Can US Expats Still Invest from Abroad?
Yes, but your platform choices narrow, your reporting obligations increase, and certain investments become toxic from a tax perspective. Interactive Brokers and Charles Schwab International are the go-to platforms for US expats. Vanguard and Fidelity may restrict or close your account when you change your address to a foreign country. The biggest trap is investing in foreign-domiciled mutual funds, which trigger punishing PFIC (Passive Foreign Investment Company) tax rules. Your investment strategy doesn't need to change dramatically, but your platform, reporting, and fund selection absolutely do.
The Platform Problem
Most US brokerage firms were not designed for clients living abroad. When you change your address to Costa Rica (or any foreign country), some firms will:
- Restrict your ability to make new trades
- Limit you to liquidation-only access
- Close your account entirely
- Stop allowing contributions to retirement accounts
This isn't malice. It's compliance. Foreign address holders trigger additional reporting obligations (FATCA, CRS) and regulatory complexity that many firms choose to avoid rather than absorb.
Which Platforms Work for Expats
| Platform | Expat-Friendly? | Key Advantage | Watch Out For |
|---|---|---|---|
| Interactive Brokers (IBKR) | Yes, built for international | Access to 150+ global markets; lowest currency conversion fees; multi-currency accounts | Complex interface; geared toward active/experienced investors |
| Charles Schwab International | Yes, popular with expats | Excellent customer support; strong research tools; familiar US interface | Requires international account application; some account types may differ |
| Vanguard | Problematic | Low expense ratios; great index ETFs | Known to restrict accounts when address changes to foreign; may close account or limit to liquidation |
| Fidelity | Problematic | Good domestic platform; wide fund selection | Some services restricted for foreign addresses; inconsistent policy enforcement |
| TD Ameritrade (now Schwab) | Fully merged into Schwab (completed September 2023) | Former TD Ameritrade accounts now follow Schwab's expat policies | N/A |
| Robinhood | No | Not designed for international accounts | Will likely close your account |
| Wealthfront / Betterment | No | Require US address | Not viable for expats |
The Critical Pre-Move Action
Before you move, contact every financial institution you use. Ask this exact question:
"What happens to my account if I change my address to Costa Rica?"
Get the answer in writing, email or letter. Not a phone call you can't reference later.
What to do before changing your address:
- Open an Interactive Brokers or Schwab International account while you still have a US address
- Transfer assets from platforms that won't work abroad (Vanguard, Fidelity, Robinhood)
- Set up a US mailing address if possible (family member, registered agent) as a backup
- Download all tax documents and account statements. You'll need them.
The PFIC Trap
This is the single most expensive mistake US expats make with investments. PFIC stands for Passive Foreign Investment Company, and it refers to most foreign-domiciled mutual funds and ETFs. Per the IRS Instructions for Form 8621, the PFIC regime under IRC Section 1291 can result in effective tax rates exceeding 50% on gains, compared to the standard 15-20% long-term capital gains rate on equivalent US-domiciled funds.
"PFIC is the trap that catches smart people. You move abroad, a well-meaning advisor at a local bank recommends a perfectly good international fund, and you've just triggered a tax regime that will cost you more than the gains are worth. Stick with US-domiciled ETFs. Full stop." Brennan Vitali, CFP®, Vitality Wealth Planning
What Triggers PFIC
If you buy mutual funds or ETFs domiciled outside the United States, even through a reputable international provider, the IRS treats them as PFICs. Examples:
- A European-domiciled index fund bought through a Costa Rican bank
- An Irish-domiciled ETF tracking the S&P 500 (even though it holds the same stocks as a US version)
- A Canadian mutual fund held from before you moved
- Any collective investment vehicle organized outside the US
Why PFIC Is Punishing
The default PFIC tax regime (IRC Section 1291) taxes gains as ordinary income (not capital gains rates), adds an interest charge calculated as if you earned the gains evenly over your holding period, and requires filing Form 8621 for each PFIC investment. The effective tax rate can exceed 50%.
| Investment Type | Tax Treatment for US Expats |
|---|---|
| US-domiciled ETF (e.g., VTI, SPY) | Normal capital gains rates (15–20%) |
| US-domiciled mutual fund | Normal capital gains rates (15–20%) |
| Foreign-domiciled ETF (e.g., Irish-domiciled) | PFIC rules, potentially 40–50%+ effective rate |
| Foreign mutual fund | PFIC rules, same punishing treatment |
| Individual stocks (any domicile) | Normal capital gains rates |
The simple rule: Stick with US-domiciled ETFs and mutual funds. Never buy a foreign-domiciled fund, even if someone at a Costa Rican bank recommends one. The tax consequences can be devastating.
