Filing US Taxes as an American Living in Estonia
June 26, 2025 | Country Guides | 15 minute read
Expat Tax Blog. Tax Tips for US Americans abroad.
Updated
All blogs are verified by Enrolled Agents and CPAs
All blogs are verified by Enrolled Agents and CPAsUpdated
Thinking about moving to Estonia? This Baltic gem has become a popular destination for digital nomads, entrepreneurs, and remote workers, thanks to its streamlined e-residency program, high quality of life, and tech-forward economy. Whether you’re drawn to the cobblestone charm of Tallinn’s Old Town or the country’s fast, paperless bureaucracy, life in Estonia offers a unique blend of medieval history and digital innovation. But if you’re a US citizen living there, understanding US-Estonia expat taxes is essential. As a US expat, you’re still required to file annual tax returns with the IRS—and you may also owe tax in Estonia. Navigating the two systems can be tricky, especially when it comes to reporting foreign income, avoiding double taxation, and meeting strict disclosure rules like FBAR and FATCA. We’re here to guide you through everything you need to know so you can enjoy life in Estonia without tax surprises.
Who Needs to File US Expat Taxes?
US-Estonia Expat Tax Deadlines
Which Filing Status is Right for Me?
US-Estonia Expat Tax Agreements
Estonia Taxes For US Expats: Navigate US-Estonia Expat Tax Regulations
US-Estonia Expat Tax Strategies to Avoid Double Taxation
Investing in Estonia as a US Expat
US-Estonia Expat Taxes Made Easy with MyExpatTaxes
Who Needs to File US Expat Taxes?
It’s a question many US expats ask themselves. Surely you don’t have to pay US taxes once you move abroad?! Well, since the US taxes based on citizenship rather than residency, you probably do.
In 2025, if you are a US citizen or green card holder who meets any of the following thresholds, you’ll need to file your 2024 US taxes:
| 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 |
As a result, you may face double taxation: paying tax in the US and Estonia on the same income. Luckily, there are several strategies that can help you reduce or eliminate double taxation altogether. We’ll break them down in this US-Estonia Expat Tax Guide.
Why Choose Estonia?
Estonia offers an appealing mix of modern convenience and old-world charm, making it an increasingly popular choice for US expats. The country has been dubbed the “Silicon Valley of Europe” and is famous for its efficient digital infrastructure—you can start a business, sign contracts, and pay taxes online in minutes through its groundbreaking e-residency program.
Culture & Climate
Estonian culture blends Nordic minimalism with Baltic warmth, offering a relaxed pace of life and a strong appreciation for nature, music, and tradition. From medieval sites to modern-day museums, there is plenty of cultural appeal at every turn. The climate features cold, snowy winters and mild, showery summers, which appeals to those who enjoy seasonal variety. Estonia consistently ranks high for safety, with low crime rates and political stability. Quality of life is high, with easy access to forests, lakes, and the Baltic Sea, and a strong emphasis on work-life balance. To cap it off, Estonia is one of seven countries to meet the World Health Organization’s annual clean air guideline.
Cost of Living
The cost of living is moderate—lower than in Western Europe—with affordable housing and public transport, particularly outside of Tallinn. The average cost of living in Estonia is about 50% lower than in the US. However, if you’re earning a local Estonian salary, the average purchasing power is 67% of what it would be in the US.
Healthcare
The Estonian Health Insurance Fund (EHIF) is publicly funded and accessible to residents through employment, self-employment or the Voluntary Health Insurance Contract (€170.30 per month) for those who are otherwise ineligible. EHIF is accessible 1-2 months after you complete registration, and comes with very low fees (e.g., €25 maximum for a hospital stay). Some expats choose private health insurance (for around €30-€150 per month) for shorter waiting times and greater availability of English-speaking caregivers.
Challenges
Finding accommodation can also be quite challenging, and finding work with a local employer usually requires fluency in Estonian. Though English is widely spoken among younger Estonians, many expats struggle with the language barrier, especially outside of urban areas. Overall, Estonia is ideal for expats looking for a safe, affordable lifestyle in Northern Europe, with a modern infrastructure.
US-Estonia Expat Tax Deadlines
US expats benefit from a 2-month filing extension:
| 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) |
When it comes to your Estonian taxes, the tax year follows the calendar year (just like the US), and you’ll need to file by 31 March of the following year.
You can stay up-to-date with deadlines (as well as tips and offers) straight to your inbox with the MyExpatTaxes newsletter.
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Fallen Behind on US Taxes While Living in Estonia?
If you’ve missed a few years of US tax filings while living in Estonia, don’t panic—the Streamlined Procedure offers a way to catch up without penalties. This IRS program is designed for expats whose failure to file was non-willful—meaning you simply weren’t aware you had to file.
To use the procedure, you’ll file your last 3 years of US tax returns, and the last 6 years of FBARs. For many US citizens in Estonia, this is the fastest, safest route to become compliant and avoid future IRS trouble. But don’t wait—you must file under the Streamlined Procedure before the IRS contacts you, or you’ll lose the penalty protection.
