Do Green Card Holders Pay Taxes on Foreign Income?

Yes. Green card holders are required to pay U.S. taxes on their worldwide income, regardless of where they reside or where the income is earned. According to the IRS, lawful permanent residents are treated as U.S. tax residents from the moment they receive their green card. This means you report and pay taxes on all income, whether it comes from a job in Singapore, rental property in your home country, or investments in foreign markets.

While you must report worldwide income, the U.S. tax system includes powerful protections that prevent double taxation. The Foreign Earned Income Exclusion lets you exclude up to $130,000 (for the 2025 tax year) from U.S. taxation, and the Foreign Tax Credit provides dollar-for-dollar credits for taxes paid to foreign governments. Most green card holders living abroad or with foreign income discover they owe little or nothing to the IRS once these protections are applied.

This guide explains exactly what income you must report, how to avoid double taxation, which IRS forms you need to file, and what mistakes to avoid that could jeopardize your immigration status.

Need clarity on your US tax obligations as a Green Card holder?

Whether you’re living abroad or earning income overseas, the rules for Green Card holders are strict. If you’re unsure what you need to report, our team can help you sort out your filing requirements with confidence.

Why Does a Green Card Trigger U.S. Tax Obligations?

The moment you become a lawful permanent resident, the IRS treats you the same as a U.S. citizen for tax purposes. This obligation continues until you formally surrender your green card through proper channels or it’s administratively terminated. Your tax obligations as a green card holder include:

Worldwide Income Reporting

You must report all income from every source, including wages earned abroad, foreign business income, rental properties in your home country, investment gains from foreign accounts, and even foreign pension distributions.

Annual Tax Return Filing

You file Form 1040 every year, the same form U.S. citizens use. Green card holders living abroad get an automatic extension until June 15, but the filing requirement remains regardless of where you live.

Foreign Account and Asset Disclosure

If your foreign financial accounts exceed $10,000 in aggregate at any time during the year, you must file an FBAR (Foreign Bank Account Report). If your foreign assets exceed certain higher thresholds, you also file Form 8938 (FATCA) with your tax return.

This Is Different from Filing Form 1040-NR

Never file Form 1040-NR (the nonresident form) if you hold a green card. Filing Form 1040-NR signals to both the IRS and USCIS that you’ve abandoned your permanent residency, which could jeopardize your immigration status.

What Foreign Income Must I Report?

You must report all income earned after becoming a green card holder, regardless of the source or location.

Income You Must Report:

Employment income: Wages, salaries, bonuses from foreign employers
Business income: Profits from foreign businesses, freelance work, consulting fees
Investment earnings: Interest, dividends, capital gains from foreign investments
Rental income: Income from property you own in other countries
Foreign pensions: Distributions from foreign retirement accounts
Cryptocurrency: Gains from crypto transactions, mining, or staking
Foreign social security: Benefits from your home country’s social insurance system

Income You Don’t Report:

Pre-green card income: Money earned before you became a lawful permanent resident
Post-surrender income: Money earned after you formally surrendered your green card using Form I-407

Example: Priya received her green card on July 1, 2025. She earned $45,000 working in India from January through June, and $60,000 working in the U.S. from July through December. She only reports the $60,000 earned after receiving her green card on her 2025 tax return, not the income from her pre-green card months in India.

How Do I Avoid Double Taxation?

The U.S. tax system recognizes the unfairness of taxing income that’s already been taxed by another country. Two primary tools help prevent double taxation:

Foreign Earned Income Exclusion (FEIE)

The FEIE allows you to exclude up to $130,000 of foreign earned income from U.S. taxation for the 2025 tax year (filed in 2026). For the 2026 tax year (filed in 2027), this amount increases to $132,900.

Who It’s Best For: Green card holders living and working abroad in low-tax or no-tax countries, or those earning below the exclusion threshold.
Requirements: You must pass either the Physical Presence Test (present in foreign countries for at least 330 full days during any 12-month period) or the Bona Fide Residence Test (established as a genuine resident of a foreign country for an entire tax year).
File: Form 2555
Important Limitation: FEIE only applies to earned income from employment or self-employment. It does not cover passive income like rental income, interest, dividends, or capital gains.
Example: Ahmad holds a green card and works for a company in Dubai, earning $95,000 annually. The UAE has no income tax. Ahmad passes the Physical Presence Test and can exclude the entire $95,000 using FEIE, owing $0 in U.S. taxes on his employment income.

Foreign Tax Credit (FTC)

The FTC provides a dollar-for-dollar credit against your U.S. tax liability for income taxes you paid to a foreign government.

