U.S. Taxes for Americans Living in Costa Rica

The short answer

Moving to Costa Rica does not take you out of the U.S. tax system. The IRS states that U.S. citizens and resident aliens living abroad are subject to tax on worldwide income from all sources and must report it under the Internal Revenue Code, the same as if they lived in the United States.

What changes is the set of tools and forms that apply to you:

The rest of this page explains each line, and then what can and cannot be said about the Costa Rican side.

You still file a U.S. return every year

Citizenship, not residence, is what keeps you in the U.S. system. If your gross income is above the filing threshold for your filing status, you file Form 1040 as you would at home, reporting income from every country: Social Security, pensions and IRA distributions, brokerage income, rent from property in the United States or Costa Rica, and any wages or self-employment income.

The IRS makes one point directly that is easy to miss: the special benefits available to Americans abroad, including the foreign earned income exclusion and the foreign tax credit, can only be claimed by filing a U.S. return. Not filing because you believe you owe nothing forfeits the very benefits that would produce that result.

The automatic two-month extension

If you are living outside the United States on the regular due date, the IRS allows an automatic two-month extension to file, without a request, which moves the filing date from April 15 to June 15. Whether any tax you owe is also due in April, and how to request more time beyond June 15, are questions to confirm in the IRS instructions for your return or with your tax preparer.

The foreign earned income exclusion

The foreign earned income exclusion lets a qualifying taxpayer exclude foreign earned income from U.S. taxable income, up to an annual limit. For tax year 2026 the maximum is $132,900 per person, up from $130,000 for 2025, according to the IRS's inflation adjustment announcement.

To qualify, the IRS requires all three of the following:

1. Foreign earned income, meaning pay for personal services such as wages, salaries or professional fees.
2. A tax home in a foreign country, generally where you work on an indefinite basis.
3. One of two tests: you are a U.S. citizen who is a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year, or you are physically present in a foreign country or countries for at least 330 full days during any 12-month period.

You claim it on Form 2555, attached to your return.

What it does not cover

This is a frequent misunderstanding among retirees. The IRS lists pension and annuity payments, including Social Security benefits, as income that is not foreign earned income. Neither is investment income: dividends, interest and capital gains are not pay for personal services. For a pensionado living on Social Security and a pension, or a rentista living on portfolio income, the exclusion usually has little or nothing to exclude.

It matters mainly for people who work while living in Costa Rica, such as remote employees on the digital nomad permit or self-employed professionals. Keep in mind that the Costa Rican residency categories restrict local work: pensionado and rentista residents need Migración's authorization for paid work in Costa Rica, and investor residents may not do paid work at all until they become permanent residents. Those are immigration rules, separate from U.S. tax rules.

The foreign tax credit

If you pay income tax to another country on income the United States also taxes, the IRS allows you to take either a credit or an itemized deduction for that foreign tax. A deduction reduces taxable income; a credit reduces the tax itself, and the IRS notes that in most cases the credit is the better choice. Individuals claim it on Form 1116.

The two tools interact in one important way. The IRS states that if you elect to exclude foreign earned income or foreign housing costs, you cannot take a foreign tax credit for taxes on the income you excluded. Choosing between them, or combining them on different slices of income, is exactly the kind of decision to make with a tax professional who can see your numbers.

No income tax treaty

Costa Rica does not appear on the IRS list of countries with which the United States has an income tax treaty. In practice this means there is no treaty tie-breaker rule, no treaty-reduced withholding rate and no treaty article assigning taxing rights over pensions between the two countries. Relief from double taxation for Americans in Costa Rica comes from U.S. domestic law, principally the foreign tax credit and the foreign earned income exclusion described above.

FBAR: reporting Costa Rican bank accounts

Once you open a Costa Rican bank account, the Treasury's foreign account reporting rules apply. See our guide to banking in Costa Rica for the account side.

FinCEN states that a United States person with a financial interest in, or signature authority over, foreign financial accounts must file a Report of Foreign Bank and Financial Accounts (FBAR) if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.

Three practical consequences:

• Aggregate means combined. A colón account and a dollar account that together pass $10,000 for a single day trigger the requirement, even if neither did on its own.
• No income is required. The IRS notes that accounts must be reported even if they generate no taxable income.
• Rentista deposits count. A rentista who places funds in a Costa Rican bank to support the rentista application will pass the threshold on the day of the deposit.

Form 8938 and FATCA

Form 8938, Statement of Specified Foreign Financial Assets, is a separate IRS requirement that overlaps with the FBAR but is not the same. It is filed with your income tax return, and its thresholds are much higher for taxpayers who live abroad.

