American expat taxes in Spain

Here is something most Americans don’t realise until they’ve already moved to Spain: the United States is one of only two countries in the world that taxes its citizens based on citizenship — not where they live. That means even if you live in Madrid, pay all your taxes in Spain, and haven’t set foot in the US in years, you still have to file a US tax return every year. And that’s just the beginning.

This guide covers everything a US citizen living in Spain needs to know about their American expat tax obligations — from Spanish income tax to FBAR reporting, the Foreign Tax Credit, and the Beckham Law.

Do US citizens living in Spain have to file US taxes?

Yes — always. The US taxes its citizens and permanent residents (Green Card holders) on their worldwide income, regardless of where they live. Living in Spain does not remove your obligation to file a US federal tax return (Form 1040) each year, provided your income exceeds the standard filing threshold.

For 2024, the general filing threshold for US expats is the same as for domestic filers: $14,600 for single filers and $29,200 for married filing jointly. These thresholds are adjusted annually.

Spanish tax obligations for US citizens in Spain

Once you have lived in Spain for more than 183 days in a calendar year, you become a Spanish tax resident. This means:

• You must declare your worldwide income to the Spanish Tax Agency (AEAT)
• You file Form Modelo 100 (IRPF) annually — the standard Spanish personal income tax return
• Spain’s progressive income tax rates apply: from 19% on the first €12,450 to 47% on income above €300,000 (national rates; regional rates add additional layers)
• You may also need to file Modelo 720 if you hold foreign assets (bank accounts, investments, real estate) with a total value above €50,000

The Spain–US tax treaty: your first line of defence against double taxation

The double taxation treaty between Spain and the United States (in force since 1990) determines which country has the primary right to tax each type of income. It does not eliminate US filing obligations, but it prevents the same income from being taxed twice. Key provisions:

• Employment income: generally taxable in the country where the work is performed
• Pensions: US Social Security benefits are taxable only in the US; private pensions follow specific treaty rules
• Dividends: 15% withholding (10% for qualifying corporate shareholders)
• Interest: 10% withholding
• Royalties: 8% withholding

The treaty does not override the US citizenship-based taxation system — but it does provide tiebreaker rules and exemptions that significantly reduce the real tax burden.

The Foreign Tax Credit: your main tool to avoid double taxation

The most important mechanism for US expats in Spain is the Foreign Tax Credit (FTC), claimed on IRS Form 1116. It allows you to reduce your US tax liability by the amount of Spanish income tax you have already paid on the same income.

Since Spain’s income tax rates are generally higher than US federal rates, most US citizens in Spain end up with little or no US tax liability after applying the FTC. However, the credit has complex rules — separate baskets for different income types, carryforward provisions, and interaction with the treaty — that require careful calculation.

The Foreign Earned Income Exclusion (FEIE)

US citizens abroad can also use the Foreign Earned Income Exclusion (Form 2555) to exclude a set amount of foreign earned income from US tax. For 2024, the exclusion is $126,500. However, income excluded under the FEIE cannot also generate a Foreign Tax Credit. For expats in Spain — where tax rates are high — the FTC is usually more advantageous than the FEIE.

FBAR: reporting foreign bank accounts

If you have financial accounts in Spain (or elsewhere outside the US) with an aggregate value exceeding $10,000 at any point during the year, you must file an FBAR — FinCEN Form 114 — with the US Financial Crimes Enforcement Network. This is separate from your tax return and has its own deadline: April 15, with an automatic extension to October 15.

Failure to file an FBAR can result in penalties of up to $10,000 per violation for non-willful failures — and up to the greater of $100,000 or 50% of the account balance per violation for willful failures.

FATCA: what Spanish banks will tell the IRS

Under the Foreign Account Tax Compliance Act (FATCA), Spanish financial institutions are required to report information about accounts held by US persons to the IRS. This means the IRS is likely already receiving data about your Spanish bank accounts. FATCA reporting by US taxpayers with significant foreign financial assets is done on Form 8938, filed with the regular tax return.

Can US expats in Spain use the Beckham Law?

The Beckham Law (Spain’s special tax regime for expatriate workers) is available to qualifying individuals regardless of nationality — including US citizens. Under this regime, you pay a flat 24% Spanish income tax rate on Spanish-source income for up to 6 years, instead of the standard progressive rates.

However, US citizens using the Beckham Law must still file a US tax return. The interaction between the Beckham Law and the Foreign Tax Credit requires careful planning — particularly because the Beckham Law excludes foreign income from Spanish tax, which means there may be US tax exposure on that foreign income without a corresponding Spanish credit to offset it.

Frequently asked questions

What is the deadline for US expats to file their tax return?

US citizens living abroad automatically receive a 2-month extension to June 15 (from the standard April 15 deadline). A further extension to October 15 can be requested by filing Form 4868. However, any tax owed is still due by April 15 — extensions apply to filing, not payment.

Do I need to report my Spanish pension to the IRS?

Yes. Foreign pension accounts (including Spanish Social Security contributions and private pension plans) may need to be reported on Form 8938 and potentially on the FBAR, depending on the account value. The tax treatment of distributions from Spanish pensions depends on the type of plan and the applicable treaty provisions.

What happens if I haven’t filed US taxes since moving to Spain?

If you have missed US tax filings, the IRS offers a program specifically for non-willful expat non-filers: the Streamlined Foreign Offshore Procedures. This allows you to file 3 years of back returns and 6 years of FBARs, pay any tax owed, and come into compliance without the standard failure-to-file penalties. Acting proactively — before the IRS contacts you — is always the better option.

US–Spain tax compliance is genuinely complex. At Capital Auditors & Consultants, we work with American expats in Spain to manage both their Spanish IRPF obligations and their US reporting requirements — including FBAR, FATCA, and treaty planning. Reach out to our international team for expert guidance tailored to your situation.