US Expat Tax CPA for Americans Living in Colombia
Living in Colombia does not end your US tax obligations. As a US citizen or green card holder, you continue to file a US tax return and report your worldwide income even after moving abroad.
Colombia is different from most of the countries Americans move to in one important way. The United States and Colombia have no income tax treaty and no Social Security totalization agreement. Everything that a treaty would normally settle has to be handled with US domestic rules, Colombian domestic rules, and careful planning.
Who This Page Is For
Egan Tax works with Americans living in Colombia on the US side of their international tax situation.
I work directly with clients on issues including the Foreign Tax Credit, Foreign Earned Income Exclusion, US self employment tax, FBAR, Form 8938, PFICs, Colombian companies and Form 5471, retirement income, US rental property, state tax residency, and other US international tax matters.
When an issue depends on Colombian law, I coordinate with your Colombian contador rather than trying to replace them.
Key Tax Issues for Americans in Colombia
When You Become a Colombian Tax Resident
Colombia generally treats you as a tax resident once you spend more than 183 days in the country within any 365 day period, and that period can span two calendar years. A Colombian resident is taxed on worldwide income, including your US income. Your Colombian contador should confirm your status, especially in the year you arrive.
The US side does not depend on days at all. You file a US return as a citizen or green card holder no matter where you live.
Foreign Tax Credit or Foreign Earned Income Exclusion
Americans living in Colombia can use the Foreign Tax Credit, the Foreign Earned Income Exclusion, or in some situations both for different types of income.
The right choice depends on how much Colombian tax you pay on your earnings.
If you pay Colombian income tax at full rates, the Foreign Tax Credit eliminates the US tax on those earnings, builds credits you can carry forward, and keeps your earnings eligible for IRA contributions and the refundable child tax credit.
If your Colombian tax is low, including in a year before you become a Colombian resident, the Foreign Earned Income Exclusion, which can exclude up to $132,900 of foreign earned income for 2026, often works better.
If you claim the exclusion and later revoke it, you cannot claim it again for five years without IRS consent.
I calculate the return both ways and look beyond the current tax year before recommending an approach.
No US Colombia Tax Treaty
Without a treaty, there are no treaty tie breaker rules, no reduced treaty rates, and no special treaty treatment for pensions or Social Security.
For income earned in Colombia, the US Foreign Tax Credit relieves double tax the usual way.
For US source income, such as IRA and 401(k) distributions, US dividends, US rental income and Social Security, the United States taxes it first and the US Foreign Tax Credit generally does not help. Relief has to come from the Colombian side, where Colombia allows its residents a credit for foreign taxes on foreign source income, subject to its own limits. Your Colombian contador should confirm how that credit applies to you.
This is the main reason Americans in Colombia, especially retirees, should plan their income before the move and not after the first Colombian return.
Self Employment Tax and Social Security
Because there is no totalization agreement, there is no certificate of coverage to exempt you from US Social Security.
If you are self employed, a freelancer or an independent contractor, you owe US self employment tax of 15.3% on your net earnings, up to the annual Social Security wage base, even if you exclude all of that income under the Foreign Earned Income Exclusion. You may also owe Colombian social security contributions on the same income. Colombian contributions are not creditable against US self employment tax.
If you work for a US employer, US Social Security and Medicare withholding generally continues. Whether Colombian contributions are also required depends on how you are employed in Colombia.
Colombian Accounts, Funds and Pensions
FBAR and Form 8938
Your Colombian bank accounts, CDTs and investment accounts are foreign accounts for US reporting purposes.
The FBAR applies when the combined maximum value of your foreign financial accounts exceeds $10,000 at any point during the year.
Form 8938 has separate thresholds. For taxpayers living abroad, it is required when specified foreign financial assets exceed $200,000 at year end or $300,000 at any time during the year for single filers, and $400,000 at year end or $600,000 at any time for married couples filing jointly.
Colombia has its own reporting rules for residents with assets abroad, including a foreign asset declaration and an annual wealth tax above a net worth threshold. The thresholds and rates have changed recently, so your Colombian contador should confirm what applies to you. The Colombian wealth tax is a tax on assets and not on income, so it is not creditable on your US return.
Colombian Investment Funds and PFICs
For US tax purposes, Colombian collective investment funds (FICs) and similar pooled investments are generally treated as Passive Foreign Investment Companies (PFICs).
