Best countries for American expats
Updated on August 22, 2025
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7 Best Countries for American Expats in 2025
Ideally, the best country for US expats to live in must not increase their tax liability. Why? Because you simply can’t avoid it. Americans are taxed on their worldwide income. So, you will still need to file a US tax return no matter where you live.
Here at Expat Tax Online, we’re looking at the best countries for American expats based on:
- Low tax burdens
- Favorable tax rules with the US
What factors should you consider before relocating?
Here’s a checklist for choosing tax-friendly countries for American expats:
- Low or zero income tax rates
- Having a tax treaty with the US
- Lower mandatory contributions to healthcare and social security systems
- Exemptions or exclusions on foreign-sourced income
📌 Important: Moving to a country without a US tax treaty increases the risk of double taxation. Expats should verify treaty coverage before relocating.
It’s worth checking out before your move or consulting a tax professional to understand your obligations.
Which countries are best for American expats in 2025?
At a glance, here are our top 7 picks for the best countries for US expats in 2025:
|
Country |
Income tax rate |
Tax treaty and Totalization agreement with the US? |
Cost of living |
Annual average income |
|
United Arab Emirates (UAE) |
0% |
No |
High (Dubai or Abu Dhabi) |
US$40,000-US$50,000 |
|
Mexico |
1.92% – 35% |
Yes |
Low |
US$17,000-US$25,000 |
|
Panama |
0% – 20% (local income only) |
No |
Moderate (US$1,500-US$2,500 a month) |
US$20,000-US$25,000 |
|
Portugal |
13% – 48% |
Yes |
Moderate (US$1,650-US$2,200 a month) |
US$22,000-US$30,000 |
|
Spain |
19% – 47% |
Yes |
Moderate (US$2,000-US$3,000 a month) |
US$30,000-US$35,000 |
|
Singapore |
0% – 24% |
No |
High (US$4,000-US$6,000 a month) |
US$60,000-US$70,000 |
|
Costa Rica |
0% – 25% (local income only) |
No |
Low to moderate |
US$14,000-US$20,000 |
United Arab Emirates (UAE): Zero income tax, no treaty with the US
Many US expats live in Dubai and Abu Dhabi because it is a tax-free haven. This setup gives you a significant financial advantage. But because there is no income tax, there is also no established tax treaty with the US.
Fortunately, Americans can still benefit from the Foreign Earned Income Exclusion (FEIE) to reduce or eliminate their US tax as long as they’re eligible for it.
📌 Important: The Foreign Earned Income Exclusion (FEIE) limit for 2025 is US$130,000. If you earn more than this limit, you may have to pay US tax.
Mexico: Low cost of living and US tax treaty benefits
Mexico has an existing tax treaty that helps prevent double taxation on income earned in both countries. You’re free to use the FEIE and Foreign Tax Credit (FTC), which are available for US expats.
Combine this with Mexico’s lower cost of living and proximity to the US, and it’s easy to see why many American expats find it attractive.
Need help filing US taxes abroad?
Reach out to our team today.
Panama: territorial tax system with no tax on foreign income
Panama is another tax haven for US expats because it only taxes income earned within its borders. Panama only taxes money you earn inside the country. So if you’re still earning money from a job in the US or are investing overseas, Panama won’t charge you income tax on that money.
Although they do not have an existing tax treaty with the US, you can still take advantage of the FEIE or the FTC to reduce or eliminate your US taxes, especially since Panama itself won’t tax foreign income.
Portugal: NHR program and strong US tax treaty protections
Portugal has a Non-Habitual Residency (NHR) program for welcoming new residents. The NHR can exempt you from paying Portuguese taxes on many types of foreign income (like US-sourced income) for up to 10 years.
Additionally, the US and Portugal also have a tax treaty and totalization agreement to lessen your tax burden. So,
- If you live in Portugal for less than 5 years, you pay US social security taxes.Â
- For stays over 5 years, you pay into Portugal’s system.
Spain: Tax treaty and lifestyle benefits despite higher rates
While Spain doesn’t offer the highest salaries, the US-Spain tax treaty ensures you won’t be taxed twice on the same income.
There is also the Habitual Residence Tax Credit in Spain to help you buy your main home there. This credit lets you deduct a percentage of your purchase or improvement costs continuously over the years, making it a valuable long-term tax break for you.
Singapore: Low taxes and high earning potential
There is no tax treaty between Singapore and the US, but you can still avoid double taxation through the FEIE and FTC.
With the low tax rates in Singapore and the quality of life that you can get there, most US expats favor this country, especially businesspeople and entrepreneurs.
Costa Rica: Tax-free foreign income and affordable living
Costa Rica also exempts foreign-sourced income from taxes once you are a resident there. So, if you continue earning in the US, your US income is basically tax-free.
For businesses set up in Costa Rica, the same rule applies: offshore income isn’t taxed, making it a favorable base for international companies. You’re only taxed on income earned inside Costa Rica.
Best tax-friendly countries for US expats: Our top 2 picks
- UAE: With zero tax on all income, you’ll enjoy significant savings and full benefits under the Foreign Earned Income Exclusion (FEIE). Because there’s no local tax to pay, all your income may be excluded under FEIE.
- Panama: This is one of the easiest places to avoid double taxation. No tax on foreign income, no estate tax, and no local tax on offshore business income. Best country for American digital nomads. Plus, you can still use FEIE or FTC on your US tax return to eliminate your US tax liability.
That said, the best country depends on your income type, lifestyle preferences, and how long you plan to stay.
📌 Important: US citizens must file a federal tax return yearly, regardless of residence. Expats should also confirm whether their chosen country has a tax treaty or totalization agreement with the US.
FAQs
-
Do I lose my US citizenship if I move abroad?
No. US citizenship is not affected by moving abroad. You only lose it if you formally renounce through the US Embassy or Consulate.
-
Can I legally work abroad as an American?
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Do I still have to pay US taxes while living abroad?
-
How does moving abroad affect my US investments and retirement accounts?
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