Guide to US Taxes in Spain for American Expats

Spain is best known for its exotic beaches, flamenco, and paella. Located on Europe’s Iberian Peninsula, this country of over 47 million people is home to seventeen autonomous regions – each rich in history and culture. Spain is an attractive option for those looking to bask in the sun while enjoying low living costs and affordable property! If you’ve made the move to Spain and seek guidance on filing US expat taxes while enjoying the sunny lifestyle, you’re in the right place.

Expat Taxes in Spain: Jump To a Topic

• Who Needs to File US Taxes from Spain? 
• Expat Tax Deadlines
• Catching Up When You Haven’t Filed from Abroad 
• Tax Filing Status – Single? Married?  
• Child Tax Credits
• How to Avoid Double Taxation 
• Self-Employment Taxes
• Investing from Spain 
• Property Ownership and Rental
• Retiring Abroad in Spain 
• Help to file your US Taxes from Spain

Who needs to file US Expat Taxes from Spain? 

From our experience, many Americans need to be aware of their tax obligations in their home country once they move abroad. It’s no wonder. The US is just one of two countries in the world whose citizens must file taxes annually, even when they live outside the United States! 

Are you living and working in Spain? Are you a US citizen or a US Green Card Holder? If you answered yes, you would likely need to file US Expat Taxes from Spain annually. The IRS general filing requirements demand that anyone who is either a US citizen OR a Green Card Holder who meets or surpasses the minimum income threshold must file US Taxes in Spain annually.  

In 2024, you’ll need to file a tax return if, in 2023, you:

• You earned more than $13,850 or,
• You make any self-employment income over $400, or
• You are married, filing separately, and earn any worldwide income over $5

The IRS has a helpful calculator if you are still trying to decide whether to file a tax return.

IRS Deadlines for US Expat Taxes in Spain 

It happens to the best of us: sipping sangria in Seville, wholly carefree, and then you remember it’s March, almost tax time. It’s okay; we have all been there. Americans living in the US commonly file their taxes by April 15th. However, expats receive an automatic deadline extension. MyExpatTaxes believes filing taxes earlier than later is better, but life happens when tax season lurks.

2024 Tax Deadline for US Expats

April 15th	Deadline if you owe US taxes or live in the US
June 17th	Expat Tax Filing Deadline!
October 15th	FBAR & Tax Extension Deadline No.1 – by digital request
December 16th	15th: Tax Extension Deadline No.2 – by written request

Did you know?

If any deadlines land on a public holiday or weekend, then deadlines are moved forward to the next weekday. For 2024, June 15th will land on a US Holiday, so that the official deadline will change to the next business day, June 17th. This situation is similar to the December 15th Deadline (December 16th in 2024). Now that you know the deadlines, we recommend putting a reminder on your calendar about a month in advance for the following year. 

The Streamlined Procedure

Suppose you are a new expat or have yet to realize your US tax responsibilities abroad; the Streamlined Procedure may be a solution. This procedure provides amnesty and a grace period for Americans (including Accidental Americans). This is so you can get caught up on their US expat taxes, even in Spain. Through this program, you may file a limited number of past returns and FBARs without fear of penalties. 

The Streamlined Procedure is only available for expats who have yet to be contacted by the IRS asking where their missing returns are. Not only does this ease the burden of chasing down accidental “tax evaders” for the IRS, but it also helps encourage US expats abroad who were unaware they needed to file to report their foreign assets and income. Be a good friend and let your other American Expat friends know! 

MyExpatTaxes offers the most affordable and transparent pricing for the Streamlined Procedure at just 749€. Through us, you can file all the necessary FBARs and tax returns with the help of a Tax Professional who will assist and sign off on your submission. 

Filing US Taxes for Families Abroad 

We hope, at this point, you have been able to determine if you need to file your US income taxes. Now is the time to talk about filing statuses. 

If you are single, you will file under “single.” 

Are you married to a US Citizen or Green Card Holder? Then, you both are required to report your foreign income and assets, making “Married-Filing-Jointly” the best option. Just like love, the IRS knows no borders when it comes to married US couples. 

Now, things are different if you are married to a NON-US Citizen or Green Card Holder and living in Spain. As your spouse is not required to file a tax return, your most common filing status will be “Married-Filing-Separately.” 

The final filing status is “Head-of-Household.” HOH applies to those who pay more than half the costs to take care of their home/ household during the tax year with a qualifying child and are considered unmarried to the IRS.

MyExpatTaxes Fun Fact: Those married to NRA (Non-Resident Aliens) are considered unmarried for this filing status. If this sounds like you, consider this filing status!

Child Tax Credits for US Families Living Abroad in Spain

Independent of your filing status as a parent living in Spain, you may qualify to claim the Child Tax Credit. This bonus is $1,600 per child through refundable tax credits. 

This refund is available for those who do not have to file the Foreign Earned Income Exclusion (FEIE, Form 2555). The FEIE must be filed if you live abroad and earn over $120,000 (the most recent maximum annual exclusion rate). 

If you and your family have just moved abroad and spent at least half of the prior tax year in the US, you may qualify for the higher Child Tax Credit.

