U.S. taxes when you live in Costa Rica

A foreign address does not end federal tax

The IRS guidance for Americans abroad explains that U.S. citizens and resident aliens are generally subject to U.S. tax on worldwide income. Whether you must file depends on the applicable rules and thresholds, not simply your address.

Report the income types relevant to you and evaluate exclusions or credits through the return. A year spent outside the United States is not, by itself, a complete tax calculation.

Match the relief to the income

The foreign earned income exclusion concerns qualifying earned income. It is not a blanket exclusion for pensions, Social Security, investment income or retirement-account withdrawals. Eligibility involves requirements such as a foreign tax home and an applicable residence or physical-presence test. A foreign tax credit has different rules and depends on the taxes and income involved.

Self-employment taxes, entity filings and investments held through foreign structures need their own review. Ask your preparer before creating a Costa Rican company or buying an investment product simply because it is common locally.

Track accounts during the year

The IRS FBAR page explains the aggregate US$10,000 trigger for foreign financial accounts. Save statements and track annual maximum values across all relevant accounts. An account need not generate income to raise a reporting obligation.

Form 8938 is separate from the FBAR and has its own thresholds. Let your preparer know about signature authority, jointly owned accounts and any foreign entity interests, rather than supplying only the accounts that paid interest.

Make a year-end folder

• U.S. and foreign income statements, including pension and investment records.
• Travel dates and evidence relevant to any exclusion claim.
• Foreign bank statements and maximum account values.
• Foreign tax returns, assessments and payment receipts.
• Details of business ownership and significant transactions.

Qualifying taxpayers abroad can receive additional filing time, but interest on unpaid tax can still run from the regular payment deadline. Confirm your actual dates with the preparer. Review state taxes separately; federal relief does not automatically carry over.