Reporting Obligations
Living abroad adds reporting requirements that don't exist for domestic investors. Missing these filings carries severe penalties. According to FinCEN, hundreds of thousands of FBAR filings are submitted annually, and per the IRS Data Book, penalties assessed for international information return violations have increased significantly in recent years. Our US tax obligations guide covers the full filing checklist.
FBAR (FinCEN Form 114)
| Detail | Requirement |
|---|---|
| What triggers it | Aggregate of $10,000+ in foreign financial accounts at any point during the year |
| What counts | Foreign bank accounts, foreign brokerage accounts, foreign pension accounts, signatory authority |
| Filing deadline | April 15, auto-extended to October 15 |
| Penalty for non-filing | Up to $16,536 per report per year (non-willful, inflation-adjusted, 2026) per 31 USC 5321; up to $129,210 or 50% of account balance (willful) |
FATCA (Form 8938)
| Detail | Requirement |
|---|---|
| What triggers it | Specified foreign financial assets exceeding threshold |
| Threshold (single, abroad) | $200,000 at year-end or $300,000 at any point |
| Threshold (married filing jointly, abroad) | $400,000 at year-end or $600,000 at any point |
| What counts | Foreign accounts, foreign securities, foreign financial instruments, ownership interests in foreign entities |
| Filed with | Your annual tax return (Form 1040) |
Other Forms You May Need
| Form | Purpose | When Required |
|---|---|---|
| Form 8621 | PFIC reporting | Each year you hold a PFIC investment |
| Form 3520 | Foreign trust transactions | If you're involved with any foreign trust |
| Form 5471 | Foreign corporation reporting | If you own 10%+ of a foreign corporation (including a Costa Rican S.A.) |
| Form 8865 | Foreign partnership reporting | If you're involved in a foreign partnership |
| Schedule B | Foreign account disclosure | If you have any foreign financial accounts |
Note on Form 5471: If you hold Costa Rican real estate through an S.A. or SRL, you may trigger Form 5471 reporting requirements as a US shareholder of a foreign corporation. This adds complexity and should be discussed with your cross-border tax advisor. See also our estate planning for expats guide for how property ownership structures affect your overall plan.
Portfolio Strategy for US Expats
Your investment philosophy doesn't need to change because you moved abroad. But your implementation does.
What Changes
| Element | Domestic US Investor | US Expat in Costa Rica |
|---|---|---|
| Platform | Any US brokerage | IBKR or Schwab International |
| Fund selection | Any US-domiciled funds | US-domiciled ETFs only; avoid foreign funds (PFIC) |
| Currency consideration | USD only | Multi-currency (USD income, CRC expenses) |
| Tax-loss harvesting | Standard rules | Same rules, but be aware of wash sale interactions |
| Roth IRA contributions | With earned income | Generally cannot contribute without US-sourced earned income |
| State taxes | Based on state of residence | May continue depending on your former state's rules |
Currency Considerations
Living in Costa Rica while investing in USD creates a natural currency mismatch. Your portfolio grows in dollars; your rent and groceries are in colones.
Practical approaches:
- Keep 6–12 months of Costa Rican expenses in colones (in your CR bank account)
- Use Wise for regular USD-to-CRC transfers at mid-market rates
- Don't over-hedge. Most long-term expats maintain primarily USD portfolios because their savings and future flexibility are dollar-denominated.
- If you return to the US, your portfolio is already in the right currency
Retirement Account Considerations
| Account | Key Issue for Expats |
|---|---|
| Traditional IRA | Can maintain and grow; contributions require US-sourced earned income; distributions still US-taxable |
| Roth IRA | Cannot contribute without US-sourced earned income; existing assets grow tax-free; distributions remain tax-free |
| 401(k) from former employer | Can maintain or roll to IRA; RMDs still apply at required age |
| SEP IRA | Can contribute if you have qualifying US self-employment income |
| HSA | Cannot contribute without US high-deductible health plan |
Key principle: Your retirement accounts remain US accounts regardless of where you live. RMDs still apply. Early withdrawal penalties still apply. The only thing that changes is your ability to contribute, which depends on having qualifying US-sourced earned income. For how your retirement savings translate to lifestyle, see our Costa Rica vs US retirement comparison.
