U.S. citizens and resident aliens (“green card” holders) must pay taxes on worldwide income.
This means that, even if they do not live in the US and earn income outside the U.S., they must (1) file an annual tax return AND ( 2) pay taxes on any income they earn (regardless of where they earned it). But there is some relief. Congress allows U.S. citizens and resident aliens not to pay Federal income taxes on up to US$105,900 of foreign earned income per year for 2019. But, be careful – it does not apply to all income and does not exempt them from all taxes. They can only exclude foreign earned income (such as wages and other compensation for services performed outside the U.S.). Also, the exclusion only applies to income tax. Payroll taxes (social security and Medicare) are not reduced by this exclusion. Similarly, depending on their state of domiciliation or residency, State income taxes may not be reduced by this exclusion. Finally, there are additional requirements they must meet to avail themselves of this exclusion. In particular, to qualify for the exclusion, they mu...