Should I Leave the US? Tax & Lifestyle (2026)

1. The Question Everyone Is Asking

More Americans than ever are considering moving abroad. Whether motivated by cost of living, lifestyle, adventure, remote work flexibility, or simply a desire for change, the question "should I leave the US?" has gone from fringe to mainstream. In 2024, the US State Department estimated there were approximately 9 million US citizens living abroad — a number that has been steadily growing.

This guide is not political. It is a practical, balanced look at the tax, financial, and lifestyle factors you should consider before making the move. Leaving the country is a major decision with real consequences — some very positive, some potentially costly — and the more informed you are, the better your outcome will be.

We will cover the tax implications (including how you can legally earn up to $130,000 tax-free abroad), the financial logistics (banking, retirement accounts, insurance), lifestyle comparisons, popular destinations, and an alternative many people overlook: leaving your state instead of leaving the country.

2. Tax Considerations: What Changes When You Move Abroad

The United States is one of only two countries in the world (the other being Eritrea) that taxes its citizens on worldwide income regardless of where they live. This means that even if you move to Portugal, Thailand, or Dubai, you are still required to file a US federal tax return every year and potentially owe federal income tax on all your income.

However, there are significant tax benefits available to Americans living abroad:

The Foreign Earned Income Exclusion (FEIE)

The Foreign Earned Income Exclusion (FEIE), under IRC Section 911, allows qualifying US citizens and residents living abroad to exclude up to $130,000 (2026 amount, adjusted annually for inflation) of foreign earned income from US federal income tax. This is the single most valuable tax benefit for Americans abroad.

To qualify, you must meet one of two tests:

• Bona Fide Residence Test: You are a bona fide resident of a foreign country for an entire tax year (January 1 through December 31). This requires establishing genuine residency — not just being present — in a foreign country. You need to have a home there, pay local taxes or be subject to local tax laws, and demonstrate intent to remain. Read our Bona Fide Residence Test guide for details.
• Physical Presence Test: You are physically present in a foreign country or countries for at least 330 full days during a 12-month period. The 12-month period does not have to be a calendar year — it can be any consecutive 12-month period that includes the tax year.

If your earned income is under $130,000, the FEIE can effectively eliminate your federal income tax on earned income entirely. Use our FEIE Calculator to estimate your savings.

Foreign Tax Credit (FTC)

If you pay income taxes to a foreign country, you can claim a Foreign Tax Credit on your US return, which reduces your US tax liability dollar-for-dollar for foreign taxes paid. This prevents double taxation. If you live in a high-tax country (like France, where top rates exceed 45%), the FTC may be more beneficial than the FEIE. You can choose the FEIE, the FTC, or a combination — but strategic planning is important, as once you revoke the FEIE election, you cannot re-elect it for 5 years.

State Tax Savings

When you move abroad, you also leave your state. If you currently live in a high-tax state like California (top rate 13.3%), New York (top rate 10.9% + NYC surcharge), or New Jersey (top rate 10.75%), eliminating state income tax is an immediate and significant savings.

However, your state domicile still matters even when you are abroad. If you do not formally change your domicile before leaving, your old state may still claim you as a tax resident. The best practice is to change your domicile to a no-income-tax state like Florida before departing. Read our California exit tax guide if you are leaving California specifically.

Exit Tax Warning: Long-Term Permanent Residents

The US does not have a broad "departure tax" the way Canada does (Canada treats you as having sold all your assets on the day you leave). However, the US does have an exit tax that applies in a very specific situation: if you are a long-term permanent resident (green card holder for 8 or more of the past 15 years) and you abandon your green card or renounce US citizenship.

Under IRC Section 877A, "covered expatriates" — those with a net worth over $2 million, an average annual net income tax liability over $201,000 (2025 threshold, adjusted for inflation), or who fail to certify 5 years of tax compliance — are treated as having sold all their worldwide assets at fair market value on the day before expatriation. Any net gain above $866,000 (2025 exclusion, adjusted annually) is taxed at applicable capital gains rates.

