About Immigrate to Europe
Last Verified: August 28, 2026 Next Verification: January 2027 Currency Basis: €1 = $1.09 (August 2026)
Do US citizens have to file taxes if they move to Europe?
Yes, absolutely. US citizens owe federal income tax on worldwide income regardless of where they live. You must file Form 1040 every year, even from Portugal, Spain, or anywhere else.
This is the #1 mistake Americans make. They move abroad thinking they're done with US taxes. They're not. You file taxes in TWO places: the US (on worldwide income) and your host country (on income earned/accumulated there).
You can reduce double taxation through the Foreign Earned Income Exclusion (FEIE, ~$126,000 for 2026) or the Foreign Tax Credit (FTC), but you MUST file Form 1040 regardless.
What is the Foreign Earned Income Exclusion and who qualifies?
The FEIE (Form 2555) allows US citizens earning abroad to exclude approximately $126,000 (2026 figure, adjusted annually for inflation) of earned income from US federal income tax.
Who qualifies: You must pass the Physical Presence Test (330 days outside the US in a 12-month period) OR establish bona fide residency in a foreign country.
Example: You earn $80,000 remote salary from your US job while living in Portugal. You exclude $80,000 with FEIE. US federal tax: $0 on that income. You still owe Portugal taxes (~25-30%), but not US federal tax.
Important: FEIE applies only to earned income (salary, self-employment). Passive income (interest, dividends, capital gains) is NOT excluded.
What's the Foreign Tax Credit and how is it different from FEIE?
The FTC (Form 1040 Schedule 3) gives you a dollar-for-dollar credit for taxes you pay to a foreign country, up to your US tax liability.
Example: You earn $100,000 in Spain. Spanish taxes take 30% ($30,000). Your US tax on $100,000 would normally be ~$12,000. With FTC, you claim $30,000 credit against US tax, so you owe $0 US federal tax (you paid Spain more than you would have owed the US).
FEIE vs. FTC: FEIE excludes income from taxation entirely. FTC credits taxes already paid. You choose one or the other for each income source; you cannot claim both on the same income.
Should I use FEIE or FTC? Which saves more money?
FEIE is better for low-tax countries (Bulgaria 10%, Romania 10%, Hungary 15%). FTC is better for high-tax countries (Spain 45%, Italy 43%, Germany 42%).
Example (FEIE better): Earn $100k in Bulgaria. With FEIE, exclude $100k, pay $0 US federal + ~$10k Bulgaria tax = $10k total. With FTC, you'd owe ~$12k US tax minus $10k credit = $2k US tax + $10k Bulgaria tax = $12k total. FEIE wins.
Example (FTC better): Earn $100k in Spain. With FTC, claim $30k Spanish tax against US tax (~$12k due), net $18k Spanish + $0 US = $18k total. With FEIE, exclude $100k, pay $0 US + $30k Spain = $30k total. FTC wins.
Rule of thumb: If your host country's tax rate exceeds US federal rates (~12-22% depending on bracket), FTC usually wins. If your host country's rate is lower, FEIE usually wins. Consult a cross-border tax CPA; this choice is material and non-trivial.
What is tax residency and when does it start?
Tax residency is determined by physical presence or economic ties, not by visa status. Most countries use a 183-day threshold: spend 183+ days in a calendar year and you're tax resident there.
Important: You can have a valid visa but NOT be tax resident if you spend <183 days in country. You can be tax resident WITHOUT a visa if you're an EU citizen and spend 183 days somewhere.
Residency starts the day you cross the threshold. Arrive in Portugal July 1? By December 31 you've spent 184 days there. You're tax resident for the full calendar year and owe tax on 12 months of income (not just 6).
Strategic timing: Arrive December 1 instead of July 1 and you're tax resident for only 1 month of the first tax year.
Do I owe tax to two countries at the same time?
Yes, once you become tax resident in your destination country. You owe US federal tax on worldwide income PLUS host country tax on your worldwide income (or income sourced there, depending on the country).
