Paying US Taxes While Abroad

Let’s start with a myth we hear all the time:

“If I move to Italy for dual citizenship, I don’t have to worry about U.S. taxes anymore, right?”

Not quite.

The United States is one of the only countries that taxes its citizens no matter where in the world they live. So if you're pursuing Italian citizenship through ancestry (jure sanguinis) and planning to relocate—even temporarily—to Italy, the IRS still expects you to file annually. That includes any income earned while you're abroad.

Yes, You Still Have to File

Whether you’re living in Naples or New York, if you’re a U.S. citizen or green card holder, you’re legally obligated to report your worldwide income. That includes:

• Salaries from Italian jobs

• Freelance or remote work

• Italian rental income

• Cryptocurrency gains

And here's the key: if you file correctly, you can often avoid paying double taxes.

Your Lifesavers: FEIE and the Foreign Tax Credit

Two IRS provisions are particularly important for Americans living in Italy:

• Foreign Earned Income Exclusion (FEIE): This allows you to exclude around $120,000 of foreign-earned income if you pass either the “physical presence” or “bona fide residence” test.

• Foreign Tax Credit (FTC): If you pay Italian taxes (which you likely will), the FTC lets you offset those payments against your U.S. tax liability.

To claim either, you must file a tax return.

What About Italian Bank Accounts?

If you open an Italian bank account (a must if you're applying for residency or citizenship in Italy), and the total value of your foreign accounts exceeds $10,000 at any point in the year, you must file an FBAR (FinCEN Form 114). Some expats may also need to file Form 8938 under FATCA.

Crypto, Currency Conversion & Other Gotchas

All income must be reported in U.S. dollars, using appropriate exchange rates. And yes—crypto trades or sales are taxable events, even abroad.

If you’re serious about relocating, this is not an area to DIY unless you're extremely confident with cross-border tax law.

Who We Recommend for Expat Taxes

We always recommend working with a professional familiar with both U.S. and Italian tax systems. Personally, we trust and use Greenback Expat Tax Services—they specialize in helping Americans abroad and know exactly how to handle dual taxation, Italian income, rental earnings, and everything in between.

👉 Use our affiliate link to get started with Greenback (no extra cost to you, and it helps support BecomeItaliani).

Final Thoughts

Getting your Italian citizenship is exciting—but moving abroad involves more than just paperwork and pizza. U.S. tax obligations follow you across the Atlantic. The good news? With the right planning and professional help, many Americans abroad end up owing little or nothing.

If you're considering relocating to Italy—whether temporarily to apply at a comune or permanently to embrace dual citizenship—make sure you're set up for tax success.

And if you're not yet sure what your options are, or how to begin the Italian citizenship process, our team at BecomeItaliani can help. Schedule a consultation here to explore your lineage and start your journey.

Disclaimer: This article is for general informational purposes only and does not constitute legal, tax, or financial advice. For guidance specific to your situation, we strongly recommend speaking with a qualified tax professional experienced in U.S. expatriate taxation.