A Guide to Filing US Expat Taxes from Panama
May 22, 2025 | Country Guides | 12 minute read
Expat Tax Blog. Tax Tips for US Americans abroad.
Updated May 20, 2025
All blogs are verified by Enrolled Agents and CPAs
Updated May 20, 2025
Thinking about moving to Panama or already living there? We don’t blame you! With its attractive tax rates, simple residency options and affordable healthcare, Panama is high on many expats’ lists. At the same time, understanding your US-Panama Expat Tax obligations is essential. Even while enjoying the beaches, mountains, and relaxed lifestyle, the IRS still expects you to file every year. You may also need to file forms like the FBAR or FATCA if you hold assets abroad. Luckily, there are ways to avoid double taxation and lower your overall tax bill. Our US-Panama Expat Tax Guide walks you through everything you need to know — from deadlines and forms to key benefits for saving money. Whether you’re retiring, working remotely, or running a business in Panama, staying compliant doesn’t have to be overwhelming. Let’s dive into how you can make the most of your new life without letting taxes get in the way!
Filing US Taxes for Families Abroad
Key US Tax Forms Every US-Panama Expat Tax Filer Needs
Panamanian Taxes for US Expats
US-Panama Expat Tax Agreements
Self-Employment in Panama for US Expats
Planning Your Retirement in Panama
Simplify Your Taxes with MyExpatTaxes
Do I Have To File US Taxes?
The US taxes based on citizenship, rather than residency. This means that as a US citizen or Green Card holder, you probably have to file US taxes–no matter where you live. It’s all down to your filing status and income.
In 2025, you’ll need to file your 2024 US taxes if you meet any of the following criteria:
| Filing Status | Income Threshold |
|---|---|
| Single | $14,600 |
| Married Filing Jointly | $29,200 |
| Married Filing Separately | $5 |
| Self-Employed | $400 |
| Qualifying Widow(er) | $29,200 |
| Head of Household | $21,900 |
The requirement to file also applies to Accidental Americans; those who the IRS considers to be an American citizen, but who may never have lived in the US. For example, those born on US territory or children of a US citizen who have never entered the US.
Filing US Taxes for Families Abroad
By now, you’ve hopefully figured out whether you need to file a US tax return. Next up: choosing the right filing status. This can affect everything from your tax rate, to the deductions you qualify for.
Single: If you’re unmarried, you’ll file as “Single.” Simple as that.
Married to a US citizen or Green Card holder: You’re both required to report your worldwide income and assets, so “Married Filing Jointly” is usually your best bet. Just like love, the IRS doesn’t recognize borders — married US couples are taxed together no matter where they live.
Married to a non-US citizen or non-resident: If your spouse isn’t a US citizen or Green Card holder, they aren’t required to file. In most cases, you’ll file as “Married Filing Separately.” You can elect to treat your spouse as a US tax resident and file jointly—but that comes with added tax and reporting complexity.
Head of Household: This option is for those who are unmarried (or considered unmarried by the IRS), pay more than half the household expenses, and have a qualifying child living with them. It usually results in better tax rates and higher deductions than filing as Single.
US Tax Deadlines
| Date | Deadline |
|---|---|
| April 15th | Standard Filing Deadline |
| June 16th | Expat Tax Filing Deadline |
| October 15th | FBAR & Tax Extension Deadline 1 (by digital request) |
| December 15th | Tax Extension Deadline 2 (by written request) |
You can stay up-to-date with deadlines (as well as tips and offers) straight to your inbox with the MyExpatTaxes newsletter. No spam: guaranteed.
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Catch Up with The Streamlined Procedure
Many expats inadvertently fall behind with their US tax filings because they were not aware they had to file from abroad. If that includes you, we have some good news! You can return to IRS compliance (and restful nights) with the Streamlined Procedure. This IRS amnesty program allows you to catchup up, penalty free, by filing 3 years of taxes and 6 years of FBARs. But don’t delay, because if the IRS comes knocking first, you could face failure-to-file and failure-to-pay fees!
