Americans Abroad and the 2027 Tax Figures: A $137,300 Exclusion, a $218,000 Exit Test, and the Lines That Never Move

Every autumn the IRS publishes the numbers that will govern the next tax year. On 5 November 2026 it published them for 2027: news release IR-2026-133 and the technical document behind it, Revenue Procedure 2026-35, which adjusts almost 70 provisions for inflation.

For most Americans the headline is the standard deduction. For Americans who live abroad, or who are thinking about leaving the US tax system altogether, the useful figures sit further down the list. Some of them rise every year. Others have not moved in decades, and those are the ones that tend to cause trouble.

The 2027 figures apply to tax year 2027, which means returns filed in 2028. Nothing changes on a 2026 return because of this release.

The foreign earned income exclusion: $137,300

The exclusion that lets a qualifying American abroad keep foreign salary or self-employment earnings out of US taxable income rises to $137,300 for 2027, up from $132,900 for 2026. That is an increase of $4,400, or about 3.3%.

The exclusion is per qualifying person: two people in the same household who both work abroad and both qualify can each claim it against their own earned income.

The tests to qualify have not changed, because they are written into the statute rather than indexed. Under section 911 of the Internal Revenue Code, you need a tax home in a foreign country and must pass one of two tests:

• the bona fide residence test: resident in a foreign country for an uninterrupted period that includes an entire tax year, or
• the physical presence test: present in a foreign country or countries for at least 330 full days in any period of 12 consecutive months.

The IRS page on the exclusion restates both. The exclusion only covers earned income: wages, salaries, professional fees and similar pay for personal services. Dividends, interest, capital gains, rents and pensions are outside it, whatever their amount.

The housing figures that follow from it

The foreign housing exclusion is not a separate number in the release. It is a formula tied to the main exclusion. Section 911(c) sets a base amount of 16% of the exclusion, computed on a daily basis, and a general ceiling of 30% of it, which the IRS can adjust for high-cost locations.

Applied to the 2027 exclusion, the arithmetic is:

These are full-year figures for someone who qualifies for all 365 days. The statute lets the IRS raise the ceiling for high-cost locations by separate guidance; those location figures are not part of Revenue Procedure 2026-35.

What the exclusion does not do

Two points in the statute matter more than the headline amount.

First, the stacking rule in section 911(f). If you exclude foreign earnings and also have other taxable income, the tax on that other income is calculated as if the excluded income were still there. The exclusion removes the earnings from tax; it does not let the remaining income start again in the 10% bracket.

Second, the denial of double benefits. Foreign income tax that relates to excluded income cannot also be claimed as a foreign tax credit. For many Americans in higher-tax countries, the foreign tax credit on its own is the better tool, and the exclusion is not used at all. In a no-tax or low-tax country, the exclusion is often what keeps a salary out of US tax.

The exit numbers: $218,000 and $940,000

The figures that matter most for anyone weighing whether to give up US citizenship, or a long-held green card, are in sections 3.39 and 3.40 of the revenue procedure.

A person who expatriates is a covered expatriate, and pays the US exit tax regime, if any one of three tests in section 877(a)(2) is met:

• Income tax test: average annual net income tax for the five years before expatriation above an inflation-adjusted threshold. For expatriations in 2027 that threshold is $218,000, up from $211,000 in 2026.
• Net worth test: net worth of $2,000,000 or more on the date of expatriation. This figure is written into the statute and is not indexed.
• Compliance test: failure to certify, under penalty of perjury, full US tax compliance for the five preceding years.

For a covered expatriate, the mark-to-market rule treats worldwide assets as sold the day before expatriation. The gain that would otherwise be taxed is reduced by an exclusion amount, which for 2027 is $940,000, up from $910,000.

The asymmetry is the point. The income threshold and the exclusion move up every year. The $2 million net worth line does not. Each year, inflation pulls more people with ordinary middle-class wealth, a paid-off house and a retirement account, over the net worth test, while the people who actually pay $218,000 a year in US income tax are a small group. For most people who look at leaving, the net worth test, not the income test, is the one that decides.

The fee side of renunciation changed earlier in the year: the State Department now charges $450, as The Brief explained in Renouncing US Citizenship Now Costs $450. The tax tests are where the real cost sits, and the 2027 figures are the ones that apply to anyone whose expatriation date falls in 2027.