This is a significant tax event. If you are a long-term green card holder considering giving up your green card, consult a tax professional well in advance. Simply moving abroad while keeping your green card does not trigger the exit tax — it is triggered only by the formal abandonment of permanent resident status.

For US citizens who are simply moving abroad but keeping their citizenship: There is no exit tax. You continue to file US returns, you can use the FEIE and FTC, and you maintain all your rights as a citizen. The exit tax only applies when you renounce citizenship or abandon a long-term green card.

3. Financial Logistics: Banking, Retirement, and Insurance

Banking Abroad

Banking is one of the most frustrating aspects of being an American abroad. Due to FATCA (Foreign Account Tax Compliance Act), foreign banks are required to report accounts held by US citizens to the IRS. Many foreign banks simply refuse to open accounts for Americans because the compliance burden is too high.

Solutions:

• Charles Schwab International: Schwab's international brokerage account is the gold standard for Americans abroad. It offers a debit card with unlimited ATM fee rebates worldwide, no foreign transaction fees, and the ability to hold your account with a US address. This is the single most recommended banking product for American expats.
• Wise (formerly TransferWise): Offers multi-currency accounts with excellent exchange rates and low fees. Wise is not a bank but provides a debit card and the ability to hold and convert multiple currencies. Very popular with digital nomads.
• Keep your US bank accounts. Do not close your US checking and savings accounts. Maintain them with a US address (a Florida virtual mailbox works well). You will need US bank accounts for receiving payments, paying US bills, and maintaining financial ties.

Retirement Accounts: IRA and 401(k) Access From Abroad

Your retirement accounts — IRA, 401(k), Roth IRA — continue to exist and grow regardless of where you live. However, there are some complications:

• Contributions: To contribute to a traditional or Roth IRA, you need earned income. If you are using the FEIE to exclude all your earned income, you may have $0 in taxable earned income — which means you cannot contribute to an IRA for that year. This is a significant trade-off that many expats do not anticipate.
• Distributions: You can take distributions from your IRA or 401(k) from anywhere in the world. The distributions are taxable as ordinary income on your US federal return (Roth distributions are tax-free if qualified). Some countries also tax retirement distributions under their domestic law, but US tax treaties often prevent double taxation.
• Brokerage access: Some US brokerages (Vanguard, Fidelity) may restrict your account access or trading capabilities if you update your address to a foreign country. This is another reason to maintain a US address. Schwab is generally the most accommodating for Americans abroad.

Health Insurance

US health insurance generally does not cover you abroad (with limited exceptions for some plans with international coverage). You have several options:

• International health insurance: Companies like Cigna Global, Aetna International, and Allianz Care offer comprehensive international health insurance plans for expats. Costs vary widely — expect $150-$500/month depending on age, coverage level, and destination.
• Local health insurance: Many countries offer affordable public or private health insurance to residents. In Portugal, legal residents have access to the national health service. In Thailand, private health insurance costs a fraction of US prices. In Mexico, IMSS coverage is available to residents for under $500/year.
• Travel insurance: For short-term nomads, travel insurance with medical coverage (SafetyWing, World Nomads) costs $40-$80/month and covers emergencies. This is not a substitute for comprehensive health insurance but works well for generally healthy young travelers.

4. Lifestyle Factors: Cost of Living, Quality of Life, and Culture

Cost of Living Comparison

One of the strongest draws of living abroad is the dramatically lower cost of living in many countries. Here is how popular expat destinations compare to major US cities:

For someone earning $100,000 remotely, moving from New York City to Lisbon could mean living a comparable lifestyle while spending $30,000-$40,000 less per year on living expenses — on top of potential state income tax savings of $8,000-$12,000. The combined financial benefit can be transformative.

