US Taxes for Retirees Abroad: The Retiree's Checklist

Here is the sentence every other "taxes abroad" guide buries: moving overseas changes your address, not your tax obligation. US citizens owe US tax on worldwide income wherever they live. You still file every year. The IRS does not have a "congratulations on your retirement villa" form.

And here is the second sentence, the one that makes this a retiree's checklist rather than a digital-nomad explainer: the most famous tax break for Americans abroad doesn't apply to you. The Foreign Earned Income Exclusion — the "$132,900 tax-free" headline every expat tax firm advertises — covers earned income only. Wages. Salaries. Self-employment. Retirement is the business of unearned income: pensions, Social Security, IRA and 401(k) distributions. The FEIE touches none of it.

So what actually applies to a retiree in Portugal or Mexico? A shorter, sharper set of tools and traps: the Foreign Tax Credit, the US–foreign tax treaties, FBAR and FATCA reporting, the states that refuse to let you go, and the Roth wrinkle nobody mentions until it costs money. This checklist follows the order you'll actually experience it: before you move, your first year, and every year after.

Before you move: the pre-departure checklist

1. Understand which of your income the FEIE ignores

Start with the one figure every expat tax guide shouts, and understand why it barely matters to you. For tax year 2026, the Foreign Earned Income Exclusion limit is $132,900 per qualifying person, set in the IRS's annual inflation-adjustment release (Revenue Procedure 2025-32) and reported by the major expat tax firms in late 2025. The 2025 figure was $130,000; the 2024 figure was $126,500 — if you see $126,500 cited for 2026, that's last year's number wearing this year's clothes.

The FEIE covers salary, wages, bonuses tied to foreign work, professional fees, and self-employment income earned abroad. It does not cover pension or annuity payments, Social Security benefits, IRA and 401(k) distributions, dividends, interest, capital gains, royalties, or rental income. That list is roughly your entire retirement income. A retiree who moves to Lisbon with only a pension, Social Security, and IRA withdrawals gets exactly $0 of benefit from the FEIE.

The one exception: if you earn part-year wages in the year you move — retire in June, consult through December while abroad — you may qualify for a partial-year exclusion on the earned portion. After that, it's the Foreign Tax Credit's world.

2. Sever domicile in a sticky state — before the plane ticket

This is the trap that costs retirees the most money per unit of effort avoided. Moving abroad does not automatically end your state income tax liability. A handful of states apply domicile-based residency rules: you remain a taxpayer until you affirmatively prove you've abandoned the old domicile and acquired a new one. The four states every expat tax firm names are California, New Mexico, Virginia, and South Carolina — and California is the strictest, with a top marginal rate of 13.3%.

California's Franchise Tax Board weighs your "closest connections" — driver's license, voter registration, a home kept available for personal use — with no simple day-count escape hatch. Its one safe harbor (546 consecutive days abroad) exists only for people sent overseas under an employment contract, which excludes retirees outright. And California doesn't recognize the federal FEIE at all, adding it back on the state return. Virginia, New Mexico, and South Carolina work on the same domicile principle: you are a resident until you actively cut the cord. New York runs a different trap — a permanent place of abode plus enough days in-state can make you a statutory resident even with an established foreign domicile.

3. Read the tax treaty for your destination

US–foreign tax treaties decide which country gets to tax your Social Security, pensions, and retirement-account distributions — and treaty rules override domestic rules. The pattern most retirees land in: the treaty gives the residence country the exclusive or primary right to tax pensions and retirement income, with the Foreign Tax Credit (Form 1116) preventing the US from taxing the same dollar twice.

This step is destination-specific, so do it before you choose the destination — it can change the math. Just don't plan around stale advice: Portugal's NHR flat-tax regime closed to new arrivals on January 1, 2024, and old "10% flat pension tax" articles are everywhere. Our Portugal cost guide and Mexico cost guide each flag the tax angle for their country.

4. Decide on Roth conversions before you leave

The year before you move is often your last clean window for Roth conversions. Once abroad, conversions complicate withholding and estimated payments, and the destination country's treaty may treat the Roth differently than the IRS does (see the Roth trap below). If a large conversion is in your plan, do it while your tax life is still simple — and tell your CPA the destination before they model it.

5. Gather the paperwork you'll need for years

Collect three years of returns, your IRA and 401(k) cost-basis records (after-tax contributions matter forever), pension plan documents, and proof of every account you hold or have signature authority over. You will be asked for all of it — by your CPA, by the state you left, or by the reporting forms below.

Your first year abroad: the filing checklist

Welcome to your first expat tax season. You still file Form 1040 (or 1040-SR if you're 65+) like always — nothing about the core return disappears. What changes is the appendage: the forms that ride along, and the deadlines that bend slightly in your favor.

Form	What it does	Who files it
Form 1040 / 1040-SR	Your US tax return — worldwide income, as always	Everyone. Still required, every year.
Form 1116	Foreign Tax Credit: dollar-for-dollar credit for income taxes you paid abroad	Most retirees — your main anti-double-tax tool
Form 2555	Foreign Earned Income Exclusion (and housing exclusion)	Only if you had qualifying earned income abroad
Form 8938 (FATCA)	Statement of Specified Foreign Financial Assets — attached to your return	Single abroad: over $200,000 at year-end or $300,000 any time; married filing jointly abroad: $400,000 / $600,000
FinCEN Form 114 (FBAR)	Report of Foreign Bank and Financial Accounts — filed separately with FinCEN, not the IRS	Aggregate of all foreign accounts exceeded $10,000 at any point in the year
Form 4868	Extension of time to file	Anyone who wants more time (interest still accrues)

One rule you'll see everywhere: you cannot claim both the exclusion and the credit on the same income. For retirees this is usually moot — the FEIE can't touch your income types anyway, so the credit stands alone. It matters mostly in move years with part-year wages.