The Tax Advisor Question
Cross-border investing adds enough complexity that a general CPA or tax software often isn't sufficient. You need a tax advisor who understands:
- FBAR and FATCA filing requirements
- PFIC identification and reporting
- Form 5471 for foreign corporation ownership
- Foreign Tax Credit calculations
- State tax obligations for your specific former state
- Costa Rica's territorial tax system and how it interacts with US obligations
Expect to pay: $1,000–$3,000+ annually for expat tax preparation, depending on complexity. This is not the place to cut corners. The penalties for missed filings far exceed the cost of professional preparation.
Common Mistakes
- Not moving platforms before moving countries. Transferring assets from Vanguard to IBKR is straightforward with a US address. Doing it after your address has changed to Costa Rica is dramatically harder.
- Buying foreign-domiciled funds. One PFIC investment can create years of tax headaches and thousands in excess taxes.
- Missing FBAR/FATCA filings. Penalties start at $16,536 per report (2026, inflation-adjusted). Set calendar reminders.
- Assuming Roth IRA contributions still work. Without US-sourced earned income, you can't contribute. Your existing Roth balance grows tax-free, but you can't add to it.
- Ignoring state taxes. Some states (California, New Mexico, Virginia) continue to assert tax jurisdiction even after you leave. Confirm your former state's rules.
- Not reporting foreign corporation ownership. If you own a Costa Rican S.A. for property holding, Form 5471 may be required. Penalties for non-filing start at $10,000.
FAQ
Which brokerage is best for US expats in Costa Rica?
Interactive Brokers (IBKR) and Charles Schwab International are the two best options. IBKR offers access to 150+ global markets, the lowest currency conversion fees, and is built for international clients. Schwab International provides a more user-friendly interface with excellent customer support. Open your account before moving while you still have a US address. It's significantly easier.
Can I still contribute to my IRA from Costa Rica?
It depends on your income. IRA contributions require US-sourced earned income. If you work for a US company, have US self-employment income (including working remotely from Costa Rica), or earn income taxable in the US, you can contribute. If your income is entirely excluded under the Foreign Earned Income Exclusion (FEIE), you may not have qualifying income for IRA contributions. Consult your tax advisor for your specific situation.
What happens if I don't file FBAR or FATCA?
Penalties are severe. Non-willful FBAR violations carry penalties up to $16,536 per report per year (inflation-adjusted, 2026). After the 2023 Bittner v. United States ruling, penalties apply per annual report, not per account. Willful violations can reach $129,210 or 50% of account balance, whichever is greater. FATCA (Form 8938) non-filing can result in a $10,000 penalty with additional penalties up to $50,000 for continued non-compliance. These are the IRS reporting requirements you cannot afford to miss.
Should I keep my investments in US dollars?
For most US expats in Costa Rica, yes. Your investment portfolio, retirement accounts, and long-term savings are best maintained in USD. You'll convert only what you need for monthly Costa Rican expenses (rent, groceries, local costs) using a service like Wise. This protects your wealth from colón devaluation risk and keeps your portfolio aligned with where you're most likely to spend money long-term, whether you stay in Costa Rica or eventually return to the US.
Do I need a special tax advisor as an expat investor?
Yes. Cross-border tax compliance (FBAR, FATCA, PFIC, Form 5471, Foreign Tax Credits, state tax obligations) is complex enough that general CPAs and tax software often miss critical filings. Look for a CPA or tax firm that specializes in US expat taxation. Expect to pay $1,000–$3,000+ annually for preparation, but the cost of missed filings, penalties starting at $16,536 per report, makes professional preparation a clear investment.
Brennan Vitali is a CFP® and cross-border financial planner whose family splits time between the US and Costa Rica. Investment architecture for expats is one of the most important, and most commonly botched, parts of the transition. Take the Readiness Quiz or book a discovery call.