Who It’s Best For: Green card holders living in high-tax countries (like Germany, Canada, Australia, or the UK), or those with passive income that doesn’t qualify for FEIE.
Advantage: Applies to both earned income and passive income (rental income, dividends, capital gains).
File: Form 1116
Carry-Over Benefit: If your foreign tax credit exceeds your U.S. tax liability in a given year, you can carry the excess backward one year or forward up to ten years.
Example: Maria holds a green card and works in Germany, earning $110,000. She pays $42,000 in German income taxes. She can claim the full $42,000 as a credit against her U.S. tax liability, which essentially eliminates any U.S. tax she would otherwise owe.

Can I Use Both FEIE and FTC?

Yes, but not on the same income. Many green card holders strategically combine both:

Use FEIE to exclude up to $130,000 of earned income
Use the FTC on income above the exclusion limit or on passive income

Example: Lin holds a green card and lives in Canada, earning $180,000 in employment income. She excludes $130,000 using FEIE and claims FTC on the remaining $50,000 for the Canadian taxes she paid on that income. This eliminates her entire U.S. tax liability.

What Are My First-Year Filing Requirements?

The year you receive your green card often creates the most complex tax situation. You’ll likely have a dual-status tax year, where you’re treated as a nonresident for part of the year and a resident for the remainder.

Understanding Dual-Status Filing:

Nonresident Portion: The period before you received your green card. You only report U.S.-source income for this period.
Resident Portion: The period after receiving your green card. You report worldwide income for this period.
Filing Method: If you’re a resident on December 31, file Form 1040 as your primary return with “Dual-Status Return” written across the top, and attach Form 1040-NR as a statement showing your nonresident period income.
Important Limitation: Dual-status returns cannot be e-filed. You must print and mail them to the IRS.
Special Election Option: If you’re married to a U.S. citizen or resident alien, you may be able to elect to treat your entire year as a U.S. resident by filing jointly. This gives you access to the standard deduction and certain credits, but you’ll pay U.S. tax on your worldwide income for the entire year, including income earned before receiving your green card.

Example: Sofia from Spain received her green card on September 1, 2025. From January through August, she earned €60,000 ($66,000) working in Barcelona. From September through December, she earned $28,000 working in Chicago. On her dual-status return, she reports only the $28,000 from her resident period, unless she makes the joint filing election with her U.S. citizen spouse.

Which IRS Forms Do I Need to File?

Form	Purpose	Filing Deadline	Who Needs It
Form 1040	U.S. Individual Income Tax Return	April 15 (June 15 for expats)	All green card holders
FBAR (FinCEN 114)	Foreign Bank Account Report	April 15 (automatic extension to October 15)	Green card holders with $10,000+ in foreign accounts
Form 8938	Statement of Foreign Financial Assets	With the tax return	Foreign assets exceeding thresholds ($200K+ for expats)
Form 2555	Foreign Earned Income Exclusion	Withthe tax return	Claiming FEIE
Form 1116	Foreign Tax Credit	With the tax return	Claiming FTC for foreign taxes paid
Form 8843	Exempt Days for Dual Status	With the tax return	Dual-status filers claiming exempt days

What About State Taxes?

Green card holders must also consider state tax obligations, which can be complex depending on where they lived before moving abroad or where they maintain connections.

“Sticky States” to Watch:

California, New York, Virginia, and South Carolina are known for aggressively claiming residents even after they move abroad. These states may continue taxing your worldwide income if you maintain:

A home or mailing address in the state
A state driver’s license or voter registration
Bank accounts or business interests
Family members living in the state

Strategic Planning: If you’re planning to move abroad with your green card, consider changing your state residency to a no-income-tax state (like Florida, Texas, Nevada, or South Dakota) before leaving the U.S. This can eliminate ongoing state tax obligations entirely.

What Mistakes Should I Avoid?

Filing Form 1040-NR Instead of Form 1040

This is the most serious mistake. Filing as a nonresident when you hold a green card signals to USCIS that you’ve abandoned your permanent residency. This could result in the loss of your green card status.

What to Do: Always file Form 1040, even if you live abroad. Use FEIE and FTC to reduce or eliminate your tax liability.

Skipping FBAR or Form 8938 Filing

Many green card holders are unaware that they must report foreign accounts and assets. The penalties for non-compliance can be severe, starting at $10,000 per year for non-willful violations of FBAR requirements.

What to Do: Track all foreign account balances monthly. If the aggregate value exceeds $10,000 at any point during the year, file FBAR. Check Form 8938 thresholds based on your filing status and residency.

