Summary

Tax breaks for overseas citizens have been discussed in recent years. While there have been proposals to grant tax breaks to US citizens living abroad, there are no specific provisions in place at this time. However, individuals living abroad may still be eligible for certain tax deductions and credits. It’s essential to consult with a free RapidTax dedicated tax professional to understand the specific tax implications and requirements for your situation.

Donald Trump has proposed tax breaks for overseas citizens but has yet to offer specific details on how these tax breaks would work or their impact on the federal budget. Trump also proposed tax breaks for auto buyers at this time. 

The IRS website has information about filing requirements for international taxpayers, as well as other relevant information, like: 

How to file

When to file

Where to file

You can also find information about Tax Form 1040-NR, US Non-resident Alien Income Tax Return, on the RapidTax website. This form is for non-residents from outside the US.

The IRS offers a standard tax deduction for both businesses and individuals. You can find more information about the standard deduction on the IRS website. In 2025, taxpayers will get a higher standard deduction, although the increase will be smaller than in previous years. The IRS adjusts standard deduction amounts each year for inflation. You can use the Tax Withholding Estimator to ensure you’re withholding the correct taxes from your paycheck. 

The IRS has also adjusted federal income tax bracket ranges for the 2025 tax year to account for inflation. 

US citizens living abroad may be eligible for several tax breaks to reduce their tax liability. Here are key options to consider:

Foreign Earned Income Exclusion (FEIE)

The FEIE allows qualified overseas taxpayers to exclude up to a certain amount of their foreign-earned income from US taxation. For 2025, this amount will be adjusted for inflation (the 2024 limit is $120,000 per individual).

To qualify, you must meet the bona fide residence test (living in a foreign country for an uninterrupted period, including a full tax year) or the physical presence test (spending at least 330 days in a foreign country within 12 months).

Foreign Tax Credit (FTC)

If you pay taxes to a foreign government on your income, you can claim the FTC to avoid double taxation. It provides a dollar-for-dollar credit against US taxes owed on foreign income. Alternatively, you can deduct foreign taxes as an itemized deduction on Schedule A.

Housing Exclusion or Tax Deduction

Overseas taxpayers can exclude or tax deduct certain foreign housing expenses, such as rent or utilities if their costs exceed a base housing amount. This deduction is available in addition to the FEIE.

Consult a tax professional with expertise in expatriate taxation for guidance tailored to your situation. Tax breaks can vary depending on where your country of residence and the nature of your income.