US Taxes for Expats in Costa Rica: The Basics Nobody Should Skip

What US citizens living in Playas del Coco need to know about filing back home, in plain English.

US taxes for expats in Costa Rica come down to one rule: moving abroad does not end your relationship with the IRS. Citizens and green card holders still file on worldwide income every year, wherever they live. Most expats owe little or nothing thanks to exclusions and credits, but everyone still files.

First, the required honesty: we sell and manage real estate. We are not accountants, and nothing here is tax advice. Think of this as the orientation talk we give friends over coffee in Playas del Coco, with every number pulled from an official source. Confirm your own situation with a licensed cross-border CPA before you act on any of it.

Do I still have to file a US tax return after moving to Costa Rica?

Yes. The United States taxes its citizens and permanent residents on worldwide income no matter where they live. The IRS page for US citizens abroad states it plainly: you are subject to tax on income from all sources and must report it under the same rules that applied when you lived in Ohio or Alberta (Canadians, your rules differ, and this post is about the US side).

Filing is not the same as owing. Many of our neighbors file every year and pay the IRS nothing, because the exclusions and credits below wipe out the liability. But you have to file to claim those tools. Skipping the return does not make the obligation disappear. It just removes your protections.

How does Costa Rica tax the money you bring with you?

Costa Rica runs a territorial tax system. In plain terms, it taxes Costa Rican-source income: money from assets used, goods located, or services rendered inside the country, as summarized in PwC's Costa Rica tax guide. Foreign-source income of residents is generally outside the net. That is why a retiree living on US Social Security and a US pension typically pays Costa Rican income tax only on what they earn here, such as rent from a local property. Confirm the treatment of your specific income with a Costa Rican accountant, because the rules have their own wrinkles.

Two absences matter more than most people expect. There is no US and Costa Rica income tax treaty, and there is no totalization agreement covering Social Security contributions. For employees and retirees the practical impact is usually small. For the self-employed it is real: without a totalization agreement, US self-employment tax of 15.3 percent generally still applies to net self-employment earnings, even if you run your business from a terrace in Guanacaste. If that describes you, get professional help early. It also matters for planning residency, which we cover in our guide to visas in Costa Rica.

What is the Foreign Earned Income Exclusion, and how much is it?

The FEIE lets qualifying Americans exclude foreign earned income from US tax. For tax year 2025 (the return most people file in 2026), the maximum exclusion is $130,000 per person, up from $126,500 in 2024. The figure adjusts for inflation each year, so check the current number before you file.

To qualify you must pass one of two tests. The bona fide residence test requires being a genuine resident of a foreign country for an uninterrupted period that includes a full tax year. The physical presence test requires 330 full days in foreign countries during any 12-month window. Count your US trips carefully; many first-year expats fail the 330-day math by a single wedding or a long Christmas visit.

Note the word earned. The FEIE covers wages and self-employment income earned abroad. It does not cover Social Security, pensions, IRA withdrawals, dividends, capital gains, or rental income. Retirees living on passive income usually get nothing from the FEIE, and that is fine: their US tax picture is often simple anyway.

Should I use the Foreign Tax Credit instead?

The Foreign Tax Credit gives you a dollar-for-dollar credit against US tax for income tax paid to another country. Because Costa Rica does not tax most foreign-source income, many expats here pay little Costa Rican income tax and so have little to credit. The credit becomes useful when you do pay Costa Rican tax, for example on local rental or business income. A good cross-border CPA will model the FEIE, the credit, or a combination and pick whichever leaves you ahead over several years, since some elections are hard to reverse.

What are FBAR and FATCA, and do they apply to me?

These are reporting rules, not taxes, and they trip up more people than any other part of US expat taxes in Costa Rica.

