Yes, as a U.S. citizen living and working outside of the United States, you are required to file a U.S. tax return. Your worldwide income is subject to U.S. income tax, regardless of where you live. This includes income from both U.S. and foreign sources.
However, you may qualify for certain tax benefits, such as the foreign earned income exclusion and the foreign housing exclusion or deduction, which can reduce your taxable income. To claim these benefits, you must file a tax return and attach Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, if you are only claiming the foreign earned income exclusion.
The foreign earned income exclusion allows you to exclude up to $120,000 of your foreign earned income for the tax year 2023, provided you meet the requirements of either the bona fide residence test or the physical presence test. The bona fide residence test requires that you be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. The physical presence test requires that you be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
Additionally, you may be able to claim a foreign tax credit or an itemized deduction for foreign income taxes paid, which can further reduce your U.S. tax liability.
For more detailed information, you can refer to IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, and IRS Publication 519, U.S. Tax Guide for Aliens.
Sources:
Publication 54 (2023)
Publication 519 (2023)
§ 911. Citizens or residents of the United States living abroad
Publication 593