Quality of Life Factors

Money is not everything. Here are non-financial factors that matter:

• Healthcare quality and access: Many expat destinations offer excellent healthcare at a fraction of US prices. Portugal, Spain, and Thailand are known for high-quality, affordable medical care. However, some destinations have limitations — rural areas in developing countries may lack modern facilities.
• Safety: Research crime rates and safety data for specific cities, not just countries. Mexico City's upscale neighborhoods (Roma Norte, Condesa, Polanco) are very different from high-crime rural areas. Portugal and Spain consistently rank among the safest countries in the world.
• Language: English is widely spoken in Dubai, the Netherlands, and Scandinavian countries. In Portugal, Spain, Mexico, and Colombia, learning the local language significantly improves your experience and integration. Thailand and other Asian countries present a steeper language barrier.
• Time zone compatibility: If you work remotely for a US company or US clients, time zones matter. Portugal and Spain are 5-6 hours ahead of US Eastern time — manageable for overlapping work hours. Thailand is 11-12 hours ahead, making real-time collaboration difficult.
• Visa and residency options: Each country has different visa requirements. Some offer specific digital nomad visas (Portugal, Spain, Colombia, Dubai). Others require work visas, investor visas, or retirement visas. Research the visa landscape before committing.

5. Popular Destinations for Americans

Mexico

The most popular destination for American expats by proximity and volume. Mexico offers a low cost of living (60-70% less than major US cities), easy flight connections to the US, a 180-day tourist visa with no application required, and a growing digital nomad scene in cities like Mexico City, Playa del Carmen, and San Miguel de Allende. Mexico has a territorial tax system for non-residents — if your income is from US sources, you generally do not owe Mexican income tax as a temporary visitor. However, if you become a Mexican tax resident (183+ days), you may owe tax on worldwide income.

Portugal

Portugal has become the top European destination for American expats, thanks to the D7 visa (passive income visa), the Digital Nomad Visa, and the IFICI regime (which replaced the Non-Habitual Resident program in 2024), offering a 20% flat tax rate on qualifying income for 10 years. Lisbon and Porto are cosmopolitan, English-friendly cities with excellent food, safety, and quality of life. Cost of living is roughly 50% less than major US cities. Read our Move to Portugal guide for details.

Spain

Spain offers the Beckham Law (special tax regime for new residents, capping tax at 24% on the first EUR 600,000 of income for 6 years), excellent quality of life, and a new digital nomad visa. Barcelona and Madrid are popular with remote workers. Cost of living is similar to Portugal — roughly 40-50% less than major US cities. Spain's healthcare system is excellent and accessible to residents.

Colombia

Medellin has become a major digital nomad hub, with a low cost of living (70% less than US cities), year-round spring weather (the "City of Eternal Spring"), growing coworking infrastructure, and a digital nomad visa. Colombia taxes residents on worldwide income, but non-residents are taxed only on Colombian-source income. The Colombian peso has been favorable for dollar earners.

Thailand

Thailand offers some of the lowest living costs in the world — a comfortable lifestyle in Bangkok or Chiang Mai for $1,500-$2,500/month. Thailand introduced a Long-Term Resident (LTR) visa in 2022 for remote workers, retirees, and investors, offering a 10-year visa with reduced tax rates. The main drawbacks are the time zone difference (11-12 hours from US Eastern) and the language barrier.

Dubai (UAE)

Dubai offers 0% personal income tax, world-class infrastructure, safety, and a business-friendly environment. The UAE introduced a 9% corporate tax in 2023 on business profits above AED 375,000, but personal income remains untaxed. Dubai is expensive compared to other expat destinations (comparable to major US cities) but offers a unique combination of tax savings and luxury. A freelance/remote work visa is available. Read our Move to Dubai guide for details.

6. The Alternative: Leave Your State, Not Your Country

Here is something many people overlook: if your primary motivation for leaving the US is taxes, you may not need to leave the country at all. You can achieve significant tax savings simply by changing your state domicile to one of the nine states with no income tax.

