US Taxation: Income Tax and Property Tax for Expats

Published on April 30, 2026 and written by Cyril Jarnias

Are you considering moving to the United States or are you already settled there? Get ready to dive into a complex but fascinating tax system. Between federal income tax, state taxes, and local peculiarities, the U.S. tax system can seem like a real maze for newcomers. But don’t worry, this comprehensive guide will help you see more clearly and optimize your tax situation as an expat in the USA.

The U.S. Tax System: A Complex but Logical Layered Structure

In the United States, the tax system is organized into three main levels: federal, state, and local. This layered structure may seem intimidating at first, but it actually reflects the country’s federal structure and allows for some tax flexibility depending on the region.

At the federal level, the Internal Revenue Service (IRS) is the agency responsible for collecting taxes. Income tax is the main source of revenue for the federal government. It is calculated using a progressive rate schedule, with rates ranging from 10% to 37% for the 2024 tax year.

At the state level, the situation is more varied. Some states, like Texas or Florida, do not impose a personal income tax, while others, like California or New York, have high tax rates. This disparity can significantly influence your choice of where to settle in the USA.

At the local level, some cities or counties may impose additional taxes. For example, New York City has its own income tax in addition to New York State’s.

Beyond income tax, expats should be aware of other important taxes:

• Property tax: It varies considerably by locality and can represent a significant expense for homeowners.
• Sales tax: It somewhat replaces European VAT but is applied differently depending on the state and the products.
• Corporate taxes: For expat entrepreneurs, these can apply at both the federal and state levels.

Income Tax: The Heart of the U.S. Tax System

Income tax is the cornerstone of U.S. taxation for individuals. For expats, it is crucial to understand how it works and what the specificities related to their status are.

The basic principle is simple: U.S. tax residents are taxed on their worldwide income. This means that if you are considered a U.S. tax resident, you must report all your income, whether it comes from the United States or abroad.

Tax residency status is determined by two main tests:

• The “Green Card Test”: If you have a green card, you are automatically considered a tax resident.
• The “Substantial Presence Test”: Based on your physical presence in the USA over a three-year period.

If you do not meet these criteria, you will be considered a non-resident alien for tax purposes, which can have significant implications for your taxation.

Federal tax rates for 2024 are progressive, ranging from 10% to 37%. Here is an overview of the brackets for a single filer:

• 10%: $0 to $11,600
• 12%: $11,601 to $47,150
• 22%: $47,151 to $100,525
• 24%: $100,526 to $191,950
• 32%: $191,951 to $243,725
• 35%: $243,726 to $609,350
• 37%: Over $609,350

It is important to note that these rates apply marginally. In other words, each income bracket is taxed at the corresponding rate.

For expats, there are specific provisions like the Foreign Earned Income Exclusion (FEIE), which allows you to exclude up to $126,500 of foreign earned income from your taxable income for 2024. However, this exclusion only applies to earned income from abroad, not to investment income or pensions.

Property Tax: A Major Issue for Expat Homeowners

Property tax is an unavoidable reality for homeowners in the United States, including expats. This tax, collected at the local level (county or municipality), can represent a significant expense and varies considerably from one region to another.

The principle of property tax is relatively simple: it is based on the assessed value of your property. Each year, local authorities assess the value of your property and apply a tax rate to that value. This rate can range from less than 0.5% to over 2% depending on the locality.

For example, in 2024, the average property tax rate in the United States is about 1.1% of the property’s value. However, this figure hides huge disparities:

• In the state of New Jersey, the average rate reaches 2.49%, the highest in the country.
• At the opposite end, Hawaii has the lowest rate at just 0.28%.

For expat homeowners, it is crucial to factor this tax into the total cost of homeownership. A house in a low property tax state may prove less expensive in the long run than a similar property in a state with high rates.

It is also important to note that property tax often funds essential local services like public schools, emergency services, or road maintenance. A high rate can therefore sometimes mean better public services.

Some strategies for managing property tax:

• Appeal your property’s assessment if you think it is overvalued.
• Inquire about possible exemptions, especially for owner-occupants or seniors.
• Consider property tax in your choice of location in the USA.

Tax Returns: An Unavoidable Annual Exercise

For expats in the United States, filing your tax return is an annual obligation that should not be taken lightly. This process may seem complex, but with good preparation and an understanding of the key forms, it becomes more manageable.

The standard deadline for filing your federal tax return is April 15th of each year. However, expats automatically receive an extension until June 15th. If you need more time, you can request an additional extension until October 15th.

The main forms to know are:

• Form 1040: This is the standard income tax return for tax residents.
• Form 1040-NR: For non-resident aliens.
• Form 2555: Used to claim the Foreign Earned Income Exclusion.
• Form 1116: For the foreign tax credit.

For expats, it is crucial to report all your foreign financial accounts if their aggregate value exceeds $10,000 at any time during the year. This is done via FinCEN Form 114, also known as the FBAR (Foreign Bank Account Report).

Don’t forget that you may also need to file tax returns in your state of residence. Deadlines and forms vary by state.

Some tips to make your filing easier:

• Keep a detailed record of all your income, both U.S. and foreign.
• Keep supporting documents for your deductible expenses.
• Familiarize yourself with the tax treaties between the USA and your home country to avoid double taxation.
• Don’t hesitate to consult a tax expert specializing in expatriation, especially in the first few years.

Golden Tips for Optimizing Your Expat Tax Situation in the USA

Navigating the U.S. tax system as an expat can be challenging, but with the right strategies, you can not only comply with the rules but also optimize your tax situation. Here are some valuable tips to help you make the most of your tax status in the United States.

1. Master Your Tax Status

Understanding whether you are considered a tax resident or non-resident is crucial. This status determines how you will be taxed and which forms you need to file. If you have a choice, carefully weigh the pros and cons of each status based on your personal situation.

2. Leverage Tax Treaties

The United States has tax treaties with many countries. These agreements can help you avoid double taxation and offer other benefits. For example, some treaties allow students or researchers to benefit from specific exemptions.

3. Optimize the Foreign Earned Income Exclusion (FEIE)

If you have income from abroad, the FEIE can allow you to exclude up to $126,500 (for 2024) of your earned income from taxation. Make sure to correctly fill out Form 2555 to benefit from it.

4. Use Foreign Tax Credits Wisely

For income that cannot be excluded by the FEIE, the foreign tax credit can help you avoid double taxation. Keep a detailed record of taxes paid abroad to maximize this credit.

5. Plan Your Investments

U.S. tax rules for foreign investments can be complex. Certain types of foreign accounts or investments may be subject to additional reporting requirements or unfavorable taxation. Consider restructuring your investments to align with the U.S. tax system.

6. Beware of PFICs

Passive Foreign Investment Companies (PFICs) are subject to a particularly unfavorable tax regime in the USA. Many foreign mutual funds fall into this category. If possible, avoid these investments or consult an expert to manage them effectively.

7. Don’t Neglect Estate Planning

U.S. estate rules can be very different from those in your home country. Proper planning can help you minimize estate taxes and protect your assets.

8. Stay Informed About Tax Changes

Tax legislation changes regularly. Stay up to date on changes that could affect your situation, both in the USA and in your home country.