Moving to Ecuador from the US: A Tax Planning Checklist

Moving to Ecuador is one of the best financial decisions many Americans make. But the tax side of things needs attention — ideally before you go, not after.

I moved to Cuenca myself, and I've helped dozens of Americans plan their relocations. Here's the tax checklist I wish everyone followed.

Before You Leave the U.S.

1. Sever State Tax Ties

This is the most commonly overlooked step — and it can cost you thousands.

Some states continue to tax former residents who haven't properly established domicile elsewhere. The worst offenders:

What to do before you leave:

• File a final state return (marking it as "final")
• Surrender or update your driver's license
• Change your voter registration
• Close or re-register bank accounts to a no-income-tax state
• Update your address with the USPS, IRS, and financial institutions
• Cancel club memberships and recurring local services

The goal: leave no paper trail that suggests you still live there.

For the full breakdown, see my state tax guide for Americans abroad.

2. Set Up a Tax-Friendly U.S. Address

You still need a U.S. mailing address for banking, IRS correspondence, and voting. Choose a state with no income tax:

• Florida
• Texas
• Nevada
• Wyoming
• South Dakota
• Washington
• Tennessee
• Alaska

Many expats use a mail scanning/forwarding service in one of these states. This becomes your U.S. domicile.

3. Organize Your Financial Accounts

Before you move, document everything:

• All U.S. bank and investment accounts
• Retirement accounts (401(k), IRA, Roth, pensions)
• Any foreign accounts you already hold
• Real estate ownership (U.S. and abroad)
• Stock options, RSUs, or deferred compensation

You'll need this information for your first expat tax return and potentially for FBAR/FATCA reporting.

4. Understand Your Retirement Income Taxation

If you're retiring to Ecuador, know that:

• Ecuador won't tax your U.S. retirement income — the territorial tax system exempts foreign-source income
• The U.S. still taxes it — Social Security, pensions, 401(k)/IRA distributions remain taxable
• The FEIE doesn't apply to retirement income — it only covers earned income

Your U.S. tax bill doesn't decrease by moving to Ecuador. The savings come from Ecuador not adding a second tax bill, plus the dramatically lower cost of living.

For specifics on retirement income, see my Ecuador pension tax guide.

5. Plan Your Departure Date

Your departure date affects tax elections:

For the FEIE (if you have earned income):

• The Physical Presence Test requires 330 days outside the U.S. in a 12-month period
• The Bona Fide Residence Test generally requires a full calendar year of foreign residency
• Leaving mid-year means the Physical Presence Test is usually your best option for year one

For state taxes:

• Some states prorate taxes based on the date you left
• Others count you as a full-year resident if you were there for more than 183 days

A January departure is often cleanest. But any date works with proper planning.

6. Notify Social Security (If Applicable)

If you're receiving Social Security:

• Update your address with SSA (even if payments go to a U.S. bank)
• Confirm direct deposit is set up to a U.S. bank account
• Ecuador is not eligible for international direct deposit — you need a U.S. bank

Read my full Social Security in Ecuador guide for details.

After You Arrive in Ecuador

7. Open Ecuadorian Bank Accounts

You'll likely open accounts at Banco Pichincha, Banco del Austro, Produbanco, or another local bank.

This creates an FBAR obligation if your foreign accounts exceed $10,000 at any point during the year. Most Americans in Ecuador trigger this immediately.

What you need to track:

• Maximum balance in each account during the year
• Account numbers and bank addresses
• Type of account (checking, savings, CD)

See my FBAR requirements guide for the full picture.

8. Get Your Visa

Your visa type affects your U.S. tax strategy — specifically, whether you can claim the Bona Fide Residence Test for the FEIE.

For most retirees, the visa type matters less (since you're not claiming the FEIE on retirement income anyway). But if you have earned income, it matters a lot.

Full details in my visa types and tax implications guide.

