Moving Abroad Mid-Year — U.S. Taxes in the Year You Leave

The year you move abroad produces one U.S. return covering two lives: ordinary domestic income before the move and foreign earned income after it. The exclusion applies to the foreign part — prorated, and only once you've met a test that may not be satisfied until the following year. Getting the move year right sets up every year that follows.

On this page

1. Can I claim the foreign earned income exclusion in the year I move?
2. What if I haven't completed 330 days by the filing deadline?
3. How is the exclusion prorated?
4. What happens to my state return?
5. Should I change my withholding?
6. When does foreign account reporting start?
7. What about foreign tax in the first year?
8. Frequently asked questions
9. Next step

Can I claim the foreign earned income exclusion in the year I move?

Yes, for the part of the year you qualify — but not under the bona fide residence test, which needs a full calendar year abroad first. The route for a move year is the physical-presence test: 330 full days abroad in any 12-month period, which can start on the day you leave and run into the next year. Once that window is complete, the days of the move year that fall inside it qualify, and the exclusion limit is prorated by those days.

What if I haven't completed 330 days by the filing deadline?

File Form 2350 for an extension until roughly 30 days after you expect to qualify. It exists for exactly this situation and lets you claim the exclusion on the original return rather than amending. Alternatively, file by the deadline without the exclusion and amend once you qualify — slower, but it works. Don't claim the exclusion before the test is met.

How is the exclusion prorated?

Multiply the annual limit by the number of qualifying days in the tax year divided by the days in the year. Move on July 1 and roughly half the limit is available for that year, applied against the foreign earned income you earned after the move. Income earned before the move is ordinary U.S. income, fully taxable.

What happens to my state return?

You file a part-year resident return in your old state for the months before the move — and then ideally nothing after it, if you've broken residency. The move year is when the break is documented: sell or lease the home, change licenses and registrations, move accounts, record the date you left. States that are difficult to leave judge the whole pattern, so the paper trail matters.

Should I change my withholding?

If you stay on a U.S. employer's payroll, give them Form 673 once you expect to qualify for the exclusion; it stops federal withholding on wages you'll exclude. Ask payroll to stop state withholding as well, with your new address on file. If you become self-employed or work for a foreign employer, start planning for estimated payments on any U.S. tax you'll still owe — self-employment tax especially.

When does foreign account reporting start?

Immediately. If your new foreign accounts (and any others) together exceed $10,000 at any point in the move year, an FBAR is due for that year. Form 8938 uses the domestic thresholds in a move year unless you meet the abroad tests for that year — which with a mid-year move you generally won't.

What about foreign tax in the first year?

Many countries tax you as a resident from your arrival date, often with a different tax year and a return due months after the U.S. one. Decide early whether to claim the foreign tax credit on the paid or accrued basis; the accrued method matches foreign tax to the U.S. year it relates to and avoids a credit landing a year late.

Frequently asked questions

Next step

Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. If you're moving abroad this year, our U.S. Tax Desk can map the move-year return in advance — the test, the extension, the state exit, and withholding — so nothing is left to repair later. See pricing or book a free fit call.