As of early 2026, U.S. citizens abroad are subject to U.S. income tax on worldwide income, a long-standing policy. While Donald Trump pledged during his 2024 campaign to end this "double taxation", recent legislation, such as the 2025 "One Big Beautiful Bill," has focused on altering tax provisions, not eliminating taxation.
1. I'm a U.S. citizen living and working outside of the United States for many years. Do I still need to file a U.S. tax return? Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live.
During his 2024 campaign, Trump pledged to end double taxation for overseas Americans, saying, “You've wanted this for years...and you deserve it.”
The Civil War income tax disappeared in 1872, but when lawmakers tried to revive the levy in the 1890s, they reasserted their right to tax citizens living abroad. The enacted-but-overturned income tax of 1894 was also imposed on the worldwide income of U.S. citizens, regardless of where they lived.
Trump's Double Taxation Proposal Explained
This would allow Americans to pay taxes only to the country where they live and earn income, similar to how most other developed nations handle their expatriate citizens.
Yes, U.S. citizens living abroad generally must file U.S. taxes on their worldwide income, creating a risk of double taxation, but mechanisms like the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC) help avoid paying taxes twice on the same earnings by allowing exclusion or credit for taxes paid to foreign countries. These tools, claimed by filing a U.S. return (Form 1040), significantly reduce or eliminate U.S. tax liability for many expats.
Dual citizenship remains fully legal in the United States. The Exclusive Citizenship Act of 2025 has not been enacted and does not change current law. Americans can still hold more than one citizenship, and no renunciation deadlines or requirements exist today.
Taking Advantage of Capital Gains, Not Salary
One of the biggest reasons Bezos pays little in personal income tax is that he doesn't rely on a traditional salary. Instead, he holds most of his wealth in Amazon stock. Here's why this matters: Capital gains taxes are much lower than income taxes in most cases.
Do all countries tax their citizens? No, most countries tax based on residency, not citizenship. Only the US and Eritrea tax citizens on worldwide income regardless of residence.
If the individual tax cuts expire, taxpayers in all income groups would face higher and more complicated taxes. Machinery and equipment expensing is a key provision that, if allowed to expire, would especially harm capital-intensive industries like manufacturing.
Dual Citizenship at Birth
If you were born a dual citizen, you may be able to avoid the exit tax—but only if: You still hold citizenship in your other country at the time of expatriation. You have been a U.S. resident for no more than 10 of the last 15 years (as defined for tax purposes).
The United States is one of only three countries in the world that taxes citizens based on citizenship rather than residence (along with Eritrea and North Korea). This means you must file US tax returns no matter where you live.
The United States taxes you based on your citizenship, not where you live, so even if you retire abroad, you must still report your worldwide income once it reaches IRS filing thresholds.
The United States uses citizenship-based taxation (CBT), rather than residence-based taxation (RBT), meaning US citizens are taxed on their worldwide income regardless of where they live and where the income was earned.
Planning of Residential Status (RS)
This ensures that only your Indian income is subject to tax, while any income earned abroad will not be taxable in India for the financial year of departure (i.e., from April 1 to March 31).
“Tesla: The company has used mechanisms like deferred tax assets, research and development credits, and massive deductions from Elon Musk's stock-based compensation to reduce its U.S. federal income tax to near zero in profitable years.”
Yes, Jeff Bezos famously paid himself a modest salary of around $80,000 per year at Amazon for about two decades, choosing equity over large paychecks to align with his founder's mindset and drive wealth through increased company value, not more salary. He felt his significant ownership stake provided ample incentive, and he was proud of this decision, which allowed him to avoid higher taxes while his stock value soared.
A U.S. citizen may naturalize in a foreign state without any risk to their U.S. citizenship. U.S. dual nationals owe allegiance to both the United States and the foreign country (or countries, if they are nationals of more than one).
What are the disadvantages of dual citizenship?