Which Filing Status is Right for Me?
Picking the correct filing status is one of the first—and most important—steps when preparing your US tax return from Estonia. Your filing options depend largely on your marital situation and your spouse’s citizenship.
Unmarried? This one is straightforward. Simply file as Single.
Married to a US Citizen or Green Card Holder? As the IRS requires both spouses to report worldwide income, you’ll most likely benefit from filing as Married Filing Jointly, which often results in the lowest overall tax bill.
Married to a Non-US Citizen? If your spouse isn’t a US citizen or Green Card holder, they’re not obliged to file a US tax return. Many expats in Estonia choose to file as Married Filing Separately in this case. It’s a common way to avoid involving your spouse’s Estonian income and financial accounts in your US filings.
Head of Household? If you’re unmarried (or considered unmarried by the IRS), have a qualifying US dependent who lived with you for more than half the tax year, and pay more than half the costs of your household, you may be eligible to file as Head of Household—a status that can offer better rates than filing separately.
Read More: Expat Filing Status and Gross Income
FATCA & FBAR Compliance
US citizens living in Estonia must comply with FBAR and FATCA, two key reporting obligations that target tax evasion. These rules require you to report foreign financial accounts and assets to the US government once they cross specific thresholds.
If your combined foreign bank and investment accounts exceed $10,000 at any point during the year, you’ll need to file the FBAR using FinCEN Form 114. This is submitted separately from your tax return.
Under FATCA, you must also report foreign accounts and assets over $200,000 on IRS Form 8938, which is filed with your federal return.
While neither results in owing taxes, failure to file these forms can lead to steep fines, so it’s essential to stay compliant while living in Estonia.
Tax Tip: FBAR and FATCA reporting are included as standard in all MyExpatTaxes plans.
US-Estonia Expat Tax Agreements
The US-Estonia tax treaty is designed to reduce the risk of double taxation by outlining which country has taxing rights over various types of income—like employment earnings, pensions, dividends, and business profits. In some cases, it can reduce or eliminate tax on specific income sources. However, due to the treaty’s Savings Clause, most benefits don’t apply to US citizens. Still, the treaty is helpful for clarifying income sourcing rules and determining residency. It also supports the use of Foreign Tax Credits, helping you avoid paying tax on the same income to both countries.
There’s no totalization agreement between the US and Estonia. This means that self-employed expats and US employees working in Estonia may have to pay into both countries’ social security systems. You might not be able to combine work credits between the two systems, but you could potentially qualify for separate retirement benefits from each.
Estonian Visa Options
You don’t need a visa for visits of less than 90 days in any 12-month period. However, from 2026, you’ll need to apply for an ETIAS travel authorization to visit Estonia or other Schengen area countries.
For stays of over 90 days, you can apply for the D Visa for the purpose of:
- Study
- Short-Term Employment
- Start-Up Business
- Family reunification
- Remote Work
You’ll need to provide valid supporting documents, as well as proof of sufficient funds and travel insurance for the D visa. Most requests are processed in 15 calendar days from the date of registration at the Embassy. If you intend to stay for more than one year, you’ll need to apply at an Embassy for a residence permit.
Estonian Taxes For US Expats: Navigate US-Estonia Expat Tax Regulations
Tax Residency
If you stay in Estonia for 183 days in any 12 month period, or your permanent residence is in Estonia, you’ll officially be resident in Estonia for tax purposes, with residency backdated to the first day of your stay.
Residents are taxed on their worldwide income; while non-residents are only taxed on income from Estonian sources.
Income Tax & Social Security
Estonia uses a simple income tax system with a flat rate of 22% (2025) that applies to nearly all types of income, including wages, self-employment earnings, capital gains, rent, royalties, interest, dividends, pensions, scholarships, prizes, and lottery winnings. Both residents and non-residents pay the flat rate.
Employers in Estonia must also pay a 33% social security tax on employee salaries, which is split between the public pension fund (20%) and health insurance (13%). Employees themselves don’t contribute to this tax, but self-employed individuals are responsible for the full 33%. There’s an unemployment insurance tax, where employees pay 1.6% of their salary, and employers contribute 0.8%. Resident employees also pay 2% towards the compulsory accumulative pension scheme, plus 4% paid by the employer.
Other Key Taxes
- VAT: 22% standard rate
- Land Tax: 0.1%-2.5%, depending on municipality
- Property Tax: 0%
US-Estonia Expat Tax Strategies to Avoid Double Taxation
As a US citizen living in Estonia, facing taxation on your income in two countries at once might sound scary. Fortunately, several IRS tax benefits are designed to prevent double taxation and ease the burden of living abroad. The most important tools available to you are the Foreign Earned Income Exclusion (FEIE), Foreign Tax Credit (FTC), and the Child Tax Credits (CTC and ACTC).
Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion allows you to exclude up to $126,500 of earned income from your US taxes. To qualify, you need to pass either the Physical Presence Test (being physically present in a foreign country for at least 330 full days during any 12-month period) or the Bona Fide Residence Test (being a resident of a foreign country for an entire tax year). This benefit is useful for wages and self-employment income but doesn’t apply to passive income, such as interest, dividends, or rental income. To claim the FEIE, you’ll need to include Form 2555 with your US tax return.
Foreign Tax Credit (FTC)
The Foreign Tax Credit offers a dollar-for-dollar credit for taxes paid abroad. You can use it to reduce your US tax bill by the amount of Estonian income taxes you’ve paid—on both earned and passive income. However, the IRS requires income type matching. For instance, taxes on passive income, such as Estonian rental income, can only reduce US tax on other foreign passive income (and earned income can only be used on earned income or other “general” types of foreign income, such as pension). You’ll need Form 1116 to claim the credit.
Child Tax Credit (CTC)
If you have qualifying children under age 17 with US Social Security Numbers, you may be able to claim the Child Tax Credit for up to $2,000 per child. You are eligible to receive the full benefit if your income falls below $200,000 (single) or $400,000 (married).
If your CTC is more than the tax you owe, you might also be eligible for a refundable portion through the Additional Child Tax Credit (ACTC)—up to $1,700 per child. The Additional Child Tax Credit is calculated based on your earned income and requires a minimum income of $2,500. Note that if you claim the FEIE, you’re not eligible to claim the ACTC. You can file for the child tax credits using Schedule 8812.
Self Employment in Estonia
Estonia is a popular choice for digital nomads and freelancers thanks to its advanced digital infrastructure and innovative e-Residency program, which allows you to start a company 100% online from anywhere. With the start-up visa, you can stay in Estonia for up to one year as a digital nomad to develop your business, with mentorship and government funding available.
If you’re self-employed in Estonia, you’re required to pay a 20% flat income tax plus a 33% social tax, which covers public pension and health insurance. US citizens also pay US self-employment tax—15.3%—on their net earnings if they earn over $400, even if they live and work abroad.
Unfortunately, neither the Foreign Earned Income Exclusion (FEIE) nor the Foreign Tax Credit (FTC) can reduce your US self-employment tax. Without a totalization agreement between the US and Estonia, many freelancers and entrepreneurs face double contributions to social security systems. The upside is that you may be eligible to draw from both pots when you retire.
Investing in Estonia as a US Expat
Investing abroad as a US expat in Estonia might seem tricky at first, but once you understand the rules, it’s entirely manageable. Popular investment options for Americans in Estonia include:
- Property: US citizens are allowed to buy property in Estonia, whether for personal use or rental income. Tallinn, Estonia’s capital, is popular among investors, offering strong rental demand and relatively low property prices (average €3,084/m2 in 2024) compared to Western Europe. Estonia’s purchase process can be completed remotely and doesn’t require a visa. Legal and notary fees amount to approximately 1% of the property value.
- IRAs & Roth IRAs: One of the best ways to stay on track for retirement while abroad is with a US-based Individual Retirement Account (IRA). You can still contribute up to $7,000 per year ($8,000 if you’re over 50) to your US-based retirement accounts, as long as you have eligible earned income and meet the adjusted gross income thresholds.
- US Stocks & Bonds: Sticking with US-based investments is generally safest. Buying foreign mutual funds or ETFs—like Estonian investment products—can trigger steep US tax penalties under PFIC rules.
Securing your financial future is just a few steps away with MyExpatInvest. Work with a financial consultant with international expertise to craft your personal investment and retirement strategy. The service includes management of US mutual or hedge funds and advice regarding Passive Foreign Corporation (PFIC) reporting exposure. The initial consultation is free and you’ll be matched with the best expert for your goals.
Retiring in Estonia
Ranking 16th in the world for quality of life, Estonia offers an appealing lifestyle with a relatively low price tag. The average cost of living for a single person is just over $1000, plus rent at around $700 for a 1 bed apartment in the city center; though these costs vary greatly depending on how comfortable (or frugal) you want to be.
There is no retirement visa, so you need to apply for the long stay D Visa and a temporary residence permit, which both require evidence of financial self-sufficiency. You can receive your US pension while living in Estonia. As an Estonian resident, you’ll be taxed on worldwide income, including your pension, at 22%.
Tallinn is a great choice for retirees who enjoy a vibrant urban lifestyle, with modern amenities, and a well-preserved medieval old town. Tartu, known as Estonia’s university city, offers a more relaxed pace, lower cost of living, and a strong sense of community. For nature lovers, Parnu provides seaside charm, spa culture, and a quieter, resort-style atmosphere that’s especially appealing in the summer months.
US-Estonia Expat Taxes Made Easy with MyExpatTaxes
This US-Estonia guide might have given you some food for thought, but filing your US expat taxes doesn’t have to be stressful or expensive! Our award-winning expat tax software makes IRS compliance a breeze. Whether you need to file for the first time or you’re a seasoned filer, we’ve got all the forms and support you need. Join the thousands of satisfied clients who file their US taxes with us. Saving money on your taxes abroad has never been so easy.
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.
June 26, 2025 | Country Guides | 15 minute read