Consider the math: if you earn $200,000 in California, you pay roughly $17,000 per year in state income tax. Move your domicile to Florida, and that drops to $0. That is $17,000 per year — $170,000 over a decade — without leaving the country, without dealing with foreign banking, without navigating visas, and without being 12 time zones away from your family.

For many people, the domicile change is the better move:

• You keep your US banking, insurance, and retirement account access without any complications.
• You stay in your time zone for work and family.
• You maintain easy access to the US healthcare system.
• There are no visa requirements, language barriers, or cultural adjustment.
• Florida has no minimum stay requirement — you can travel the world with a Florida domicile and still save on taxes.

If taxes are your primary concern and you are not drawn to living abroad for lifestyle reasons, changing your domicile to Florida may give you 80% of the financial benefit with 20% of the complexity. Read our Florida Residency Guide for a step-by-step walkthrough, or take our Domicile Quiz to compare states.

7. What NOT to Forget Before You Leave

If you do decide to move abroad, here is a checklist of things many people overlook:

• Renew your passport. If your passport expires within 12 months, renew it before you leave. Renewing from abroad is possible through US embassies and consulates, but it takes longer and is more cumbersome. Make sure you have at least 12-18 months of validity remaining.
• Set up voting from abroad. US citizens can vote from anywhere in the world using the Federal Post Card Application (FPCA). Register with the Federal Voting Assistance Program (FVAP) to receive absentee ballots at your foreign or US mailing address.
• FBAR reporting for foreign accounts. If you have $10,000 or more in aggregate across all foreign financial accounts at any point during the year, you must file an FBAR (FinCEN Form 114) by April 15 (with automatic extension to October 15). Failure to file can result in severe penalties — up to $10,000 per violation for non-willful violations. This catches many new expats off guard.
• FATCA reporting (Form 8938). Separate from FBAR, if your foreign financial assets exceed certain thresholds ($200,000 on the last day of the year or $300,000 at any point during the year, for single filers living abroad), you must report them on Form 8938 with your tax return.
• Change your state domicile before you leave. Do not leave the US from a high-tax state like California or New York. Change your domicile to Florida first, then depart. This ensures you stop owing state income tax from the date of your domicile change, not from the date you leave the country.
• Keep your US address. Maintain a US mailing address (virtual mailbox in Florida is ideal) for banking, IRS correspondence, and official documents. Read our guide on mail forwarding for digital nomads for options.
• Power of attorney. Consider giving someone you trust a limited power of attorney to handle US-based administrative tasks (banking, real estate, legal) in your absence.
• International driver's license. An International Driving Permit (IDP) is a translation of your US driver's license accepted in many countries. It costs $20 from AAA and is valid for 1 year. Some countries require it; others accept a US license directly.

8. Making the Decision: A Framework

Here is a simple framework for deciding whether to leave:

Moving abroad makes the most sense if:

• You are drawn to a specific country or culture for lifestyle reasons, not just tax savings.
• Your work is fully remote with no requirement to be in the US.
• You are young and flexible, or retired and adventurous.
• You earn under $130,000 and can benefit fully from the FEIE.
• You are comfortable navigating foreign bureaucracy, language barriers, and being far from family.

Staying in the US (but changing states) makes more sense if:

• Your primary motivation is tax savings rather than lifestyle change.
• You have significant passive income (FEIE does not help with dividends, capital gains, etc.).
• You want to stay close to family, friends, and the US healthcare system.
• You value the simplicity of staying in one legal and financial system.
• Your clients or business require you to be in a US time zone.

There is no universally right answer. Some people thrive abroad. Others try it for a year and come back. The key is to go in with realistic expectations, a solid financial plan, and an understanding of the tax implications.

9. Frequently Asked Questions

This guide is for informational purposes only and does not constitute legal, tax, or immigration advice. Tax laws, visa requirements, and financial regulations change frequently and vary by country. Always consult qualified professionals before making decisions about international relocation.