Do I still have to file US taxes if I live abroad?
Yes — moving to Mexico or Spain doesn't end your US taxes. The Foreign Earned Income Exclusion can cut your income tax to $0, but it's not automatic, and it doesn't erase self-employment tax. See what you'd actually owe, and the Mexico-vs-Spain difference that catches people.
Your situation
The breakdown
Email me my FEIE summary + the questions to ask an expat-tax pro
Worked examples
Salaried remote employee in Mexico City, qualifies on days
Excluded from US income tax: $78,500
You can exclude $78,500 from US income tax. As an employee you owe no US self-employment tax — and you still have to file to claim the exclusion.
⚠ The FEIE is not automatic. You must file Form 1040 and attach Form 2555 to claim it — skipping the form forfeits the whole exclusion. And if your gross income is over the filing threshold (or you have $400+ of net self-employment income), you must file even if the exclusion drops your income tax to $0.
The breakdown
- Foreign earned income: $78,500
- FEIE exclusion (Form 2555): −$78,500
- US income tax on the excluded part: $0
- Must file Form 1040 + 2555?: Yes — the exclusion isn't automatic
Freelance consultant in Guadalajara earning above the FEIE cap
US self-employment tax you'd still owe: $23,314
You can exclude $132,900 from US income tax — but self-employment tax isn't excluded, so you still owe about $23,314 (~14.1% of your income) to the US, plus ordinary tax on the $32,100 above the cap.
⚠ The FEIE is not automatic. You must file Form 1040 and attach Form 2555 to claim it — skipping the form forfeits the whole exclusion. And if your gross income is over the filing threshold (or you have $400+ of net self-employment income), you must file even if the exclusion drops your income tax to $0.
⚠ The US and Mexico have NO totalization agreement in force (one was signed in 2004 but never took effect), so a self-employed American in Mexico still owes US self-employment tax.
ℹ️ Income above the $132,900 cap stays taxable at your ordinary US rates — the FEIE only excludes up to the cap. The exact tax uses the Foreign Earned Income Tax Worksheet (the 'stacking rule'), and the foreign housing exclusion, state tax and foreign tax aren't included here. A US expat-tax pro should run your full return.
The breakdown
- Foreign earned income: $165,000
- FEIE exclusion (Form 2555): −$132,900
- Still taxable above the $132,900 cap: $32,100 (ordinary rates)
- US income tax on the excluded part: $0
- US self-employment tax (15.3%, not excluded): ≈ $23,314 — still owed
- Must file Form 1040 + 2555?: Yes — the exclusion isn't automatic
Autónomo in Valencia, moved mid-year — fails the 330-day test
Still fully taxable in the US: $95,000
You don't qualify for the exclusion yet, so all $95,000 stays taxable in the US. You need 330+ full days abroad in a 12-month period, or a full tax year as a bona-fide resident, with a foreign tax home.
⚠ The FEIE is not automatic. You must file Form 1040 and attach Form 2555 to claim it — skipping the form forfeits the whole exclusion. And if your gross income is over the filing threshold (or you have $400+ of net self-employment income), you must file even if the exclusion drops your income tax to $0.
✓ The US and Spain HAVE a totalization agreement (in force since 1988). If you're covered by Spanish social security, a certificate of coverage exempts you from US Social Security / self-employment tax.
ℹ️ Income above the $132,900 cap stays taxable at your ordinary US rates — the FEIE only excludes up to the cap. The exact tax uses the Foreign Earned Income Tax Worksheet (the 'stacking rule'), and the foreign housing exclusion, state tax and foreign tax aren't included here. A US expat-tax pro should run your full return.
⚠ You only get the exclusion if your tax home is abroad AND you pass one of two tests: the Physical Presence Test (330 full days in a foreign country during any 12 consecutive months) or the Bona Fide Residence Test (a bona fide resident of a foreign country for an uninterrupted period that includes a full tax year).
The breakdown
- Foreign earned income: $95,000
- FEIE exclusion (Form 2555): $0 — you don't qualify yet
- Still taxable above the $132,900 cap: $95,000 (ordinary rates)
- US income tax on the excluded part: $0
- US self-employment tax (15.3%, not excluded): $0 — treaty exemption
- Must file Form 1040 + 2555?: Yes — the exclusion isn't automatic
Examples are recomputed whenever the underlying rates or data change; the date above is the last recompute.
Methodology & data sources
US citizens and green-card holders are taxed on worldwide income regardless of where they live. The Foreign Earned Income Exclusion (FEIE, Form 2555) lets you exclude up to $132,900 for 2026 of foreign earned income from US income tax — if your tax home is abroad and you pass the Physical Presence Test (330 full days in a foreign country in any 12 consecutive months) or the Bona Fide Residence Test (a full tax year as a resident). It is an election you must claim by filing Form 1040 with Form 2555 attached — it is not automatic, and income above the cap stays taxable at ordinary rates (computed with the Foreign Earned Income Tax Worksheet "stacking rule"). Critically, the FEIE reduces income tax but not self-employment tax (15.3% = 12.4% Social Security up to the $184,500 wage base + 2.9% Medicare, on 92.35% of net earnings). Whether a self-employed American owes US SE tax abroad turns on totalization agreements: the US–Spain agreement is in force (a certificate of coverage can exempt you), while the US–Mexico agreement was signed in 2004 but never entered into force — so a self-employed American in Mexico still owes it. We compute the confident layer (exclusion + SE tax) and flag the rest for a cross-border pro.
Sources: IRS — Foreign Earned Income Exclusion · IRS — Form 2555 instructions · SSA — Totalization agreements (Spain in force; Mexico not)
Frequently asked questions
Do I still have to file if I live in Mexico or Spain?
Yes. You file on worldwide income. The FEIE can cut your income tax to $0, but it's not automatic — you must file Form 1040 + Form 2555 to claim it, or you forfeit the exclusion.
Does it cover self-employment tax?
No. The FEIE excludes income tax only. Self-employment tax (15.3%) still applies — and in Mexico, which has no totalization agreement in force, you still owe it. In Spain a certificate of coverage can exempt you.
How much is the exclusion for 2026?
$132,900 per qualifying person (up from $130,000 in 2025). Each spouse who qualifies files their own Form 2555, up to $265,800 combined.
What if I earn more than the cap?
Only up to $132,900 is excluded; income above that is taxed at your ordinary US rates via the stacking-rule worksheet. The foreign housing exclusion and the Foreign Tax Credit (Form 1116) are separate options — a US expat-tax pro should run your full return.