Guide for U.S. Expatriates in Costa Rica: What You Need to Do for the IRS in 2025

By Gabriela Páez

If you are living in Costa Rica as a U.S. citizen, you still have tax obligations to the IRS. In 2025, you’ll need to report income earned in 2024. This guide summarizes the forms you need to file, the exclusions available to you, foreign account reporting requirements, and the potential reforms that could impact you under the new administration.

Filing Your Federal Tax Return in 2025 (Based on 2024 Income)

Form 104O

All U.S. citizens are required to file Form 1040 to report worldwide income. If your income exceeds the following thresholds, you must file:

• Single: $14,600

• Married Filing Jointly: $29,200

• Head of Household: $21,900

Foreign Earned Income Exclusion (FEIE)

You can exclude up to $126,500 USD of foreign-earned income if you meet one of the following criteria:

• Physical Presence Test: At least 330 days in Costa Rica during a 12-month period, or

• Bona Fide Residence Test: You are a legal resident of Costa Rica.

  
  

This exclusion is claimed through Form 2555.

Foreign Tax Credit (FTC)

If you paid taxes on the same income in Costa Rica, you can apply for a Form 1116 to receive a credit, reducing your U.S. tax liability.

Foreign Account Reporting Requirements

FBAR (FinCEN Form 114)

You must file this form if you have foreign bank accounts in Costa Rica with a combined balance exceeding $10,000 USD at any point during the year. The due date is April 15, 2025, with an automatic extension until October.

FATCA (Form 8938)

If the total value of your foreign financial assets exceeds:

• $50,000 USD (individual), or

• $100,000 USD (married filing jointly), you must report these assets to the IRS along with your Form 1040.

IRS Amnesty Programs

If you haven’t been up-to-date with your filings, the IRS offers programs to help you get back on track without facing severe penalties:

Streamlined Foreign Offshore Procedures

For those who haven’t filed due to oversight, this program allows you to submit:

• The last 3 years of tax returns,

• The last 6 FBARs,

• A certification stating that the failure to file was not willful.

Delinquent International Information Return Submission Procedures

If you’ve filed your 1040 but missed forms like FBAR or FATCA, you can submit them now without penalties, provided the failure wasn’t willful.

Key Dates in 2025

• April 15: Final deadline to file your tax return and pay any owed taxes.

• June 15: Automatic extension for expatriates.

• October 15: Final deadline if you requested an additional extension (Form 4868).

What Changes Could Come with Trump in 2025?

During his 2024 campaign, Donald Trump proposed eliminating double taxation for U.S. citizens living abroad. This would shift from a citizenship-based taxation system to a residency-based one, which would benefit expatriates by reducing their tax burden.

According to Forbes (October 2024), Trump’s proposal includes revising the tax treatment for expatriates to “reduce the unfair burden of reporting income that has already been taxed in the country of residence.” While there have been no concrete legal changes yet, this issue is expected to be part of the new administration’s fiscal agenda.

For now, the current system remains in place, requiring worldwide income reporting and the application of FEIE or FTC as applicable.

Final Recommendations

Fulfilling your tax obligations in the U.S. while living in Costa Rica can be straightforward if you know your options. Take advantage of benefits like the FEIE and the Foreign Tax Credit, and keep an eye on potential reforms that could bring relief in the near future.