Key US Tax Forms Every US-Panama Expat Tax Filer Needs
For your US obligations, keep an eye on these forms:
- Form 1040 – Annual US income tax return.
- Form 2555 – To claim the Foreign Earned Income Exclusion (FEIE).
- Form 1116 – To claim the Foreign Tax Credit (FTC).
- FinCEN Form 114 (FBAR) – if your foreign financial accounts combined maximum balances exceed $10,000 in total at any time during the calendar year.
- Form 8938 (FATCA) – For reporting foreign accounts and assets if thresholds are met, starting at $200,000 for single filers.
Of course, these forms and many more are supported by our expat tax software. MyExpatTaxes can handle your tax situation, no matter how complicated.
Securing Your Panama Visa
Getting started in Panama is pretty easy. You can stay for up to 180 days visa-free as a tourist.
If you plan to live, work, or retire in Panama long-term, you’ll need to apply for a residence permit. The go-to choice for many US expats is the Friendly Nations Visa. It offers permanent residency and requires proof of economic ties to Panama—like owning a business, working full time for a Panamanian company, purchasing property ($200,000+) or making a Certified Deposit into a Panama bank account of $200,000 (2024). The Retirement Visa (Pensionado Program) is available if you receive a lifetime pension of at least $1,000/month. It comes with great perks, including discounts on travel, restaurants, healthcare, and more. If you’re employed by a Panamanian company or investing in real estate or business, you can apply for the Temporary Work or Investor Visas.
All visas require background checks, birth certificates, and proof of income, amongst other documents. You’ll need a local lawyer and be prepared to pay several thousand dollars in legal and government fees.
Panamanian Taxes for US Expats
If you’re a US expat living in Panama, you’re in luck. Panama’s tax system is one of the most expat-friendly in the world. Making life even simpler, Panama has both the Panamanian Balboa and the US Dollar as legal tender. That said, you’ll still need to keep track of your local obligations while managing your US-Panama expat tax responsibilities.
Residency for Tax Purposes
In Panama, you’re considered a tax resident if you have been physically present for more than 183 days in the country in a calendar year, whether those days are consecutive or not.
How Panama Taxes Expats
Panama uses a territorial tax system, which means you’re only taxed on income that comes from sources inside Panama. Foreign income — like US salary, freelance work for non-Panamanian clients, or investments abroad — isn’t taxed by Panama at all!
If you earn income from Panamanian sources, you’ll pay Personal Income Tax (PIT) on a sliding scale (2024):
- Income up to USD 11,000: 0%
- Income between USD 11,000–50,000: 15%
- Income over USD 50,000: 25%
Social Security Contributions: If you work for a Panamanian employer, you’ll pay 9.75% and your employer contributes 12.25% to Panama’s social security system.
Panama’s tax year is the same as the calendar year, running from January 1 to December 31. If you need to file a Panamanian tax return, it’s usually due by March 15. However, many expats don’t need to file at all if they have no Panamanian-source income.
US-Panama Expat Tax Agreements
The US and Panama do not have a tax treaty, which means there’s no automatic protection against double taxation on income earned in both countries. There’s also no totalization agreement, so US expats working in Panama may be required to contribute to both US Social Security and Panama’s social security system. Without these agreements, you’ll need to rely on standard IRS provisions to reduce your US tax bill. Thankfully, the IRS offers several tax breaks, including the Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC), which can reduce or eliminate your US tax liability.
Avoiding Double Taxation
Foreign Earned Income Exclusion (FEIE)
US expats in Panama can use the Foreign Earned Income Exclusion to exclude up to $126,500 of foreign-earned income from US taxes. To be eligible, you need to meet the Physical Presence Test (being physically present in a foreign country for at least 330 full days during any 12-month period) or Bona Fide Residence Test (being a resident of a foreign country for an entire tax year).
If you still have US tax liability after applying the FEIE, there are further credits you can apply, read on!
Foreign Housing Exclusion
If you qualify for the FEIE, you may also exclude certain housing expenses like rent and utilities in Panama. The Foreign Housing Exclusion can be used only on qualifying housing costs that exceed $20,240 (considered to be the base housing cost for living in the US). While Panama is generally quite affordable, costs in desirable locations like Panama City and Chitre can still make this exclusion a valuable addition to your tax strategy.