PFICs are reported on Form 8621. Without an election, gains and certain distributions are taxed at the highest ordinary rate plus an interest charge.
Colombian voluntary pension funds and AFC accounts can carry tax benefits in Colombia that the United States does not recognize, and the investments inside them can also raise PFIC questions. Talk to me before you contribute.
Colombian Mandatory Pension Funds
If you work for a Colombian employer, you may be enrolled in a mandatory pension fund (AFP). The US treatment of foreign pension funds without a treaty is complicated, and it depends on how the fund is set up and how you contribute. I review these individually.
Colombian Companies
Many Americans in Colombia operate through a Colombian company, most often a SAS.
If you own 10% or more of a Colombian company, you have a Form 5471 filing requirement. If US shareholders together own more than 50%, the company is a controlled foreign corporation, and its income can be taxed on your US return each year under the Subpart F and net CFC tested income rules (formerly GILTI), even if you leave the money in the company.
A Section 962 election can reduce that US tax in the right situation. The penalty for a missed Form 5471 starts at $10,000 per form per year.
How you set up your business in Colombia has US consequences. Talk to me before you form the company.
US Retirement Income and US Rental Property
The US continues to tax its citizens on pensions, IRA and 401(k) distributions, and Social Security.
Traditional IRAs and 401(k)s keep their US deferral after you move. Once you are a Colombian resident, Colombia can tax this income too, so the order of withdrawals and the timing of your move both matter.
Rental income from US property remains subject to US federal tax, and the state where the property is located will usually require a nonresident return.
What I Handle for Americans in Colombia
I prepare US returns for Americans living in Colombia, including the Foreign Tax Credit and Foreign Earned Income Exclusion, US self employment tax for freelancers and contractors, FBAR and Form 8938, Form 8621 for Colombian funds, Form 5471 for Colombian companies, US retirement income, US rental property, state tax residency when you leave the US, and the Streamlined Filing Compliance Procedures if you are behind.
Frequently Asked Questions
Do I still have to file a US tax return if I live in Colombia?
Yes. US citizens and green card holders continue to file US tax returns and report their worldwide income, even when they live in Colombia and pay Colombian tax.
Is there a tax treaty between the US and Colombia?
No. There is no income tax treaty in force between the United States and Colombia. Double taxation is handled with the US Foreign Tax Credit and Foreign Earned Income Exclusion on the US side and Colombia's foreign tax credit on the Colombian side.
I am a freelancer in Colombia. Does the Foreign Earned Income Exclusion get rid of my US self employment tax?
No. The exclusion only applies to income tax. You still owe US self employment tax of 15.3% on your net earnings up to the Social Security wage base, and because there is no totalization agreement, there is no certificate of coverage to exempt you.
I work remotely for a US company from Colombia. Is my salary foreign earned income?
Yes. Wages are sourced where the services are physically performed. If you do the work while physically in Colombia, the wages are foreign earned income for US tax purposes even if your employer is a US company and pays you into a US bank account.
Should I use the Foreign Tax Credit or the Foreign Earned Income Exclusion in Colombia?
If you pay Colombian income tax at full rates on your earnings, usually the Foreign Tax Credit. If your Colombian tax is low, including in a year before you become a Colombian resident, the exclusion often works better.
I calculate both and consider the longer term consequences, because revoking the exclusion bars you from claiming it again for five years.
I am retiring to Colombia. Will my Social Security and IRA be taxed twice?
They can be if you do not plan for it. The US taxes them first, and the US Foreign Tax Credit generally does not help with US source income. Relief has to come from Colombia's foreign tax credit, and your Colombian contador should confirm how much it covers. Planning your withdrawals before you become a Colombian resident makes a real difference.
Do I need to report my Colombian bank accounts and CDTs to the United States?
Yes, if your Colombian and other non US accounts together exceeded $10,000 at any point during the year, even for one day. That is the FBAR, and it is filed separately from your tax return.
Form 8938 applies at higher thresholds. For taxpayers living abroad, those start at $200,000 at year end for single filers and $400,000 for married couples filing jointly.
I am behind on my US filings. What can I do?
Most Americans abroad who fell behind without realizing they had to file can use the Streamlined Foreign Offshore Procedures.
The program involves three years of US tax returns and six years of FBARs, with no penalties for qualifying taxpayers.
Related US International Tax Resources
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