The solution is tax credits and exclusions (FEIE/FTC) to avoid paying the same tax twice.
Example: $80k earned income in Portugal. Portugal: 25% tax = $20k owed. US: 12% federal rate normally, but FEIE excludes it entirely, so $0 US owed. Total: $20k tax to Portugal, $0 to US.
vs. Alternative: FTC would give you a $20k credit against the US portion, also resulting in $0 US due. Result is similar but calculation differs.
What is the FBAR and do I need to file it?
The FBAR (Foreign Bank Account Report) is required if you have any foreign bank account totaling $10,000+ at ANY point during the year. You file it with FinCEN (the Treasury Department), not the IRS.
It takes 30 minutes to file. Failure to file carries penalties of $10,000 to $100,000+ for willful violations. This is the #1 tax penalty Americans abroad face because they don't know it exists.
If you have a Portuguese bank account with $12,000 in it, you must file FBAR. If you have multiple accounts totaling $12,000, you must file FBAR. The threshold is $10,000 total across ALL foreign accounts.
File by April 15 (same as income taxes). FinCEN.gov has the e-filing system.
What is FATCA and do I need to file it?
FATCA (Form 8938, Foreign Account Tax Compliance Act) requires reporting if you have foreign financial assets exceeding $200,000 (for singles living abroad; higher thresholds apply depending on filing status and location).
FATCA is more restrictive than FBAR. It includes not just bank accounts but also stocks, bonds, mutual funds, real estate (in some cases), and other assets.
If you meet the threshold, file Form 8938 with your 1040. Penalties for non-compliance are steep.
Simple version: If you have significant foreign assets beyond a bank account, file both FBAR and Form 8938. Consult a cross-border CPA.
What's the deal with Portugal's NHR tax regime?
Portugal's NHR (Non-Habitual Resident regime) was a 10-year tax holiday (historically 2009-2019). It's now being phased out. As of 2024, NHR is significantly less generous and will be eliminated entirely after 2026.
Current NHR (2024-2026): Certain income categories are taxed at flat 10-20% (not 0%). Many income types are excluded (capital gains, Portuguese-source income).
2027+: NHR will be eliminated entirely.
Consequence: Many Americans moved to Portugal expecting no tax for 10 years, then faced a 20% bill they didn't budget for. As of 2026, NHR is not the draw it once was. Portugal's general tax rates (23-45%) are competitive but not exceptional.
Which EU countries have the lowest income taxes?
Bulgaria and Romania: ~10% flat rate (lowest in EU). Hungary: 15% flat rate. Cyprus: 0% non-domiciled for 10 years (recently eliminated for new arrivals). Czech Republic, Slovakia: ~15-19%.
However: Low-tax countries often have poor visa options for Americans. Bulgaria and Romania don't have investor/passive income visas tailored to US citizens. The EU countries with good visa options (Portugal, Spain, Germany, France) have higher taxes (23-48%).
Trade-off: Low tax (Bulgaria, Romania) but limited visa options. OR better visa options (Spain, Portugal) but higher taxes. Most Americans choose the latter.
What taxes do I pay beyond income tax?
Value Added Tax (VAT), property tax (if you buy), wealth tax (in some countries), and social security (if self-employed). These vary significantly by country.
VAT: 17-27% on most goods and services (included in prices, like sales tax). Property tax: 0.4-1.5% annually (Spain, Portugal, Germany). Wealth tax: Some countries tax total wealth annually (France, Spain, Germany). Rare and usually applies to high net worth. Social security (self-employed): 19-30% of your self-employment income in most countries.
If you're self-employed (freelancer, digital nomad), budget for 30-40% total tax burden (income + social security). If employed, your employer usually pays the employer portion of social security.
How do I file taxes in two countries without getting penalized?
File Form 1040 (US) by April 15, claiming FEIE or FTC. File your host country tax return by its deadline (usually June 30 - September 30 depending on country). Keep meticulous records.
US filing: April 15 (or June 15 if living abroad and can show hardship). Spain: June 30. Portugal: Tax return due by end of tax year (Dec 31), but payment due earlier depending on withholding. Germany: July 31 (extended deadline).
