It has been estimated that there are 20,000 Americans living in El Salvador.
Living in El Salvador is an incredible experience for a variety of reasons, including the tropical climate, world-class beaches and coffee, and the wonderful landscapes, flora and fauna. As an American expatriate living in El Salvador though, what exactly do you need to know regarding filing US expat (and Salvadoran) taxes?
All US citizens and green card holders who earn more than $14,600 in 2024,(just $400 of self-employment income or just $5 if you’re married filing separately) anywhere in the world are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live or where their income originates.
The good news is if you are paying income tax in El Salvador, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.
📋 Key Updates for US Expat Taxes for Americans Living in EI Salvador in 2025
- El Salvador now exempts foreign-sourced income from taxation, reducing tax burdens for expats. Meanwhile, U.S. expats still must file U.S. taxes, but they can use the Foreign Earned Income Exclusion or Foreign Tax Credit to avoid double taxation. A proposed U.S. policy change may further ease tax obligations for expats in the future.
- The U.S. and Salvadoran governments share taxpayer information, and banks report U.S. account holders’ financial data to the IRS. Expats who haven’t filed U.S. taxes can use the IRS Streamlined Procedure to catch up penalty-free. U.S. tax deadlines remain April 15, 2025, with extensions available until October 15, 2025.
US taxes – what you need to know
If you earned more than US$14,600 (in 2024, or $400 of self-employment income etc), you are required to file Form 1040..
While any US taxes due are still due by April 15, expats get an automatic filing extension until June 15, which can be extended further on request until October 15.
If you have overseas assets worth over US$200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 to declare them.
If you had a total of at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
“An individual is considered a tax resident in El Salvador if they reside temporarily or permanently in the country for more than two hundred consecutive days during a calendar year, or if they have their main source of income in El Salvador.”
– PricewaterhouseCoopers
If you pay income tax in El Salvador, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS.
The main exemptions are the Foreign Earned Income Exclusion, which lets you exclude the first around US$126,500 for tax year 2024 (US$130,000 for tax year 2025) of foreign earned income from US tax if you can prove that you are a Salvadoran resident (or you spend at least 330 days outside the US each year), and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in El Salvador. These exemptions can be combined if necessary.
The US and Salvadoran governments share taxpayer info, and Salvadoran banks pass on US account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The penalties for incorrect or incomplete filing for expats are steep to say the least.
If you’re a US citizen, green card holder, or US/Salvadoran dual citizen, and you have been living in El Salvador but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don’t delay though, in case the IRS comes to you first
Salvadoran taxes – what you need to know
Foreigners living in El Salvador are considered residents if they spend over 200 consecutive days in the country each year. Non-residents are taxed on Salvadoran income at a flat rate of 30%. Residents are taxed on their worldwide income on a scale from 0% to 30%.
The Salvadoran tax year is the same as the American, and tax returns are due by April 30. The Salvadoran tax authority is called the Ministerio de Hacienda.
What if I’ve never filed my US taxes while living in El Salvador?
If you’re a US citizen, green card holder, or US/El Salvadorian dual citizen, and you have been living in El Salvador but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don’t delay though, as this procedure is only effective as long as the IRS hasn’t come to you first.
Let Bright!Tax guide you through US tax in El Salvador
Navigating tax compliance as a US expat in El Salvador can be challenging, but with the right information and guidance, you can stay compliant and avoid penalties. At Bright!Tax, we specialize in helping Americans abroad understand and manage their US tax obligations.
If you’re ready to be matched with one of our Bright!Tax experts, simply click the “Get Started” button below—we’re here to make the process smooth and stress-free.