How to Financially Plan a Move from the US to Spain: 401(k), Taxes, and Property Explained
Moving to Spain is an exciting new chapter—but it comes with serious financial considerations, especially for Americans. From managing retirement accounts to understanding Spanish taxes, this guide covers the essential financial decisions to make before and after your move. Whether you're retiring or relocating for lifestyle, we've got your bases covered.
Why Financial Planning for Spain Is Different
As a US citizen, you face unique cross-border financial rules that can have a huge impact on your investments, taxes, and even retirement income. That’s why we teamed up with SJB Global, experts in international financial planning, to walk through the top questions Americans have when making the leap to Spain.
Before You Move: Critical Financial Steps
Should I Roll Over My 401(k) Before Moving?
In most cases, rolling over your 401(k) into an IRA before relocating to Spain is a smart move. Here’s why:
Simplification: Many Americans have multiple 401(k)s from previous jobs. Consolidating them into a single IRA streamlines account management and makes it easier to plan for retirement income. It's much simpler to draw from one or two accounts than track multiple custodians.
Flexibility: IRAs generally offer a broader range of investment options compared to employer-based 401(k)s. This flexibility allows for a more customized strategy, including investment types that align with your risk profile and income goals as a retiree in Spain.
Custodian Support: Not all US-based providers allow you to keep your account once you become a non-resident. By rolling over in advance to a custodian like Schwab or Fidelity that supports expatriates, you avoid being forced to move funds under time pressure later.
Ongoing Management: 401(k)s often don’t allow independent advisors to manage the assets. IRAs give you the freedom to work with a cross-border financial planner who understands both US and Spanish tax frameworks.
Bottom Line: Rolling over to an IRA gives you more control, clarity, and compliance.
What About a Roth Conversion?
Roth conversions can be a valuable tool in your tax planning strategy, especially before you become a Spanish tax resident. Here's what you should know:
US Taxable Event: When you convert a traditional IRA to a Roth IRA, you're creating a taxable event in the US. If your income is relatively low in the year before your move, this can be an opportunity to convert at a lower tax rate.
Spanish Tax Treatment: Unfortunately, Spain does not recognize the Roth IRA as a tax-sheltered vehicle. To Spanish tax authorities, Roth accounts are treated as standard brokerage accounts. This means gains and withdrawals may be subject to Spanish taxation.
Strategic Use: Roth conversions can still make sense if you're using them to lock in lower US tax rates, and if you plan to repatriate to the US eventually. But if you intend to stay in Spain long-term, other strategies may be more tax-efficient.
Tip: This decision should be made with the input of a cross-border financial advisor and potentially a tax specialist.
Should I Sell My US Property?
Yes, if your property has appreciated significantly, it’s often financially advantageous to sell it before you become a Spanish tax resident.
US Tax Exclusion: In the US, homeowners can exclude up to $500,000 in capital gains if married ($250,000 if single) when selling a primary residence.
Spain Taxes Global Income: Once you're a resident in Spain, the entire capital gain from the property sale becomes subject to Spanish taxation. This can be as high as 28%, leading to potentially six-figure tax bills.
Example: Selling a $1M house bought at $500K = $500K capital gain.
In the US: Potentially zero tax if married.
In Spain: €140K+ in tax at 28%.
Recommendation: If you're confident about leaving your US base behind, sell your property before you relocate to minimize capital gains exposure.
📞 Book Your Free Call with a Vetted Cross-Border Financial Advisor
Ready to get personalized advice on managing your 401(k), avoiding wealth tax, or planning your income as a US expat in Spain? Schedule a no-obligation call with one of our trusted financial experts today.
Claim Your Free Financial ConsultationShould I Change My State Residency?
Changing your state of domicile before moving abroad is a nuanced decision but can yield substantial tax benefits.
Aggressive States: States like California, New York, and New Mexico may try to maintain a tax claim on your income even after you leave the country.
Tax-Friendly States: Moving to a no-income-tax state like Florida or Texas before leaving the US can potentially shield you from state-level taxation in the future.
Important: To successfully change your state residency, you may need to:
Establish a physical address
Get a driver's license
Register to vote
File a "final" state tax return
If you can't change your domicile, document your exit carefully to minimize future tax liabilities.
After You Arrive: Smart Financial Management in Spain
🏦 Can I Keep My US Brokerage Accounts?
Yes, but only with brokers that support non-resident clients. Providers like Schwab and Fidelity allow expats to maintain IRAs and brokerage accounts, making them popular options for Americans abroad.
Why it Matters: Some firms will force closure once you report a non-US address. Others may freeze your ability to trade.
What to Do: Before you move, contact your brokerage to confirm continued eligibility, or proactively transfer to a firm with international client support.
This allows you to maintain your investment accounts with minimal disruption.
Can I Still Invest in the US After Moving?
Yes, but you need to be very selective about the assets you choose, due to IRS and Spanish tax rules.
