US citizens in Japan: US and Japanese taxes, FBAR and the foreign tax credit

US citizens taxes in Japan work on two tracks. As of October 2026, the IRS taxes you on worldwide income wherever you live, so you still file a US return, due April 15 with an automatic extension to June 15 if you live abroad. Japan taxes you under its own residency rules. If your accounts in Japan total more than $10,000 at any point in the year, you also file an FBAR.

This page covers US citizens. The IRS taxes US citizens wherever they live, so a Japanese visa type or permanent residency is not what decides your US duties. It is general information, not tax advice: a US-qualified tax preparer or a licensed tax accountant (税理士) should look at your actual numbers.

Do US citizens still file a US tax return in Japan?

Generally yes. The IRS says you are subject to tax on worldwide income from all sources, and the filing rules are generally the same abroad as at home. Your salary from a Japanese employer, rent, interest and gains from Japanese accounts all count as income for the US.

Two benefits exist for people abroad, and the IRS says you can claim either one only by filing a US return: the foreign earned income exclusion and the foreign tax credit. So even when you expect to owe nothing, ask a preparer whether you should file.

How does Japan tax you at the same time?

Japan decides your tax category from where your life is based and how long you have lived here, not from your US citizenship. You may be a resident or a non-permanent resident, depending on how long you have lived here. The details are in Japan tax residency for foreigners.

For the Japanese side of filing, see filing a tax return in Japan.

You end up with two returns, in two currencies and on two tax calendars. Japan’s tax is the “foreign tax” the US credit works from.

What is the foreign tax credit?

The foreign tax credit lets you subtract Japanese income tax you paid from your US tax. The IRS says you can take either a credit or an itemized deduction for foreign taxes, and a credit generally works better because it reduces your US tax directly, while a deduction only lowers taxable income.

Key points from the IRS:

• You claim it on Form 1116, with a separate form for each category of income, such as passive or general.
• Only foreign income taxes imposed on you qualify.
• If a treaty applies, only the treaty-reduced rate counts.
• You can’t claim a credit for tax on income you exclude under the foreign earned income exclusion.
• You may skip Form 1116 if all your foreign income is passive (such as bank interest) and reported on a payee statement, and your foreign tax is no more than $300 ($600 if married filing jointly).

Japan has a similar credit in the other direction, for Japanese residents who pay foreign income tax. The National Tax Agency (国税庁) allows it up to a limit, with a 3-year carry-over. This matters if you also have income taxed in the US or elsewhere.

What is the foreign earned income exclusion?

The exclusion lets you leave a set amount of foreign earned income out of US taxable income. For tax year 2026 it is $132,900 (it was $130,000 for 2025). You claim it on Form 2555, attached to your return.

You qualify by passing one of two tests:

• Bona fide residence test: you are a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.
• Physical presence test: you are in a foreign country at least 330 full days in any 12 consecutive months.

The IRS rule to remember: you can’t deduct, exclude or take a credit for items related to income you exclude. Choosing between the exclusion and the credit is a calculation for your preparer. The pages we checked don’t compare them for you.

Do you need to file an FBAR for your Japanese accounts?

Only if your foreign accounts together pass the limit. The FBAR (FinCEN Form 114) is required if you have a financial interest in, or signature authority over, foreign accounts whose combined value exceeded $10,000 at any time during the calendar year. One day over the limit counts.

• It covers bank, brokerage and mutual fund accounts at any foreign financial institution, whether or not they earn taxable income.
• Count all your foreign accounts together, including ones where you only have signature authority.
• It is not filed with your tax return. You file it online with FinCEN through BSA E-Filing. Individuals don’t need to register.
• It is due April 15 of the following year, with an automatic extension to October 15.

Civil and criminal penalties can apply, and the IRS decides on the facts. We haven’t listed amounts because the official page doesn’t give them. See opening a bank account in Japan for the accounts you are likely to hold.

What is Form 8938?

Form 8938 is a separate FATCA report of specified foreign financial assets. It is attached to your income tax return, and the IRS says it does not replace the FBAR. The two forms define things differently, so an account may appear on one and not the other.

For people living abroad (tax home in a foreign country and 330 days there in a 12-month period), the thresholds are:

The failure-to-file penalty is $10,000, with up to $50,000 more if you continue after an IRS notice. A penalty may not apply if the failure was due to reasonable cause.

Can Japanese investment funds cause US tax trouble?

Possibly. A foreign fund can be a passive foreign investment company (PFIC), generally a foreign corporation with 75% or more passive income or at least 50% passive assets. US owners of a PFIC generally file Form 8621 when they receive certain distributions or sell at a gain. The first part of the form is exempt if your PFIC holdings are $25,000 or less at year end ($50,000 joint) and you have no excess distribution or gain.

The IRS instructions we read don’t say which funds are PFICs. Whether a Japanese investment trust or a fund held in a NISA account falls under these rules is a question for a US preparer before you buy. For the Japanese side, see NISA for foreigners.

What if you missed US filings while living in Japan?

The IRS runs streamlined foreign offshore procedures for US taxpayers who live outside the US and certify that missing returns or FBARs was non-willful, meaning negligence, a mistake or a good-faith misunderstanding. They are not available if the IRS has begun a civil examination or a criminal investigation.

If this applies, speak to a US-qualified tax professional before filing anything. The IRS also advises that if you are late and haven’t been contacted, you file as soon as possible to limit penalties.

Questions we could not confirm

We did not confirm the treaty’s rules for US citizens, how long unused foreign tax credit carries over, the FBAR penalty amounts, the US-Japan social security agreement, or how Japanese banks treat US-citizen customers. Ask your preparer about each if it applies to you. Rules and thresholds change, so check the IRS pages in the sources before you file.

More guides: Japan tax residency, tax return in Japan, bank accounts for foreigners, NISA for foreigners, leaving Japan checklist.