Income tax in the US: A guide for Expats [2026]

While the US tax system can seem complicated – especially with both federal and local tax requirements – this guide explains what you need to know and how to file your return.

Here are the topics we’ll cover in this guide:

Income tax in the US: Overview and latest developments

The US has a progressive income tax system, meaning that higher levels of income are taxed at higher rates. It consists of both federal and local income taxes. The Internal Revenue Service (IRS) is the federal tax authority, and the tax year runs from 1 January – 31 December. Tax returns are generally due in the following year.

Income taxes in the US help fund a wide range of services and programs, including healthcare, education, public transport, national defense, and social security. At the federal level, income tax is the largest source of revenue, accounting for about 54% of total federal revenue in 2022.

Most types of income are taxable in the US, including:

• Employment income
• Self-employment or business income (where it is not subject to corporate tax)
• Investment income, such as dividends, interest, or capital gains
• Rental income
• Benefits, such as pensions and unemployment benefit
• Gambling and lottery winnings

Latest news about income taxes in the US in 2026

The US budget for 2026 features a mix of routine inflation adjustments and proposed income tax changes, including:

• Inflation adjustments to the seven federal income tax brackets, which are updated annually
• Increases to the standard deduction, also adjusted each year in line with inflation
• A proposed temporary deduction for eligible seniors (age 65+) of up to $6,000 (or $12,000 for joint filers), subject to income limits and congressional approval

2026 tax rates: How much tax will I pay in the US?

The US has seven federal income tax brackets, and the income ranges for each bracket vary depending on your filing status – for example, whether you file as a single taxpayer, a married couple filing jointly, or as head of household.

The tax rates for 2026 are:

Tax Rate	Single Filers	Married Couples Filing Jointly	Heads of Households
10%	$0–$12,400	$0–$24,800	$0–$17,700
12%	$12,401–$50,400	$24,801–$100,800	$17,701–$67,450
22%	$50,401–$105,700	$100,801–$211,400	$67,451–$105,700
24%	$105,701–$201,775	$211,401–$403,550	$105,701–$201,775
32%	$201,776–$256,225	$403,551–$512,450	$201,776–$256,200
35%	$256,226–$640,600	$512,451–$768,700	$256,201–$640,600
37%	Above $640,600	Above $768,700	Above $640,600

To help estimate your federal income tax liability for the current year, the IRS offers an official tax withholding estimator on its website.

In addition to federal income tax, many states and some cities also collect their own income taxes.

• Most states (42 states plus Washington, D.C.) impose a state income tax, using either a flat rate or graduated rates that increase with income. For 2025 and 2026, rates generally range from 1% to 13.3%, depending on the state.
• Only a few local governments charge income tax, and these are usually below 1%, although New York City has higher rates between 3.078% and 3.876%.

Who pays income tax in the US?

➡️ The following groups pay income tax in the US:

• Tax residents in the US pay tax on their worldwide income
• Non-residents pay tax only on income earned within the US
• US citizens are liable for income tax on worldwide income, although various treaties and foreign tax credits prevent double taxation for citizens living abroad

You are legally considered a tax resident in the US if you meet the IRS “substantial presence” test. This applies if you are physically present in the country for at least:

• 31 days during the current year, and
• 183 days during the three-year period including the current year and the two years immediately before that, counting all the days in the current year, ⅓ of the days in the first previous year, and ⅙ of the days in the second previous year

Who needs to file a tax return in the US?

📌 You need to file a tax return in the US if you:

• Earn worldwide income above the threshold amount ($16,100 for a single filer, or $18,150 if aged over 65), if you are a US citizen or tax resident
• Have US-source earnings above the threshold amount, if you are a non-resident
• Are self-employed or freelancing in the US and earn more than $400

Different thresholds apply if you file jointly as a married couple, or as a head of household.

You may also need to file if you meet certain other requirements. See the IRS website for details.

If you are a US citizen living abroad, it’s important to remember that you still need to file a tax return each year if your worldwide earnings are above the threshold, even if you spend no time in the US and earn no money there.

If your only income is from standard employment, and your employer withholds your income tax through the Pay As You Earn (PAYE) system, you still usually need to file a tax return. However, you will not need to make additional payments if the correct amount has been withheld.

