In 2024, single US taxpayers living abroad can exclude $126,500 ($253,000 if married and filing jointly) of their earned income from taxation and an allowance for housing also escapes taxation. Those taxpayers also may be able to claim a tax credit that reduces their US income taxes dollar-for-dollar by the amount of foreign income tax they pay. Between the earned income exclusion and foreign tax credits (not used together on the same dollar of income) many taxpayers may owe no US income taxes. 

But some taxpayers who earn incomes greater than the exclusion who live in countries with low income taxes can still owe US taxes, although they arguably benefit less from some federal spending (like spending on national parks), than US residents. And the credit does not apply to some taxes, like those on foreign mineral income or a portion of combined foreign oil and gas income. 

The tax system also imposes burdens on American citizens with foreign bank accounts, which people living abroad typically have. They must file a report if they have an interest in or authority over foreign financial accounts worth $10,000 or more on one or more days in a year. The penalties for failure to file, even if one is unaware of the law, are severe: more than $160,000 for a willful violation and more than $16,000 for an inadvertent violation in 2024. These penalties are also indexed for inflation.

US citizens living abroad enjoy exemptions and tax credits that limit the risk of double taxation of their income. But the risk remains, and the US tax system can make ordinary activities, such as having an account at the local bank, more difficult.