U.S. citizenship carries significant obligations for all American citizens, in addition to rights. The most important obligation is to file tax returns in the U.S. every year, as well as to declare bank accounts held by U.S. citizens in banks outside the U.S. The United States is possibly the only developed country that taxes citizens living abroad.
U.S. tax law requires most U.S. citizens (and U.S. permanent residents with green cards) who have income to file tax returns in the U.S., even if the income is from activities outside the U.S. and even if the citizen lives permanently outside the U.S. There are some exceptions for citizens with income below a minimum threshold — for more details on who must file a U.S. tax return, you can visit the IRS website at IRS Do I Need to File. In general, U.S. citizens living abroad with an annual family income over $14.600 (approx. €13,490) (for singles) or $29,200 (approx. €26,980) (for married couples) must file a U.S. tax return. The minimum thresholds are slightly higher for those over 65 and may change yearly, so it’s good to check the IRS website to confirm if you need to file based on your income.
Income includes salary from employment, bank interest, capital gains from selling stocks or real estate, etc. It should be noted that the obligation to file a tax return in the U.S. does not necessarily mean a tax payment is due. The so-called “foreign earned income exclusion” exempts up to $102,100 of earned income from foreign sources from taxation, under certain conditions. Taxes paid to other countries can also be credited to reduce or eliminate any U.S. tax liability. Furthermore, Greece and the U.S. have signed a “Double Taxation Avoidance Agreement” that may further reduce any U.S. tax liability in some cases.
In summary, for the vast majority of people with U.S. citizenship living and working abroad, filing a U.S. tax return does not result in tax liability. The filing deadline for individuals residing permanently outside the U.S. is June 15 of the following year. Those who have not filed returns in the past as required should file late returns for the last three years. Recently, U.S. tax authorities have become very strict on these matters, and every time a U.S. citizen applies to renew a passport, the tax authorities are automatically notified to check if the individual is compliant with tax obligations. So don’t be surprised if you receive a letter from the IRS a few months after renewing your U.S. passport. More information can be found at IRS Publication 54.
In addition to the tax filing obligation, U.S. authorities have imposed an additional requirement on U.S. citizens who hold bank accounts outside the U.S. with a total balance exceeding $10,000. Those who have or co-own or manage foreign bank accounts that total more than $10,000 at any point during the calendar year must file a deposit report known as FBAR by April 15 of the following year (with an automatic extension until October 15). Penalties for not filing the FBAR can be severe, including up to five years imprisonment and fines equal to up to 50% of the total bank account balances. More information can be found in the related article or at IRS FBAR.
