Worldwide Income Reporting

U.S. citizens and U.S resident aliens are subject to U.S. income tax on their worldwide income regardless of whether they live and work in the United States or a foreign country. Most other countries use a territorial tax system. In the territorial system only income from a source inside the country is taxed.

U.S. citizens and green card holders must file a U.S. tax return and report worldwide income even if living outside the United States. If you are a U.S. citizen or a U.S. resident alien living in a foreign country, you are subject to the same U.S. income tax laws that apply to citizens and resident aliens living in the United States. In other words, if you would be required to file a U.S. tax return in the United States, you are required to file one from outside of the United States.

Unfortunately for the American abroad, the United States is one of the few nations on earth that taxes its citizens on their worldwide income regardless of where they live. If you have a U.S. passport, you are locked in to the Internal Revenue Service until death or you renounce your citizenship. However, the beauty of the U.S. tax system is its exceptions.

See Frequently Asked Questions (FAQs) About International Individual Tax Matters, for more details.