Deadlines, first year: April 15 remains the anchor. US citizens living abroad get an automatic two-month extension to June 15 — no form required. But interest on any tax owed accrues from April 15 regardless, so pay what you expect to owe by April 15 even if you file later. Form 4868 pushes the filing deadline to October 15. The FBAR runs on its own clock: April 15, with an automatic extension to October 15 — but it's a separate filing through FinCEN's BSA e-filing system, not part of your return.

Two first-year freshness notes worth their weight:

• The $6,000 senior deduction. The tax law signed July 4, 2025 (the One Big Beautiful Bill Act) added a $6,000 bonus deduction for taxpayers 65 and older, effective through 2028, on top of existing senior deductions — and it applies whether you file from Florida or France. Confirm your CPA is applying it on your 2026 return.
• The Medicare Part B decision. Your first year abroad is also when the Part B keep-or-drop clock starts: dropping it saves ~$2,400/year but carries a permanent 10%-per-year late-enrollment penalty if you re-enroll later. That's its own calculator: Should You Keep Medicare Part B If You Retire Abroad?

Every year after: the ongoing checklist

Make the Foreign Tax Credit your default

For a retiree, the decision tree is short: FEIE if you work abroad, FTC if you retire abroad. The credit shines when the foreign country's tax on your retirement income is comparable to the US rate — and the credit also carries forward up to ten years, smoothing out lumpy years like big Roth conversions or a one-time pension payout.

Know how each income stream is taxed

• Social Security: taxable under standard US rules (up to 85% taxable depending on combined income) unless a treaty says otherwise — many assign Social Security taxation to one country only. Collecting it abroad is its own walkthrough: the plain-English Social Security guide.
• Pensions: US-source pensions are generally taxable by the US unless the treaty reassigns the right. If you also earned a foreign pension, the WEP repeal changed what that means — most old articles are now wrong, so use our 2026 WEP action checklist.
• IRA and 401(k) distributions: taxed as ordinary income wherever you live. Required minimum distributions follow you abroad. These are never excludable under the FEIE — they're distributions, not earnings.
• Self-employment abroad: if you consult or freelance from abroad, you owe self-employment tax unless a totalization agreement exempts you — and there is none with Mexico, Costa Rica, Panama, or Thailand. See the totalization myth-bust.

The Roth-abroad trap

This one deserves its own section because it surprises even careful planners. Inside the US, Roth IRA withdrawals are tax-free once the rules are met — clean, simple, done. Treaties, however, are written country by country, and many of them never mention Roth-style accounts at all. They define pensions, they define annuities, and then silence — into which a foreign tax authority can fit a taxable event.

What this means in practice: a Roth withdrawal that's tax-free in the US can be taxable in the country you retire to, depending on how that country's domestic law and its US treaty classify the account. The practical defenses are (a) check the treaty and the destination country's domestic treatment before you plan your withdrawal sequencing, and (b) consider front-loading Roth conversions and withdrawals in your final US-tax-resident years. Don't discover this one on a foreign tax return — by then the year is closed.

FBAR and FATCA in plain English

These are the two forms retirees actually get hurt by — not because they create tax (they're information returns), but because the penalties are severe and the filing is easy to overlook:

• The FBAR (FinCEN Form 114) asks one question: did the combined value of all your foreign financial accounts — checking, savings, brokerage, some foreign pension accounts — exceed $10,000 at any point during the year, even for a day? Three accounts with $4,000 each is $12,000. That crosses it. You report all the accounts, even the small ones. It's filed separately from your tax return through FinCEN's BSA e-filing system, and it also reaches accounts where you only have signature authority — say, you're a signatory on an aging parent's account abroad. That counts.
• Form 8938 (FATCA) is the IRS's version, attached to your tax return, at much higher thresholds — for a single filer genuinely living abroad, over $200,000 on the last day of the year or $300,000 at any point; double that for married filing jointly. It covers a broader set of assets but not everything the FBAR covers. Filing one does not satisfy the other. Most retirees abroad with real savings end up filing both, reporting largely the same accounts twice.

A subtlety worth knowing: "living abroad" for Form 8938's higher thresholds is a defined test — a foreign tax home plus either bona fide residence for a full tax year or 330 days of physical presence — not a self-description. If you don't meet it, the lower domestic thresholds apply however long you've been gone.

If the penalty stakes still feel abstract, this walkthrough covers a retired expat's real FBAR failure and what went wrong — worth watching before your first filing season abroad:

Video: a case-study walkthrough of FBAR requirements, the $10,000 aggregate threshold, and penalties from Savvy Nomad's expat-tax channel. Educational context only — not tax advice.

Expect the state audit years later

Sticky-state enforcement doesn't arrive the year you leave. It arrives three to five years later, when a data match triggers a notice asking why you stopped filing. This is why the pre-departure checklist ends with "keep dated proof of every step" — the folder with your final part-year return, the dated license change, and the registration cancellations is the entire defense, and it costs nothing to keep.

Revisit the treaty when life changes

Tax treaties get renegotiated, and regimes like Portugal's NHR get replaced. The treaty you planned around in 2026 may not be the treaty in force in 2030. Put a January treaty-and-law check on your annual calendar alongside the return itself: confirm nothing material changed in your country's treaty, your state's rules, and the federal thresholds. Ten minutes a year, once a year, forever.