Foreign Tax Credit (FTC)
The Foreign Tax Credit allows you to receive a dollar-for-dollar credit for taxes paid abroad.
Since Panama only taxes Panamanian-sourced income, if your income in Panama comes from abroad (e.g., US source), you won’t be able to claim this credit. However, if you pay Panamanian income tax on locally sourced income, you can apply the FTC to both earned income (such as salary and self-employment income) and passive income (e.g., dividends, interest, and income from property). Many expats use the FTC when their taxable income exceeds the FEIE and Foreign Housing Exclusion.
Child Tax Credit and Additional Child Tax Credit (ACTC)
If you have a child under 17 with a US Social Security number, and you meet income and residency requirements, you may be able to claim a credit of $2,000 per child. What’s more, if your credit exceeds your US tax liability, you can claim a refund of up to $1,700 per qualifying child with the Additional Child Tax Credit (ACTC). But watch out. You can’t claim the ACTC if you exclude your foreign income using the Foreign Earned Income Exclusion (FEIE).
Self-Employment in Panama for US Expats
Running your own business or freelancing while living abroad is no small feat — and if you’re doing it from Panama, hats off to you! But careful planning is important, as self-employed expats face unique US-Panama expat tax rules, especially with Social Security and Medicare contributions.
Here are three key things to know if you’re self-employed in Panama:
- Earning $400 or more per year? That’s enough to trigger a US filing requirement. So even small freelance gigs or side projects count.
- You may owe US self-employment tax. The IRS takes 15.3% of your net earnings to cover Social Security and Medicare.
- No totalization agreement exists between the US and Panama, meaning you may owe both US self-employment tax and contributions to Panama’s social system (if enrolled).
Planning Your Retirement in Panama
Panama is a top retirement destination for US expats thanks to its warm climate, low cost of living, and retiree-friendly benefits. Throw in some fresh tropical produce, and plenty of outdoor activities like hiking, birdwatching, and beach trips all year round, and Panama could be the ideal place to enjoy your golden years. Popular retirement spots include Boquete, known for its cooler mountain air and expat community, and Coronado, a beach town just an hour from Panama City.
US citizens with a lifetime pension of $1,000/month can qualify for the Pensionado Visa, and it includes discounts on healthcare, transportation, dining, and more. US Social Security benefits are not taxed by Panama, and the country doesn’t tax foreign-sourced income—a major plus for retirees. However, you’ll still need to file US taxes annually, even if your only income is social security.
Panama offers both public and private healthcare, with the private system in Panama City and David providing high-quality care at affordable prices. Most doctors speak English, and are known for their excellent bedside manner. With no language barrier in expat hubs and plenty of support for newcomers, Panama makes retirement surprisingly easy.
Simplify Your Taxes with MyExpatTaxes: A US-Panama Expat Tax Solution
If you’re ready to file your US taxes from abroad, why not give us a try? Our award-winning expat tax software can take the stress out of filing while ensuring you keep as much of your cash as (legally) possible!
Depending on your tax needs, you can choose from 3 plans:
- Do it yourself with our Base Plan and e-file in minutes.
- File confidently and have your work personally Reviewed by a Tax Professional.
- For the ultimate peace of mind, work with a Tax Professional for professional guidance with the Premium Plan.
If reading our US-Panama Expat Tax Guide has raised a few questions, at MyExpatTaxes, we’re here to answer every one of them. Our expert customer support team are on hand to help, and our Help Center has guidance on everything you need to know for filing your US expat taxes.
Join the thousands of satisfied US expats who trust us to file their taxes every year.
Get Started with MyExpatTaxes
Written by Nathalie Goldstein, EA
Nathalie Goldstein, EA is a leading expert on US taxes for Americans living abroad and CEO and Co-Founder of MyExpatTaxes. She contributes to Forbes and has been featured in Forbes, CNBC and Yahoo Finance discussing US expat tax.
May 22, 2025 | Country Guides | 12 minute read