9. Start Tracking Your Days

If you plan to claim the FEIE using the Physical Presence Test:

• Record every day you're outside the U.S.
• Note all U.S. trips (even layovers count as U.S. days)
• Keep flight records and passport stamps
• A simple spreadsheet works — just be consistent

You need 330 full days outside the U.S. in a 12-month period. "Full day" means all 24 hours.

10. Understand Ecuador's Tax System

Ecuador uses a territorial tax system. Key points:

• Foreign income is not taxed — your U.S. retirement income is exempt
• Ecuador-source income is taxed — if you work locally or earn rental income in Ecuador
• Most retirees don't file an Ecuador tax return — no Ecuador-source income means no obligation

If you do work in Ecuador (even remotely for Ecuadorian clients), you may need an RUC (tax ID) and could owe Ecuadorian income tax on that portion.

Tax Season: Your First Expat Filing

11. File Your U.S. Tax Return

Your first expat return is the most complex. Here's what's different:

New forms you may need:

• Form 2555 — Foreign Earned Income Exclusion (if you have earned income)
• Form 1116 — Foreign Tax Credit (if you paid taxes to Ecuador)
• Form 8938 — FATCA (if foreign assets exceed the threshold)

New deadlines:

• June 15 — Automatic 2-month extension for Americans abroad (no form needed)
• October 15 — Extended deadline with Form 4868

What doesn't change:

• You still report all worldwide income on Form 1040
• Social Security, pensions, and investment income are reported normally
• Standard deduction and credits still apply

12. File Your FBAR

Separately from your tax return, file FinCEN 114 (FBAR) if your foreign accounts exceeded $10,000 at any point.

• Filed electronically through the BSA E-Filing System
• Due April 15 with automatic extension to October 15
• No tax is owed — it's a reporting requirement
• Penalties for non-filing are severe

13. Check FATCA Requirements

If your foreign financial assets exceed these thresholds, file Form 8938 with your tax return:

FATCA and FBAR are separate requirements with different thresholds and different agencies.

Ongoing: Annual Tax Maintenance

Every Year

• File U.S. tax return (Form 1040)
• File FBAR if foreign accounts exceeded $10,000
• File FATCA (Form 8938) if applicable
• Track days outside the U.S. (if claiming FEIE)
• Keep Ecuador bank statements showing maximum balances

When Applicable

• File Ecuador tax return (if you have Ecuador-source income)
• Make quarterly estimated payments (if you're self-employed)
• Update SSA with address changes
• Respond to SSA proof-of-life questionnaires

Common Mistakes to Avoid

I've seen every version of these. Don't be the person who learns the hard way.

1. Not filing at all — "I live abroad so I don't need to file" is wrong
2. Forgetting the FBAR — It's separate from your tax return and easy to miss
3. Assuming the FEIE covers retirement income — It doesn't
4. Not severing state tax ties — California will follow you to Cuenca
5. Thinking Ecuador taxes your pension — It doesn't, but the U.S. still does
6. Using a non-expat tax preparer — Expat returns require specialized knowledge

For the full list, see my 7 common tax mistakes Americans in Ecuador make.

Haven't Filed in Years?

If you moved to Ecuador and haven't been filing, you're not alone. The Streamlined Filing Compliance Procedures exist exactly for this:

• File 3 years of back tax returns
• File 6 years of FBARs
• Certify the failure was non-willful
• Generally no penalties

It's better to come forward voluntarily than to be found. Learn more in my guide for Americans who haven't filed.

The Bottom Line

Moving to Ecuador is financially smart for most Americans — no tax on foreign pensions, low cost of living, and the U.S. dollar as currency. But you need to handle the tax transition properly.

The biggest items:

1. Sever state tax ties before you leave
2. Set up a no-income-tax state domicile
3. Open Ecuador bank accounts and understand FBAR
4. Keep filing U.S. taxes every year
5. Know that Ecuador won't tax your retirement income

Get these right and the financial picture is compelling. Get them wrong and you're dealing with penalties and back-filings that could have been avoided.

Planning a move to Ecuador and want to make sure your tax situation is clean from day one? I'm here to help with the transition.