Avoiding Double Taxation 

We all know that the IRS loves to use acronyms, and we are sure that if you have worked in the US, you are familiar with a 1040. Are you familiar with the FEIE, FTC, FACTA, and the notorious FBAR? 

To protect you from double taxation, there are the following: 

Forms that help avoid double taxation such as:

•  FEIE (Foreign Earned Income Exclusion)
• FTC (Foreign Tax Credit)

Additionally, you’ll need forms for reporting your foreign assets, such as:

1. FATCA (Foreign Account Tax Compliance Act)
2. FBAR (Foreign Bank Account Report)

US Self-Employment taxes from Spain

No matter where you are, being self-employed is a huge accomplishment! As a self-employed person living in Spain, we are positive you have brushed up on local law and tax obligations, but what about filing your US taxes? 

To keep it simple, here are three crucial things to know for the self-employed in Spain: 

1. Expats may need to pay around 15.3% of net profit in Self-Employment taxes to the US government. 
2. Anyone who earns $400 or more per year from Self-Employment should be filing US Taxes from Spain.
3. Since 1988, the US and Spain have had a totalization agreement. This means you can use the treaty to offset US Self-Employment taxes. 

It is a common mistake that US citizens filing their self-employment taxes abroad end up owing the incorrect amount on their returns. Let MyExpatTaxes help ensure this doesn’t happen to you! 

Investing in Spain as an American 

It is never too early or too late to begin investing money. Although the US has stricter rules for those wanting to invest while living abroad, it is still possible. Let’s go over the basics together. 

Common Ways to Invest in Spain: 

RAs/ Roth IRAs: The most straightforward way to invest as an American abroad for retirement is through these accounts. As an expat, you can invest up to $6,500 annually in a retirement account, assuming you are eligible based on the IRS’s contribution requirements.

Property: Purchasing property in Spain as a foreigner is not only the fast track to residency in Spain thanks to the Golden Visa Scheme but can be an excellent investment. 

US-Based Stocks & Bonds: Keeping your money and portfolio US-based is another simple way to invest your money. Foreign investment products like mutual funds, often incur higher tax rates and fees. 

While living abroad, it is vital to check with a local tax advisor to help you understand the full spectrum of responsibilities of US-based investments during your time in Spain. 

All About Property in Spain

Whether purchasing a parcel of property to live permanently, rent out, or simply for investment, property is a common way to invest worldwide. Luckily for foreigners living in Spain, purchasing property is relatively easy once you have obtained an “NIE.”

Important to know when acquiring property in Spain: 

• There is a 6-10% property transfer tax for existing properties; VAT is around 10% for new properties 
• External costs such as notary, title deed tax, and land registration fees will also vary 
• Legal fees are between 1-2%, including VAT 

As the Spanish property market has varied dramatically over the last decade, it is now considered a “recovery” phase. That means now would be an excellent time to purchase as prices are still low, but the market is becoming more stable each year. 

Not only can purchasing property in Spain be a tremendous investment for your money (House Hunters International, here you come!), but it also helps you obtain a “Golden Visa” if the home is worth more than 500,000 euros. 

Once you’ve purchased your property or home in Spain, you must pay Income Tax, Capital Gains Tax, and Real Estate Tax annually. If this is your plan, we highly suggest contacting a Spanish accountant to help you keep things in order. 

Renting in Spain

Renting when first moving abroad is almost always the safest option. When searching for a rental property, here are some things to be aware of: 

1. Most homes and apartments in Spain are owner-occupied, meaning prices can be competitive and expensive.
2. Spain recently passed new laws to improve the rental housing market, allowing regional governments to impose rent caps in cities where the housing market is tight. 
3. Most expats flock to Madrid, where prices for a one-bedroom apartment can be as high as 1,300 euros per month. Consider looking outside of the big cities to enjoy lower rental costs. 

Retiring Abroad in Spain

With the regular Spanish sunsets, tapas, and fresh seafood, it is no wonder Spain attracts retirees worldwide! With its proximity to major European cities as well as African destinations, Spain is a cultural hub ideal for those looking to spend their newly found free time learning and discovering daily. 

To retire in Spain, you’ll need to either: 

1. Apply for a long-term residency card at least three weeks before your initial 90-day stay ends in Spain. To qualify for a long-term residency card, you will be required to show a minimum of 25,000 euros in a Spanish bank or, 
2. Purchase property worth at least 500,000 euros 

Before retiring in Spain, here are some ways you can save your hard-earned money: 

1. Spanish pension through your Spanish employer. Any contributions your employer makes to your retirement fund in Spain are taxable in the US during that tax year. Simply put, it is not deferred and usually does not impact your US expat taxes. 
2. Spanish state pension, this income is taxed when paid out, though, as there is currently no tax treaty benefit for Spanish Social Security Benefits.
3. IRA, US Individual Retirement Account 
4. US Social Security Benefits 

Get Help Filing US Taxes in Spain! 

Are you still unsure how to file your US expat taxes from Spain? Do you have questions beyond what our guide answered? MyExpatTaxes is here to help! We are not only expats but professional tax experts! You can find help via our Support Specialist Chat once you are ready to begin your tax return at any time for support and in the Help Center. 

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