You'll need: Income records, expense records, receipts for tax deductions, proof of foreign taxes paid, Form 2555 (FEIE) or Schedule 3 (FTC).
Mistakes happen. If you miss a deadline, consult a tax CPA about penalties and remedies.
What are common tax mistakes Americans abroad make?
Not filing at all ("I'm out of the country, I don't need to file"), not claiming FEIE/FTC, forgetting to file FBAR, not paying quarterly taxes if self-employed, and mixing personal and business expenses.
Most dangerous: Not filing at all. IRS penalties for non-filing are 5% per month of taxes owed (capped at 25-75% depending on reason). This accumulates fast.
Safe: File something (even if wrong) by April 15. You can amend later. Filing late is better than not filing.
Do I still owe US state income taxes if I move abroad?
Most states don't tax non-residents. Once you move and establish residency elsewhere, you typically stop owing state income tax. However, some states (California, Maryland) try to tax based on citizenship or prior residency; consult a CPA.
California: Notoriously aggressive about pursuing former residents for taxes. Maryland: Similar aggressive stance. New York: Follows federal residency rules; once you leave, you're no longer a resident. Texas, Florida: No state income tax.
If you move from a high-tax state (California, Maryland, New York) to Europe, consult a cross-border CPA about severance of residency and state-level obligations.
What happens if I don't pay taxes I owe?
The IRS and your host country's tax authority will pursue collection. Penalties accrue (5-10% monthly interest, plus penalties). If you ignore it long enough, you can face criminal prosecution, loss of passport, or wage garnishment.
Even abroad, the IRS has long reach. Failure to file FBAR is treated as tax fraud and can carry criminal penalties.
Action plan if behind: File back taxes immediately. Consult a tax professional about penalties, interest, and payment plans. The IRS offers Streamlined Filing Compliance Procedures for people who missed filings and want to get current without criminal prosecution.
Should I hire a cross-border tax CPA?
Yes. The cost ($1,500-3,000/year) is worth avoiding penalties, making the right FEIE/FTC choice, and maximizing deductions. If you're self-employed or have substantial assets, it's essential.
What a cross-border CPA does:
- Files your US 1040, FEIE/FTC, FBAR, FATCA
- Files your host country return
- Advises on tax-efficient strategy
- Responds to IRS inquiries
DIY is possible if you have simple income (W-2 salary, remote job), but self-employment or complex situations warrant professional help.
Can I deduct housing, food, and transportation abroad?
Housing: Limited. If self-employed, part of your office space is deductible. If employed, not deductible as personal expense. Food and transportation: Only if directly tied to business.
Home office deduction: If you have a dedicated office in your apartment, the portion can be deductible (usually 10-20% of rent). Meals: Deductible only if business-related (client lunch, business meeting). Transportation: Deductible only if directly tied to business (travel to client, work commute).
Personal housing and food are never deductible. This is the same as in the US.
What happens to my US Social Security if I live abroad?
You continue to receive benefits (if eligible), but tax treatment differs. If you're a tax resident of a high-tax country, your Social Security may be partially taxable.
Social Security is taxed in the US only if your income exceeds certain thresholds (~$25k for singles). If you're in a high-tax country with other income, SS might become partially taxable.
Medicare: Generally does NOT cover healthcare abroad. If you're outside the US for >6 months, enroll in local healthcare and maintain a Supplemental insurance plan.
Want the full picture?
Our EU Tax Planning Guide goes deeper: FEIE/FTC decision worksheets, country-by-country tax rate comparisons, quarterly tax planning checklists, specific tax residency calculations by arrival date, and cross-border CPA referrals you won't find in Q&As alone.
→ Pick your own top 5 EU countries → Read the full guide
Verified August 2026 against IRS publication 54 (Tax Guide for US Citizens), FEIE 2026 amounts, and current EU tax rates. Tax law changes annually and varies by country. This is general information, not tax advice. Consult a cross-border tax professional for your specific situation.