US income tax for foreigners

If you’re a foreigner living in the US, you’ll pay tax according to your residency status. This means you’ll pay tax on your worldwide income if your main residency is in the US. If you’re a non-resident earning money from a US source (e.g., a remote worker), you’ll pay tax on this income only.

The US has income tax treaties with over 60 countries worldwide – including the UK, Canada, Australia, and France – as well as a foreign tax credit. This helps to prevent double taxation.

💡 If you’re an expat in the US, you may need to:

• Transfer money to pay taxes in your home country while living in the US
• Pay US tax on foreign income

Wise can help you avoid excessive currency conversion fees when making international transfers. These are done using the mid-market exchange rate with no hidden markups, which usually makes the transaction cheaper overall.

You can send low-cost international transfers, using the mid-market exchange rate with no hidden markups and open a Wise Account to receive payments in 20+ currencies.

Who is exempt from US income tax?

Most people are not fully exempt from US income tax, but you may owe no federal income tax in certain situations.

You generally do not have to pay US federal income tax if your income is below the IRS filing threshold, which depends on your age and filing status. For example, the threshold is higher for people aged 65 or over, married couples filing jointly, and heads of household. These amounts change over time.

Those who don’t qualify as tax residents in the US are exempt from income tax if their only source of income is from overseas.

💡 You may also owe no income tax if your only income comes from sources that are not taxable, such as:

• Gifts and inheritances (these are not income to the recipient, although inheritance and gift taxes may apply to the giver)
• Most life insurance payouts
• Certain scholarships, when used for qualified education expenses

How do you file your tax return in the US? 🇺🇲

The US tax year runs from 1 January to 31 December each year. Tax returns are usually due by 15 April the following year. Extensions until 15 October are available if you meet certain criteria.

Here is a brief explainer guide for filing your US income tax return.

How to register for tax in the US?

You will need a tax identification number to file and pay taxes in the US. For most US residents, this is your Social Security Number (SSN). Non-residents and those without US work authorization need to obtain an Individual Taxpayer Identification Number (ITIN) instead.

Both of these are unique 9-digit numbers. You can apply for an SSN online or by completing the form SS-5 and submitting it to your local Social Security Office.

To apply for an ITIN, you will need to complete Form W-7 and either mail it to the IRS or submit it in person at your local tax office.

Which forms do I need to fill out?

➡️ You can file your federal return electronically or by post. The main options are:

• IRS Free File
• Through an IRS-approved tax professional
• Using paper forms
• With help from IRS-certified volunteers, if you earn under $69,000 or meet certain criteria

💡 You will need to have to following information to hand:

• Your tax number (SSN or ITIN)
• Bank account details
• Current address
• Details of any dependents
• Form W2 (wages from employers, if applicable)
• Supplementary 1099 forms, if you have income not withheld at source (e.g., self-employment, investment income, or rental income)
• Records for credits and deductions (e.g., charitable donations, medical expenses, or dependent care)

If you file your tax return electronically, the software will guide you through the sections you need to complete and select the required forms automatically. If you file by mail, the main form you need to complete is Form 1040. Depending on your situation, you may also need to include additional schedules or forms. The IRS website provides guidance and links to all required forms.

Deductibles and tax relief

There are many deductions and credits that can reduce your US tax bill. You can find a full list on the IRS website.

Deductions reduce your taxable income. You subtract them from your income before calculating how much tax you owe. You can choose between the standard deduction and itemized deductions.

The standard deduction is a fixed amount set by the IRS each year ($16,100 for single filers in 2026) and is the simplest option for most taxpayers. You claim it without listing individual expenses.

Itemized deductions require you on your tax return. This approach can be beneficial if your total deductible expenses exceed the standard deduction.

📌 Common itemized deductions include:

• Charitable donations
• Home mortgage interest
• Certain medical and dental expenses (above the threshold)
• State and local taxes, such as income or property taxes (subject to limits)

💡 Some deductions, often called adjustments to income, can be claimed whether or not you itemize. These may include:

• Business use your car or home (for self-employed individuals)
• Contributions to certain retirement or health savings accounts
• Student loan interest (subject to income limits)

Tax credits reduce your tax bill dollar for dollar. Some are refundable, meaning you may receive money back even if you owe no tax, while others are non-refundable.

