Paying U.S. Taxes While Living in Italy (And Who I Trust to Do It Right) • Anthony in Italy

Disclaimer: This post is for general informational purposes only and doesn’t constitute legal, tax, or financial advice. I’m not a CPA or tax attorney—just someone living abroad sharing what I’ve learned from experience. For anything specific to your situation, talk to a qualified tax professional who understands expat taxes.

Let’s get something out of the way right now: moving to Italy doesn’t mean you get to ghost the IRS.

I know, it sounds like a joke. But it’s true. The United States is one of the only countries in the world that taxes its citizens no matter where they live. That means even if you’ve swapped Chicago deep dish for Neapolitan pizza and the L train for the Italo, Uncle Sam still wants a slice of your income.

But here’s the kicker—if you don’t know what you’re doing (or don’t have an accountant who knows what they’re doing), you could end up paying taxes you don’t actually owe. So let’s walk through what I’ve learned, living in Italy and still filing my U.S. taxes every year.

💡 Need help filing U.S. taxes from abroad? I use and recommend Greenback Expat Tax Services. They specialize in helping Americans like us who live overseas. I trust them with my own taxes. (Affiliate link – it helps support this site at no extra cost to you.)

Yes, You Still Have to File

If you’re a U.S. citizen or green card holder, you’re required to report your worldwide income—even if all of it was earned outside the States. This includes salary, freelance income, rental income, and even cryptocurrency transactions. Doesn’t matter if you made it in dollars or euros. It’s all fair game to the IRS.

But there are some crucial exemptions and credits that can save your ass—if you file correctly.

Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC)

These two are your new best friends:

FEIE (Form 2555): This lets you exclude up to ~$120,000 of foreign income from U.S. taxation (the amount adjusts yearly). You have to meet either the “physical presence test” or “bona fide residence test”—basically, prove you really live abroad.
Foreign Tax Credit (Form 1116): If you pay income tax in Italy, this credit helps reduce your U.S. tax liability so you don’t get taxed twice.

Here’s the catch: you have to file a tax return to claim either of these. If you skip it, the IRS assumes you owe them, and you miss the break.

Who I Use (and Recommend)

This is not something you want to mess up. Most U.S.-based accountants won’t know what to do with Italian tax documents or how to file an FBAR.

I personally use and recommend Greenback Expat Tax Services. They specialize in U.S. tax filing for Americans abroad, and they actually understand how to apply the FEIE, foreign tax credits, and all the forms like 8938 or 3520 if you have trusts or foreign bank accounts.

If you’re going to invest in anything your first year abroad, make it a good accountant. This link is an affiliate, which means I get a small commission if you sign up (at no extra cost to you), but I wouldn’t recommend them if I didn’t use them myself.

Officially, they say your data usage may be suspended if you’re outside the US for over 90 days—but this mostly applies if you’re using Fi’s data. I’ve been abroad for months at a time without a problem by just using Wi-Fi or my Italian SIM.

Reporting Foreign Bank Accounts (FBAR)

Got an Italian bank account with more than $10,000 total across all accounts at any point in the year? Congrats, you’ve got more paperwork. You’ll need to file an FBAR (FinCEN Form 114) electronically, separately from your tax return.

Also, if you’re holding significant foreign financial assets (think investments, trusts, etc.), you may also need to file Form 8938.

Bottom line: if it involves non-U.S. money, the U.S. government probably wants to know about it.

Currency, Crypto, and Other Gotchas

Everything must be reported in U.S. dollars, which means you’ll need to use proper exchange rates when converting your foreign income or expenses.

And don’t think crypto is a loophole—if you’re buying, selling, or even just trading digital currency, the IRS wants that reported too.

Identity Protection and Tax IDs

If you or your dependents don’t have a Social Security Number (SSN), you’ll need an ITIN (Individual Taxpayer Identification Number). And if you’ve been assigned an Identity Protection PIN (IP PIN), make sure you include it. Forgetting it can delay or reject your return.

Final Thoughts

Living abroad, especially in a place like Italy, is incredible—but U.S. tax law doesn’t magically stop at the border. The good news? If you do your homework and file correctly, you might owe nothing at all.

But don’t DIY this unless you really know your stuff. Get help from someone who understands the cross-border rules. Again, I recommend Greenback Expat Tax Services for that.

Questions about this or want to share your experience? DM me on Instagram or hit the contact form on my site.