7 Key Changes Americans Abroad Should Know For The 2026 Tax Season

Nathalie Goldstein, MyExpatTaxes‘ CEO, helps Americans stay tax-compliant while living abroad with her user-friendly US expat tax software.

The upcoming tax season has several changes in store that will directly affect U.S. expats. Both recent IRS updates and newly enacted tax legislation, combined with any major life changes you experienced in 2025, will influence how you file in 2026.

Here are the seven most significant changes U.S. expats need to be aware of as they head into the 2026 tax season.

1. Standard deduction amounts increase.

Your standard deduction reduces the amount of income subject to U.S. tax, and it increases annually to keep up with inflation. For the 2025 tax year, under the One Big Beautiful Bill Act (OBBBA), the standard deduction increases to $15,750 for single filers and those married filing separately, $31,500 for married filing jointly and $23,625 for head of household filers.

You can itemize if your itemized deductions exceed these amounts; otherwise, the standard deduction will be more beneficial.

2. Filing thresholds are higher for 2025 income.

If you’re a U.S. citizen or green-card holder, you must file a U.S. tax return no matter where you live if your worldwide income exceeds certain IRS thresholds.

The filing thresholds for 2025 income are as follows: single filers, $15,750 (up from $14,600 in 2024); married filing jointly, $31,500 (up from $29,200); and head of household, $23,625 (up from $21,900). Married filing separately remains $5, and anyone with $400 or more in net self-employment income must also file a return.

Review all your 2025 income, including foreign wages, freelance income, rental income, investment earnings and pension income, to determine whether you meet the IRS filing requirement for 2026.

3. More of your 2025 foreign earned income can be excluded in 2026.

The Foreign Earned Income Exclusion (FEIE) allows U.S. expats to exclude up to $130,000 of foreign income earned in 2025, an increase of $3,500 over 2024. To qualify, you must meet either the Physical Presence Test (you spend at least 330 full days outside the U.S. during any 12-month period) or the Bona Fide Residence Test (you are a resident of a foreign country for an entire tax year).

Keep accurate travel records, such as a date log, flight confirmations or passport stamps, in case the IRS requests documentation.

4. More of your 2025 foreign housing expenses can be excluded in 2026.

If you qualify for the Foreign Earned Income Exclusion, you may also be able to exclude certain qualifying housing expenses like rent and utilities under the Foreign Housing Exclusion.

For the 2025 tax year, the base amount increases to $20,800 (16% of $130,000, the new Foreign Earned Income Exclusion amount), and up to $39,000 (30% of the 2025 FEIE limit).

So, let’s say you had $45,000 in qualifying housing expenses abroad. After subtracting the base amount of $20,800, you’re left with $24,200 that you can fully exclude from U.S. taxation, as it falls under the $39,000 cap.

Add up all your 2025 qualifying housing costs and compare them to the new base amount and cap to estimate your exclusion for 2026. The IRS also increases the housing cap in 2025 for higher-cost locations, so be sure to check the latest limits to see if your city qualifies for a higher exclusion amount.

5. The Child Tax Credit increases under the One Big Beautiful Bill Act.

The OBBBA reaches into almost every area of the tax code, and family credits are no exception. For the 2025 tax year, the Child Tax Credit increases to $2,200 per qualifying child under the age of 17, with up to $1,700 in refundable credits available through the Additional Child Tax Credit (ACTC).

At least one parent on a joint return and the qualifying child must have a valid SSN to take advantage of this tax break and possible refund. If your family expanded in 2025 and you haven’t already done so, it’s wise to apply now for your child’s SSN, as processing times can be longer when applying from overseas.

6. IRS exchange rates are adjusted annually.

The IRS publishes average yearly exchange rates annually. When filing your 2026 tax return, all foreign income needs to be converted to U.S. dollars. Although the IRS allows several exchange-rate sources, the most important thing is that you stick with the same rate across all foreign income and deductions to avoid inconsistencies. Check the IRS website for newly updated 2025 exchange rates as they become available.

7. Review any major life or family changes in 2025.

Think about any major life changes you had during 2025. Did you move countries, get married or divorced or have a child? These events can impact everything from your filing status, deductions and tax bracket to the expat tax benefits you may be eligible for.

Plan ahead for a smooth filing experience.

The 2025 tax return is due April 15, 2026, with an automatic filing extension to June 15, 2026, for expats (taxes owed must still be paid by April 15). Deciding how you’ll file in 2026—whether using expat tax software, working with a tax professional or going the DIY route—removes the guesswork once tax season arrives.

Also, keep in mind that expats must still file the Foreign Bank Account Report (FBAR) if their combined foreign accounts exceed $10,000 in 2025, and may also need to file Form 8938 for higher-value foreign assets.

Understanding all of these changes ahead of time helps provide a clear picture of what your 2026 filing obligations will look like and helps you plan for a smooth, stress-free tax season.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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