The FBAR (FinCEN Form 114) is required if the combined value of your non-US financial accounts exceeded $10,000 at any point in the year. That is the total across accounts, not per account. A colones account for the electric bill plus a dollar account for HOA fees can cross the line together for a moment in January and trigger the filing for the whole year. The FBAR goes to FinCEN, not the IRS, is due April 15, and carries an automatic extension to October 15.

FATCA adds Form 8938, filed with your tax return, at much higher thresholds for people living abroad: foreign financial assets over $200,000 on the last day of the year or $300,000 at any time for single filers, and $400,000 or $600,000 for married couples filing jointly. Penalties for ignoring these forms are steep, and the forms themselves are not hard. File them.

What deadlines apply when you live in Costa Rica?

Expats get extra time to file, not extra time to pay. The rhythm looks like this:

• April 15: tax payment is due. Interest runs on unpaid balances from this date even if you file later.
• June 15: automatic two-month filing extension for Americans whose tax home is abroad. Attach a statement claiming it.
• October 15: further filing extension if you request it (Form 4868), and the automatic outer deadline for the FBAR.

If you expect to owe, estimate and pay by April 15, then finish the paperwork calmly from the beach.

How does a Costa Rica rental property show up on my US return?

Worldwide income includes the condo you rent to vacationers here. Rental income and expenses from a Costa Rican property go on your US return the same way a stateside rental would, though depreciation rules differ for foreign property, so let your CPA set up the schedule correctly from year one. Costa Rica will also tax that rental income locally, since it is Costa Rican-source, and the local side has its own registration and filing requirements that your Costa Rican accountant should handle.

Good records make this painless. Owners in our property management program get monthly statements showing rental income and every expense, which is exactly what a tax preparer wants in February. If you are still deciding whether owning here fits your budget, our overview of the cost of living in Costa Rica is a useful companion read.

Do I really need a cross-border CPA?

For most people, yes, at least for the first year or two. Look for a preparer who handles US taxes for expats in Costa Rica every season: someone who files FBARs routinely, knows the FEIE tests cold, and understands how a Costa Rican corporation holding your property interacts with US reporting. A hometown preparer who has never seen Form 2555 can cost you real money in missed elections. We are not tax professionals and we do not take referral fees, but our owners work with several cross-border CPAs year after year, and we are happy to share those names when you ask.

Costa Rica rewards people who do the boring paperwork correctly. Pura vida is a lot more relaxing when the IRS has no reason to write to you. If you are mapping out a move, our guide to retiring in Costa Rica covers the lifestyle side of the same decision.

We live and work in Playas del Coco, and we have watched dozens of owners get this right with one good CPA and a folder of clean statements. If you want rental income worth reporting, browse our current listings or send us a message and we will point you in the right direction, tax names included.

Frequently asked questions

Do US citizens living in Costa Rica still have to file US taxes?

Yes. The United States taxes citizens and green card holders on worldwide income regardless of where they live, so you file a federal return every year you meet the normal income thresholds. Most expats in Costa Rica owe little or nothing after applying the Foreign Earned Income Exclusion or Foreign Tax Credit, but you must file to claim either one.

How much foreign income can I exclude with the FEIE in Costa Rica?

For tax year 2025, the Foreign Earned Income Exclusion lets a qualifying person exclude up to $130,000 of foreign earned income, and the cap adjusts for inflation annually. You qualify through the bona fide residence test or by spending 330 full days abroad in a 12-month period. It covers wages and self-employment income only, not pensions, Social Security, or rental income.

Do I have to report my Costa Rican bank accounts to the US government?

Usually, yes. If the combined value of your non-US accounts topped $10,000 at any point in the year, you file an FBAR (FinCEN Form 114), due April 15 with an automatic extension to October 15. Larger holdings can also trigger Form 8938 under FATCA, starting at $200,000 in foreign assets for single filers living abroad. Both are reports, not taxes.

Cover photo: Dwight Sipler from Stow, MA, USA, CC BY 2.0, via Wikimedia Commons · Photo: Carol M. Highsmith, Public domain, via Wikimedia Commons