The IRS treats you as living abroad if you are a U.S. citizen whose tax home is in a foreign country and you are a bona fide resident of a foreign country for an uninterrupted period that includes the entire tax year, or if you are physically present in a foreign country or countries for at least 330 days during a period of 12 consecutive months ending in the tax year.

For comparison, the IRS thresholds for taxpayers living in the United States are $50,000 and $75,000 for single filers and $100,000 and $150,000 for joint filers. Filing Form 8938 does not replace the FBAR; many people abroad file both.

State income tax

State rules are separate from federal rules and vary widely. Some states have no income tax at all. Others continue to treat a former resident as taxable until that person has clearly established a new domicile elsewhere, and look at ties such as a home kept in the state, a driver's license, voter registration or where family lives. Moving abroad does not automatically end a state's claim. Check your own state's rules with its revenue department or a tax professional before your move, not after the first notice arrives.

The Costa Rican side

This is where published guides are least careful, so we limit ourselves to what we could verify in an official source.

Costa Rica's income tax law, Law 7092, was amended in 2023 by Law 10381, published in La Gaceta 180 on 2 October 2023. As amended, its first article taxes the profits of individuals and entities domiciled in Costa Rica from lucrative activities of Costa Rican source, and defines Costa Rican-source income as income generated exclusively within the national territory from services provided, property located, capital invested and rights used there.

The same article then sets an exception. Foreign-source passive income (dividends, interest, royalties, capital gains and real estate and other capital income from assets or rights used outside Costa Rica) is taxed only when obtained by an entity that belongs to a multinational group and does not meet the law's economic substance test. The law defines a multinational group as two or more related legal entities in different jurisdictions.

What that text does not do is spell out the treatment of an individual resident living on a U.S. pension, Social Security or a U.S. brokerage account. We could not find a current Ministerio de Hacienda publication that addresses that situation directly, so we do not state a rule for it. If your plan depends on how Costa Rica treats your foreign income, confirm it with a Costa Rican tax adviser before you move.

Two points that are not in doubt:

• Income produced in Costa Rica is Costa Rican-source. Rent from a property you own in Costa Rica, or profits from a Costa Rican business, fall within the territorial definition above. Investor residents should expect the returns on their Costa Rican investment to be taxed locally, as the investor residency guide notes.
• CAJA is not an income tax. The monthly contribution to the public health system is a separate obligation tied to residency, calculated on the income you declared to Migración. The 2026 bands are in the cost guide.

A checklist for your first year

These are the questions to bring to a tax professional, not steps to take on your own:

• Which U.S. state, if any, will still treat you as a resident after the move.
• Whether any of your income is foreign earned income, and whether the exclusion or the credit fits it better.
• Which accounts you will open in Costa Rica, and a way to track their combined maximum balance for the FBAR.
• Whether your specified foreign assets approach the Form 8938 thresholds.
• How Costa Rica treats each of your income sources, confirmed by a Costa Rican adviser.
• How the residency path you choose, pensionado, rentista or investor, affects what you can earn locally.

If you have not yet chosen a residency path, the eligibility assessment takes a few minutes and tells you which one fits your income.

Sources and legal basis

1. Internal Revenue Service, U.S. citizens and resident aliens abroad: worldwide income, automatic 2-month extension, benefits available only by filing.
2. Internal Revenue Service, Foreign earned income exclusion: qualification tests, Form 2555, pensions and Social Security excluded from foreign earned income.
3. Internal Revenue Service, IRS releases tax inflation adjustments for tax year 2026: $132,900 exclusion for 2026, $130,000 for 2025.
4. Internal Revenue Service, Foreign tax credit: credit or deduction, Form 1116, no credit on excluded income.
5. Internal Revenue Service, United States income tax treaties, A to Z: Costa Rica not listed, checked September 2026.
6. Financial Crimes Enforcement Network, Report Foreign Bank and Financial Accounts: who must file, $10,000 aggregate threshold, BSA E-Filing.
7. Internal Revenue Service, Report of Foreign Bank and Financial Accounts (FBAR): April 15 due date, automatic extension to October 15, not filed with the tax return.
8. Internal Revenue Service, Do I need to file Form 8938 and Comparison of Form 8938 and FBAR requirements: thresholds for taxpayers living abroad and in the United States.
9. Ley 10381, Modificación a la Ley 7092, Ley del Impuesto sobre la Renta, arts. 1–2 (amending arts. 1, 2 bis–2 quinquies, 27 and 31 ter of Law 7092). La Gaceta 180, 2 October 2023.
10. Work restrictions by residency category: Ley 8764, art. 80; Decreto 43926-MGP-H-TUR, art. 13. See the rentista and investor guides.