➡️ Common tax credits include:

• Child Tax Credit: Available for qualifying dependent children (maximum $2,200 per child).
• Earned Income Tax Credit (ETIC): For low- to moderate-income earners.
• Education Credits: Such as the American Opportunity Tax Credit and the Lifelong Learning Credit.
• Foreign Tax Credit or Foreign Earned Income Exclusion: To avoid double taxation.
• Premium Tax Credit: Helps lower the cost of Marketplace health insurance.

How do I pay my US income tax?

You can pay your US tax bill in several ways, including:

• Directly from your bank account
• By debit card, credit card, or digital wallet
• Through your online account with the IRS
• Using the Electronic Federal Tax Payment System (EFTPS)
• By cash at an IRS retail partner (up to $1,000 per payment)

The IRS website provides full details on each payment option, including any fees and processing times.

📅 Taxes are generally due on 15 April each year, the same date your tax return is due. This deadline usually applies even if you file for an extension, as an extension gives you more time to file – not more time to pay.

If you are self-employed or do not have taxes withheld from your income, you may need to make quarterly estimated tax payments throughout the year. Learn more on this guide: Self-employed and freelance taxes in the US 📚

If you have tax obligations in more than one country, a Wise multi-currency account can help you manage your money.

Wise allows you to hold and exchange funds in 40+ currencies, and send payments to 140+ countries.

Transfers use the mid-market exchange rate with no hidden fees, helping you to save money and making things easier when it comes to international tax.

Income tax refunds

If you pay more income tax than you owe, you may be entitled to a refund. You usually claim your refund when you file your tax return.

If you file electronically, your refund is calculated automatically. You simply choose how you want to receive it. The most common options are direct deposit to your bank account or a check sent by mail.

Refunds are typically processed within 21 days, although it can take up to six weeks for returns sent by mail. Amended returns can take up to 16 weeks to process.

You must file a tax return to receive a refund, even if you would not otherwise be required to file. If you do not file on time, you generally have three years from the original filing deadline to claim a refund before it expires.

You can use the IRS Where’s My Refund service to track the status of your refund. Alternatively, you can call the automated refund hotline on 800-829-1954. If you disagree with the IRS’s calculation of your tax or refund, you can contact the IRS to resolve the issue. If it cannot be resolved, you can request an appeal through the IRS Independent Office of Appeals.

The IRS issued over $461.2 billion in tax refunds in 2024.

What happens if I don’t pay my income tax on time?

⚠️ You may face a fine or penalty if you don’t:

• Pay your tax bill by the deadline
• File your tax return on time
• Provide accurate and complete information on your return

The standard failure to pay penalty is 0.5% of the unpaid tax per month, capped at a maximum of 25%. This includes non-payment and underpayment of estimated taxes.

If you fail to file your tax return on time without applying for an extension, the standard fine is 5% of the unpaid tax for each month (or part of a month), up to a maximum of 25%.

For returns that are more than 60 days overdue, there is a minimum penalty of $525 or 100% of your unpaid tax, whichever is less.

Penalties for inaccurate or incomplete returns can be up to 20% of the underpaid tax, if due to negligence or disregard of the rules.

The IRS charges interest on tax penalties at a daily rate.

⚠️ Repeated failure to comply with US tax laws can result in tax fraud charges, leading to large fines and even imprisonment in serious cases. If you face difficulties with paying your tax bill on time, you should contact the IRS as soon as possible, as you may be able to arrange an affordable payment plan or another relief option.

Income tax advice in the US 🇺🇲

This is a general guide intended for informational purposes only and does not constitute professional advice. You should consult a qualified tax expert if you have any queries about your own situation.

If you are self-employed in the US, it’s worth considering using a professional accountant and taking independent financial advice on business tax liabilities.

📌 The IRS has several free assistance tools, and you can also check with state and local tax authorities for income tax help. If you are looking for advisors with expat and international tax expertise, services in the US include:

• CST
• HSBC Expat
• Taxes For Expats

Useful resources

• Internal Revenue Service (IRS) – federal tax authority in the US (accessed 29th Jan 2026)
• Federation of Tax Administrators (FTA) – find information on official tax agencies in each US state (accessed 29th Jan 2026)
• Tax Foundation – non-profit with information and research on tax in the US and many overseas countries (accessed 29th Jan 2026)
• National Association of Enrolled Agents – directory of tax experts (accessed 29th Jan 2026)
• National Association of Tax Professionals – find a tax pro (accessed 29th Jan 2026)