PFIC Rules: Most non-US mutual funds and ETFs are classified as PFICs (Passive Foreign Investment Companies) by the IRS. Gains on PFICs are taxed at punitive rates (up to 45%).
Compliant Strategy: Stick with direct investments in stocks and bonds or work with advisors who can build PFIC-compliant portfolios.
Currency Strategy: Want to reduce dollar exposure? Ask about euro-denominated portfolios that are still compliant for US citizens.
Diversification Idea: Consider annuities or fixed index products that offer downside protection while maintaining exposure to US markets.
Navigating Spanish Taxation
Do I Pay Tax Twice?
In theory, no. In practice, maybe temporarily.
The US and Spain have a double taxation agreement. This lets you apply foreign tax credits to avoid paying tax on the same income in both countries.
However, you may be taxed at source by the US (especially on retirement income), and need to apply for credits later when filing your Spanish tax return.
Best Practice: Work with an advisor familiar with cross-border filings to avoid missed credits or overpayments.
| Asset Type | US Tax Treatment | Spanish Tax Treatment | Planning Tip |
|---|---|---|---|
| 401(k) / Traditional IRA | Tax-deferred, taxed on withdrawal | Taxed on receipt as income | Withdraw strategically to manage brackets |
| Roth IRA | Tax-free withdrawals | Treated as regular investment account | Roth loses tax shield in Spain—plan accordingly |
| US Rental Property | Taxable, with depreciation and deductions | Taxable at full rental income, limited deductions | Report globally, prepare for limited write-offs |
| Mutual Funds (US) | Standard capital gains/dividends | Taxed on distributions/gains | OK to hold, but monitor distributions |
| Non-US Mutual Funds | Penalized under PFIC rules | Taxed as foreign investments | Avoid completely to prevent IRS penalties |
| Capital Gains | Progressive long-term rates | 19–30% based on bracket | Use timing to minimize tax year impact |
| Wealth | No federal tax | Taxed annually above thresholds | Use 60% rule and regional exemptions |
What Is Wealth Tax and Will I Owe It?
Spain applies an annual wealth tax on your global net worth—including investments, properties, and cash.
Thresholds vary by region (e.g., €800,000 in Valencia, €1M in Basque Country, exempt in Madrid and Andalusia).
Rates range from 0.25% to 3.5%, depending on wealth level and region.
Key Strategy: Use the 60% Rule
Wealth tax cannot exceed 60% of your taxable income.
By optimizing your income mix (e.g., more capital gains, fewer dividends), you can reduce your tax bill dramatically.
Real Example: A couple with €10M net worth and €150K income cut their wealth tax in half by shifting from dividends to long-term capital gains.
📞 Book Your Free Call with a Vetted Cross-Border Financial Advisor
Ready to get personalized advice on managing your 401(k), avoiding wealth tax, or planning your income as a US expat in Spain? Schedule a no-obligation call with one of our trusted financial experts today.
Claim Your Free Financial ConsultationWhat Are Spain’s Income and Capital Gains Tax Brackets?
📃 Income Tax (General Income):
19%: up to €12,500
24%: up to €20,000
30%: up to €35,000
37%: up to €60,000
45–50%: above €300,000 (depends on region)
📈 Capital Gains / Savings Tax:
19%: up to €6,000
21%: up to €50,000
23%: up to €150,000
27%: up to €250,000
30%: above €300,000
Note: Dividends, interest, and gains are all lumped under savings income.
Rental Income, Bank Accounts, and Miscellaneous
Is US Rental Income Taxable in Spain?
Yes. Once you become a Spanish tax resident, worldwide income, including US rental income, must be declared. This income is subject to progressive tax rates just like your Spanish-earned income.
You may also be able to deduct certain expenses related to the property, but rules vary and documentation must be airtight.
Should I Open a Spanish Bank Account Before Moving?
Opening an account is tricky without a NIE (Foreigner ID Number) or TIE (residency card).
If you already have legal residency, go ahead and open a Spanish account before your arrival. Otherwise, wait until you obtain your documentation. In the meantime, international accounts (like Wise or Revolut) can bridge the gap.
Final Thoughts
Relocating from the US to Spain involves more than visas and housing. Your financial setup must comply with the rules of both countries and adapt to your new lifestyle.
Key Takeaways:
Consolidate and rollover accounts before moving
Work with US-friendly custodians like Schwab
Avoid PFICs and use direct investments
Sell appreciated US property before relocation
Plan ahead for wealth tax and use the 60% rule
Talk to cross-border financial advisors and tax pros
How We Can Help
Coming to Spain partners with top cross-border financial advisors like SJB Global to offer US citizens peace of mind when relocating. From retirement accounts to Spanish wealth tax planning—we’ve got you covered.
🗓️ Book a free consultation and build your custom relocation financial plan today.
📞 Book Your Free Call with a Vetted Cross-Border Financial Advisor
Ready to get personalized advice on managing your 401(k), avoiding wealth tax, or planning your income as a US expat in Spain? Schedule a no-obligation call with one of our trusted financial experts today.
Claim Your Free Financial Consultation