Not all countries tax income. In fact, the U.S. only started permanently charging income taxes in 1913, with the 16th Amendment.
With increasingly mobile middle and upper classes in the U.S., some wonder whether they shouldn’t venture abroad to minimize their tax burden. At what point does that math start to make sense?
Savings for Middle-Class Households
Even if you move to another country, you must still file a U.S. income tax return as an American citizen. But that doesn’t mean you have to pay the full U.S. tax bill.
You can qualify for the foreign earned income exclusion (FEIE) and exclude $132,900 of income from U.S. taxes in 2026. For married couples, that doubles to $265,800. Read the full rules on the IRS website.
“The foreign tax credit (FTC) also provides a dollar-for-dollar credit against U.S. tax liability for income taxes paid abroad, ensuring expats aren’t taxed twice on the same income,” explained Jeremy Savory, founder of Millionaire Migrant.
Middle-class households can therefore combine low (or no) taxes with savings from a lower cost of living abroad to live an upper-middle-class lifestyle on a modest income. I myself lived abroad for 10 years, paying minimal taxes and lower costs for housing, groceries, restaurants, excellent healthcare, child care and of course travel.
A caveat: If you want to send your child to an English-speaking school abroad, you may need to pay tuition for the U.S. embassy school or another international school.
Vasily Yurenkov, founder of Greener Relocation, makes the case that households earning high five figures or more can benefit from expat life. “The average middle-class household should consider it, especially if they want two or more children or work careers that won’t make them rich in the U.S.”
Learn More: Here’s How Much Your State Collects on Every Type of Tax
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How High Earners Can Avoid US Taxes
Higher earners can save even more living abroad, although they often spend more money on a relocation service handling most of the paperwork for them.
Above $132,900 of income per person, expats must start paying regular income taxes again. Plus, self-employed workers and business owners must also pay self-employment taxes (FICA taxes), which aren’t excluded by the FEIE.
At a certain income level, high earners could consider surrendering their U.S. citizenship if they don’t want to pay U.S. taxes anymore. It’s a drastic move, however, and requires you to have a second citizenship waiting in the wings.
“Americans earning over $400,000 feel more tax pain and consider more methods to reduce it,” Savory said. “Still, there’s no single income threshold that applies universally.”
Remember that expat life is a lifestyle choice, not just a tax strategy. Only move forward if you actually want the lifestyle of living abroad, which can be fun and exciting but comes with its share of drawbacks.
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This article originally appeared on GOBankingRates.com: At What Income Does It Make Sense To Move to a Lower-Tax Country?
