In considering expatriate tax liability, what does 'worldwide income' encompass?

The concept of 'worldwide income' in the context of expatriate tax liability refers to the total income earned by an individual without regard to the source of that income or where it is earned. This includes income from all global sources, not limited to domestic or foreign earnings. Therefore, when a U.S. expatriate is subject to tax on their worldwide income, they must report income generated from wages, investments, business activities, and other earnings received from anywhere in the world.

This approach ensures that taxpayers with international interests and incomes are fully compliant with tax obligations regardless of where the income is earned. It reflects the principle that individuals remain accountable for income earned everywhere, aligning with the U.S. tax system that taxes citizens on global income. Consequently, for expatriates, it is crucial to understand that all income, whether from domestic or foreign sources, must be reported, emphasizing the importance of comprehensive tax planning for those living abroad.