When filing your U.S. tax return from overseas, not all income is treated equally. The IRS categorizes income types differently, and each has its own reporting rules and forms. Understanding these requirements helps you stay compliant and avoid penalties.

Here’s a quick overview for U.S. expats and military abroad:

• Earned income (salary, freelance work) → report on Form 1040 and may qualify for FEIE (Form 2555).

• Rental income → report on Schedule E, cannot be excluded under FEIE but may qualify for Foreign Tax Credit (Form 1116).

• Investment & capital gains → report on Schedule D, taxed regardless of location.

• Pensions and Social Security → usually taxable, though tax treaties may reduce double taxation.

• Self-employment income → still subject to U.S. self-employment tax even abroad.

Each income type may also affect your state filing requirements, so it’s important to know where your income is sourced and whether your state claims you as a resident.

Need help determining which forms apply to your case? At USA Tax, I help expats and military members simplify their returns and maximize deductions.