Gifts and bequests from a covered expatriate

Section 3.46(3) of the revenue procedure sets a related figure. A US person who receives a gift or bequest from a covered expatriate pays a special transfer tax under section 2801, but only on the amount above $20,000 received in 2027. For families split between someone who has left and children who remain American, that threshold is small.

Gifts, estates and the non-citizen spouse

For US citizens and domiciliaries, the basic exclusion amount for estate and gift tax rises to $15,480,000 for deaths and gifts in 2027, up from $15,000,000. The annual gift exclusion rises to $20,000 per recipient, from $19,000.

The figure that matters to many households abroad is the separate annual exclusion for gifts to a spouse who is not a US citizen. The unlimited marital deduction does not apply to such a spouse, so a special annual amount takes its place. For 2027 it is $201,000, up from $194,000.

None of this helps an American's foreign relatives with US assets of their own. A nonresident who is not a US citizen still gets only the credit of $13,000 in section 2102(b), fixed in the statute and not indexed. The Brief covered what that means for foreign investors holding US shares in The 40% Ghost in Your Portfolio.

Gifts received from abroad

Americans who receive money from abroad face two different reporting thresholds, one indexed and one not.

• Gifts from foreign corporations or foreign partnerships must be reported when they exceed an indexed threshold under section 6039F. For tax years beginning in 2027 it is $21,240.31, up from $20,573.
• Gifts or bequests from a nonresident alien individual or a foreign estate must be reported on Form 3520 when they exceed $100,000 in the year, according to the IRS page on gifts from foreign persons. That figure is not adjusted for inflation.

Neither threshold creates a tax. Both create a filing duty, and the penalties for a missed Form 3520 are reason enough to know which applies.

The passport threshold: $68,000

Section 3.65 sets the level at which unpaid federal tax becomes seriously delinquent tax debt under section 7345. For 2027 it is $68,000, up from $66,000. Under section 7345, once the IRS certifies such a debt, the certification goes to the State Department for denial, revocation or limitation of the passport. For an American living abroad, the passport is not a travel document only; it is often the document that holds a residence permit together. Keeping assessed tax debt below that line, or under an agreed payment arrangement, matters more abroad than at home.

The lines that never move

The list of what Revenue Procedure 2026-35 does not touch is as important as the list of what it does.

• FBAR: Americans with a financial interest in, or signature authority over, foreign accounts whose aggregate value exceeds $10,000 at any time in the year must file an FBAR. The IRS FBAR page gives the due date as 15 April, with an automatic extension to 15 October. The $10,000 figure is not indexed.
• Form 8938: for taxpayers living abroad, the IRS comparison of Form 8938 and FBAR gives thresholds of more than $200,000 at year end or $300,000 at any time for a single filer, and $400,000 or $600,000 for joint filers. These have not been indexed either.
• The $2 million net worth test for expatriation, described above.

For an American abroad with a local salary account, a pension account and a savings account, the FBAR line is crossed almost by default. It is a reporting rule, not a tax, but it is one that applies to ordinary lives rather than to wealthy ones.

The rest of the release, briefly

Americans abroad who still have US-source income, or whose foreign earnings exceed the exclusion, will also use the ordinary figures:

• Standard deduction 2027: $16,600 for single filers and married filing separately, $33,200 for married couples filing jointly, $24,925 for heads of household.
• Top rate: 37% for single filers above $661,375 of taxable income ($793,650 for joint filers). The 12% bracket starts above $12,800 for single filers.
• Child tax credit: up to $2,300 per child for 2027, of which up to $1,800 is refundable.

What to do with the numbers

Most of the 2027 figures need no action today; they belong on a return that will be filed in 2028. Three of them justify a look now.

• If you expect to expatriate in 2027, run the net worth test first. It is the one most people fail, and it does not rise.
• If you are moving abroad in 2027, plan the first year around the 330-day test or the bona fide residence test, because the exclusion is worthless without one of them.
• If family abroad is likely to send you money, know whether the sender is an individual or a company. The reporting line is $100,000 in one case and $21,240.31 in the other.

The wider logic behind all of this, a tax system that follows a passport rather than a person, is set out in Citizen-Based Taxation: Why America Still Taxes You After You Leave. The practical filing calendar for the current year is in October 15 for Americans Abroad, and the wider US picture on the United States country page.

Work with Sebastian

If you are an American abroad, or about to become one, and want your exclusion, your reporting and any decision about your citizenship to rest on the 2027 numbers rather than on last year's, that is the kind of cross-border planning Sebastian works on with internationally mobile clients. Book a consultation.