phased out. The IRS has generally stopped issuing paper refund checks for individuals. It has said it is developing alternatives for people abroad, but it has not confirmed direct deposit to a foreign bank account. The practical consequence is simple: keep a U.S. bank account open before you leave.
3. If you own a foreign company, the section 962 math got worse. For tax years beginning after December 31, 2025, the deduction against global intangible low-taxed income dropped from 50% to 40%. If you own a Spanish S.L. and rely on a section 962 election, that position is worth re-modeling rather than rolling forward.
4. Passport certification. Seriously delinquent tax debt above 66,000 dollars for 2026 can lead to passport denial or revocation. For someone whose Spanish residence permit renewal depends on a valid passport, this is a more serious consequence abroad than at home.
The Reporting Forms
FBAR (FinCEN Form 114) is triggered by foreign financial accounts exceeding 10,000 dollars in aggregate at any point in the year. It is due April 15 with an automatic extension to October 15 that you do not have to request.
Form 8938 is filed with the return and therefore follows your extensions. For people living abroad the thresholds are 200,000 dollars at year end or 300,000 dollars at any time if unmarried, and 400,000 dollars or 600,000 dollars filing jointly.
Neither threshold is indexed, and the two forms are not substitutes for one another. Filing one does not satisfy the other.
If you also live in Spain, there is a separate Spanish reporting regime that has nothing to do with these. It is covered in Modelo 720: What Americans in Spain Actually Have to Declare, and the Spanish wealth taxes that sit alongside it are a separate matter again.
What Has Not Been Announced for 2027
Being clear about this is more useful than guessing. As of the publication date of this article, the IRS has not published the 2027 inflation-adjusted figures. That includes the standard deduction, the brackets, the capital gains breakpoints, the foreign earned income exclusion, the foreign housing amounts, and the estate and gift exclusions. Those usually arrive in October. The 2027 retirement plan limits usually follow in early November, and the 2027 Social Security wage base comes with the October cost of living announcement.
The 2027 health savings account limits have been announced: 4,500 dollars self-only and 9,000 dollars family. Health savings accounts have no Spanish equivalent, and Spain does not recognize the wrapper, which is worth knowing before you contribute while living there.
Frequently Asked Questions
Do I have to file if I paid tax in Spain?
Yes, in most cases. Paying foreign tax does not remove the U.S. filing obligation. It affects how much U.S. tax you owe, through the credit or the exclusion, but the return still gets filed.
Does the June 15 extension mean I do not owe interest until then?
No. Interest runs from April 15 on any unpaid balance regardless of which extension applies. The extension moves the filing date, not the payment date.
Should I claim the foreign earned income exclusion?
It depends on your income mix and the foreign tax you actually paid. For many people living in Spain the foreign tax credit produces a better result, and the exclusion can waste creditable tax. It is worth modeling both rather than defaulting to the exclusion.
Can I still contribute to an IRA if I live abroad?
You need earned income that has not been excluded. If you exclude all of your earned income under section 911, you may have nothing left to support the contribution, which is one of the less obvious costs of the exclusion.
What if I have not filed for several years?
This is more common than people assume and there are established procedures for catching up. The right route depends on whether the failure was willful, so it is worth getting specific advice rather than simply filing back returns and hoping.
Ready to Talk Through Your Situation?
If you are filing from abroad and want a second opinion before you commit to an approach for 2026, a short call is an easy place to start.
If you would like help keeping your U.S. and Spanish filings consistent, see how our tax coordination works.
Book your free 20-minute intro call
Related reading: The US Spain Tax Treaty Explained: Who Taxes What · Modelo 720: What Americans in Spain Actually Have to Declare · Cashing Out a 401k While Living in Spain
Important disclosures
This article is general educational information published by Cross Border Wealth Advisors, a company of Gersten Financial Planning Inc. an investment adviser registered with the State of California (CRD 309890). Nothing in it is investment advice, tax advice, legal advice, or immigration advice, and nothing in it is an offer or solicitation to buy or sell any security.
Tax and reporting rules in the United States and in Spain change, and their application depends entirely on your own facts. Figures, thresholds, rates and filing dates are stated as of the publication date shown above and may have changed since. Figures for tax year 2027 had not been published at that date and are described as unannounced rather than estimated. Before acting on anything described here, consult a qualified professional about your own situation. Where this article says a point is unsettled or unconfirmed, that statement is deliberate and should be treated as a reason to seek advice rather than as a conclusion.
Cross Border Wealth Advisors is a fee-only firm and acts as a fiduciary to its advisory clients. The firm does not sell products and does not receive commissions. Registration with any state securities authority does not imply a certain level of skill or training.
No portion of this article should be read as a promise, guarantee or prediction of any particular tax, investment or planning outcome. Any calculation shown is a hypothetical illustration using round numbers for the purpose of demonstrating a mechanic. It is not a representation of any client’s experience, is not a projection of results, and does not reflect the performance of any actual account.
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About the Author
Victor Gersten, EA, CFP®, MS, MPAS™, is a fee-only fiduciary specializing in financial planning for Americans living in or moving to Spain. Victor founded Cross Border Wealth Advisors to serve Americans relocating to Spain, combining an Enrolled Agent’s tax expertise with comprehensive financial planning.
Works Cited
- IRS Revenue Procedure 2025-32, tax year 2026 inflation adjustments
- IRS Notice 2026-25, foreign housing cost limitations
- IRS Notice 2025-67, 2026 retirement plan limitations
- IRS Revenue Procedure 2026-24, 2027 health savings account limits
- IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- IRS Publication 505, Tax Withholding and Estimated Tax
- IRS, 2026 Form 1040-ES
- IRS, One Big Beautiful Bill provisions for individuals and workers
- IRS, Report of Foreign Bank and Financial Accounts (FBAR)
- IRS, Do I need to file Form 8938
- IRS, Net Investment Income Tax and Additional Medicare Tax
- IRS, proposed regulations on the remittance transfer tax
- IRS, Executive Order 14247 questions and answers
- Social Security Administration, contribution and benefit base