Not Filing U.S. Tax Returns While Abroad

Some green card holders assume that living abroad exempts them from U.S. tax filing. This is incorrect and can create serious complications for future green card renewals or citizenship applications.

What to Do: File Form 1040 every year, even if you owe nothing after applying FEIE or FTC. Maintain consistent tax compliance to support your immigration status.

Forgetting About State Tax Obligations

Moving abroad doesn’t automatically terminate your state tax residency. Some states will continue to tax your worldwide income unless you properly sever ties.

What to Do: Document your intent to terminate state residency. Update your driver’s license, voter registration, and mailing address. Keep records of these actions in case of future state audits.

Claiming Foreign Tax Residence Without Proper Documentation

Some green card holders claim they’re tax residents of their foreign country to avoid U.S. taxes. Without a tax treaty and proper documentation, this claim won’t hold up.

What to Do: Understand that the U.S. taxes based on citizenship and green card status, not physical presence. Use FEIE and FTC properly instead of trying to claim foreign tax residence.

What If I Plan to Give Up My Green Card?

Surrendering your green card doesn’t automatically end your U.S. tax obligations. You must properly terminate your status and file a final U.S. tax return.

Steps to Take:

File Form I-407 to formally abandon your lawful permanent resident status
File a final Form 1040 for the year of surrender
Determine if you’re a “covered expatriate” subject to exit tax
Understand how future U.S.-source income (like rental property or pensions) will be taxed

Covered Expatriate Rules: If your average annual net income tax exceeds approximately $206,000 (for 2025), or your net worth exceeds $2 million, you may be subject to exit tax on unrealized capital gains.

How Does This Affect My Immigration Status?

Tax compliance and immigration status are increasingly interconnected. USCIS now reviews tax filing history during:

Green card renewals (Form I-90)
Naturalization applications (Form N-400)
Re-entry permit applications

What USCIS Looks For:

Consistent annual tax return filing
Accurate reporting of worldwide income
Compliance with FBAR and FATCA reporting
No outstanding tax debts

Red Flags to Avoid:

Absence from the U.S. for more than six months without a re-entry permit
Filing Form 1040-NR (signals abandonment of residency)
Claiming to be a tax resident of a foreign country
Failing to file U.S. tax returns for multiple years

Protective Measures:

File U.S. tax returns every year without fail
Maintain U.S. bank accounts and credit cards
Keep your U.S. driver’s license current
Document the temporary nature of any foreign assignments
Ensure tax compliance before applying for naturalization

Get Expert Help with Your Green Card Tax Compliance

Whether you’re newly arriving in the U.S., temporarily living abroad with your green card, or managing foreign income while living stateside, proper tax compliance protects both your finances and your immigration status.

At Greenback Tax Services, we’re an American company founded in 2009 by U.S. expats for expats. We’ve focused exclusively on expat taxes and always have. Many of our CPAs and Enrolled Agents are expats themselves, and because they live in 14 time zones, they experience firsthand the challenges of international tax compliance.

We’ll help you:

File all required U.S. tax forms accurately (Form 1040, FBAR, Form 8938)
Apply exclusions and credits to reduce or eliminate your tax bill (FEIE, FTC)
Ensure proper reporting of all foreign income and assets
Navigate complex situations, including dual-status years and state tax issues
Catch up on past-due returns through Streamlined Procedures

No matter how late, messy, or complex your return may be, we can help. You’ll have peace of mind, knowing that your taxes were done right, backed by our Make It Right guarantee.

Get started today:

Get matched with an accountant – We’ll pair you with a CPA or EA based on your unique situation
Schedule a consultation – Discuss your specific tax questions with an expert
Contact our team – Our customer champions are ready to answer your questions

If you’re ready to be matched with a Greenback accountant, click the Get Started button below.

Still unsure how your foreign income affects your US taxes?

Green Card tax rules can be complex, especially if you live or work outside the United States. Our expat tax experts can walk you through exactly what you need to file and what income you must report.

This article provides general information about U.S. tax obligations for green card holders. Tax situations vary significantly based on individual circumstances, income sources, and country of residence. While we explain tax compliance, we do not provide immigration advice. For immigration matters, consult with a qualified immigration attorney. Always consult with a qualified tax professional about your specific situation before making decisions that could affect your tax obligations or immigration status.

Foreign Income and Tax Credits:

Filing Status and Forms:

Foreign Account Reporting:

State Tax Considerations:

Late Filing and Compliance:

Free Guide 15 Tax Tips Every American Expat Needs To Know in 2025

"*" indicates required fields

Name

This field is for validation purposes and should be left unchanged.