Do I still have to pay US taxes if I live abroad?

Yes. The US is one of only two countries that taxes based on citizenship, not residence. As a US citizen or permanent resident living abroad, you must file a US tax return every year regardless of where you live or earn income. However, the Foreign Earned Income Exclusion (FEIE) lets you exclude up to $126,500 (2025) in foreign earned income from US taxes, and the Foreign Tax Credit prevents double taxation. You must file even if you owe nothing.

Can I keep my US bank account while living abroad?

Many banks will close your account if you no longer have a US address. Banks that are expat-friendly include: Charles Schwab (international ATM fee rebates), HSBC (global banking), and some credit unions. Keep at least one US-based account for receiving payments, paying US bills, and maintaining your credit history. Online banks like Schwab are often the best option.

What happens to my US retirement accounts if I move abroad?

Your 401(k) and IRA remain in the US — you don't need to withdraw or transfer them. You can still contribute to an IRA if you have US-sourced income (but the FEIE can complicate this). 401(k) contributions stop if you leave your US employer. Be careful about investing in foreign mutual funds — the IRS treats them as PFICs (Passive Foreign Investment Companies) with punitive tax treatment.

Things to Do Before Moving Abroad

Before you move abroad, handle the financial details that will follow you across borders. Your US tax obligations don’t stop, your bank may close your account, and healthcare works completely differently. Getting these right before you leave saves enormous headaches later.

Pre-Move Financial Checklist

#	Task	When
1	Research tax obligations in your destination country	3-6 months before
2	Find an expat tax professional	2-3 months before
3	Set up expat-friendly US bank accounts	2-3 months before
4	Research international health insurance	2-3 months before
5	Notify creditors, banks, and investment accounts	1-2 months before
6	Understand currency exchange and transfer options	1-2 months before
7	Review your investment accounts for PFIC issues	1-2 months before
8	Set up mail forwarding or virtual mailbox service	1 month before
9	File FBAR if you’ll have $10,000+ in foreign accounts	After establishing accounts (due April 15 with extension to October)
10	Keep a US address for banking/tax purposes	Ongoing (family member or virtual mailbox)

Tax Obligations for US Expats

Requirement	Details
US tax return	Required every year, regardless of where you live
Foreign Earned Income Exclusion (FEIE)	Exclude up to $126,500 (2025) if you pass physical presence or bona fide residence test
Foreign Tax Credit (FTC)	Credit for taxes paid to foreign country (prevents double taxation)
FBAR (FinCEN 114)	Required if foreign accounts total $10,000+ at any point during the year
FATCA (Form 8938)	Required if foreign assets exceed $200,000 (single, living abroad)
State taxes	Some states (CA, VA, NM, SC) may still tax you even after you leave
Self-employment tax	Still owed on self-employment income, even abroad

Banking Setup for Expats

Need	Best Option
US bank that allows international addresses	Charles Schwab, HSBC, some credit unions
International ATM withdrawals (no fees)	Charles Schwab debit card (refunds all ATM fees worldwide)
Currency transfers (low fees)	Wise (formerly TransferWise) — best exchange rates
Credit card (no foreign transaction fee)	Capital One, Chase Sapphire, Schwab investor card
Foreign bank account	Open after arrival — needed for local bills, salary

Healthcare Abroad

Option	Cost	Coverage
International health insurance (Cigna Global, Allianz)	$150-$500/month	Worldwide coverage, including medical evacuation
Local health insurance (in destination country)	Varies ($0-$300/month)	May be required; may not cover US visits
Travel insurance (for first few months)	$50-$150/month	Temporary; limited coverage
US plan (marketplace, COBRA)	$$$	Generally doesn’t cover overseas care
Medicare	$0-$170/month	Does NOT cover care outside the US

Common Financial Mistakes Expats Make

Mistake	Consequence
Not filing US taxes	Penalties, lost passport renewal, difficulty returning
Investing in foreign mutual funds	PFIC tax rules — punitive US taxation
Not filing FBAR	Penalties up to $12,500 per account (non-willful)
Closing all US accounts	Difficult to maintain US credit, receive payments
Not understanding local tax rules	May owe taxes in both countries without proper planning
Ignoring state tax obligations	Some states still claim you as a resident
Using mainstream banks for currency transfers	2-5% markup; Wise is significantly cheaper

Budget Comparison: US vs. Common Expat Destinations

Expense	US (Average)	Portugal	Mexico	Thailand
Rent (1BR, city center)	$1,500-$2,500	$800-$1,200	$400-$800	$300-$700
Healthcare	$400-$600/month	$50-$200/month	$50-$150/month	$30-$100/month
Groceries	$400-$600	$250-$350	$150-$300	$150-$250
Dining out	$300-$500	$200-$300	$100-$200	$100-$200
Transportation	$300-$600	$50-$150	$50-$100	$50-$100
Monthly total	$2,900-$4,800	$1,350-$2,200	$750-$1,550	$630-$1,350

The Bottom Line

Moving abroad requires more financial planning than most people expect. The biggest pitfalls are tax-related: US citizens must file taxes every year, FBAR for foreign accounts over $10,000, and avoiding PFIC investments. Set up expat-friendly banking before you leave, get international health insurance, and work with a tax professional who specializes in expat taxes. The lifestyle can be incredible — but only if the finances are handled properly.