US Taxes in Spain (2026): A Practical Guide to Wealth & Financial Planning
Whether you’re already living in Spain or planning your move in the coming year, knowing how taxes and financial planning work as a US citizen abroad isn’t optional, it’s essential. Unlike most countries, the United States taxes its citizens on worldwide income, and Spain taxes residents on worldwide income too, which means the rules overlap and can create traps if you’re not prepared.
This guide breaks down what you need to know about tax obligations, reporting deadlines, investment compliance, retirement planning, and most importantly, what actions to take now to protect your financial future.
In a recent webinar I hosted, I sat down with a US–Spain tax attorney (Carlos) and a cross-border financial advisor (Rob) to break down what actually matters for US expats in Spain, and what people often get wrong.
Do US Expats Living in Spain Have to File Taxes in Both Countries?
Yes. US expats living in Spain are required to file tax returns in both the US and Spain, even if they don’t ultimately pay taxes in both.
During the webinar, Carlos explained that this happens because the US taxes based on citizenship, while Spain taxes based on residency. Even if you are physically outside the US, the IRS still requires you to file your 1040 form annually, report your worldwide income, and meet reporting obligations like FBAR and FATCA.
In Spain, tax residency triggers a requirement to report your worldwide income, including US earnings, investments, and pensions. Filing in both countries is normal, and the key is to coordinate reporting to avoid double taxation. Using the Foreign Tax Credit or exclusions can help reduce US tax liability if you are already paying taxes in Spain.
How Does Spain Determine If You Are a Tax Resident?
Spain considers you a tax resident if you spend more than 183 days in the country in a calendar year, have your main economic interests there, or your immediate family lives in Spain. Meeting just one of these criteria can trigger residency.
In the webinar, Carlos emphasized that many US expats misunderstand how residency is calculated, which can lead to unexpected tax obligations. Here’s the detailed breakdown:
1. Time Spent in Spain (183 Days Rule)
Spending more than six months and one day in Spain during a calendar year typically makes you a tax resident.
Even partial-year moves can matter if your total days exceed this threshold.
Keep careful records of travel, as Spain may request proof of presence, such as flight tickets or rental contracts.
2. Economic Interests
If your main source of income, business, or investments is based in Spain, you may be considered a tax resident.
For example, if you earn more than 50% of your total income from Spanish sources or have a business registered in Spain, this criterion applies.
Even if you spend less than 183 days in Spain, having significant economic ties can trigger residency.
3. Family Ties
If your spouse or dependent children live in Spain, you are likely considered a resident.
This applies even if you, personally, spend less than 183 days in the country.
Carlos explained in the webinar that while there are ways to prove otherwise, in practice, family presence strongly influences tax residency.
4. Visa Type and Practical Implications
Some visas may affect how Spanish authorities view your tax obligations, but in practice, most expats will need to report and pay taxes in Spain if they meet any of the criteria above.
For example, non-lucrative visa holders, digital nomads, or work visa holders may have different reporting nuances, but residency rules still apply.
5. Worldwide Income Obligation
Once you are a Spanish tax resident, Spain taxes your worldwide income. This includes:
US-based employment
Investment dividends
Rental income anywhere in the world
Retirement account distributions
Coordinating with a US tax advisor is essential to avoid double taxation and to claim foreign tax credits where possible.
Does Filing Taxes in Both the US and Spain Mean Double Taxation?
No. While you must file in both countries, you usually don’t pay tax twice on the same income.
Carlos and Rob explained that double taxation is typically avoided through treaties, foreign tax credits, and exclusions. For example, if you pay income tax in Spain, the US IRS allows you to claim a credit for those taxes, reducing your US tax liability.
Most US expats rely on a combination of:
Foreign tax credits
Income exclusions (where applicable)
Treaty rules that determine which country has primary taxing rights
However, coordination is critical. Filing incorrectly, missing deadlines, or misreporting can create unnecessary penalties or tax exposure. The key takeaway from the webinar: plan proactively, not reactively, to minimize risk.
What Are the Key US and Spanish Tax Deadlines for US Expats?
US expats and Spain-based Americans need to track separate deadlines carefully to avoid penalties.
US deadlines:
April 15: standard 1040 filing
June 15: automatic extension for expats
October 15: extended filing if requested
Spain deadlines:
March 31: Form 720 (report foreign assets > €50,000)
April–June: IRPF (personal income tax return)
Additional forms (e.g., Form 721) may apply for foreign financial assets
Carlos emphasized that extensions generally apply to filing, not always to payment, so you may still need to pay taxes by the standard date. Preparing early ensures smoother compliance.
Do US Expats in Spain Have to Pay Spain’s Wealth Tax?
Yes, Spanish wealth tax applies to residents based on worldwide net assets, but the amount depends on the region.
Some regions, like Madrid, offer rebates for most expats, whereas Catalonia has one of the highest effective tax rates. For non-lucrative visa holders and retirees, this is particularly important, as wealth tax can become the largest annual tax liability, even if other income is low.
Practical tip: Consider your choice of region when moving, as residency location can affect your overall tax exposure. Spain’s regional wealth tax can be likened to US state income taxes — some regions are “sticky” while others are more favorable.
Why Do US Expats Lose Access to Brokerage and Investment Accounts After Moving?
Many US brokerage accounts restrict or freeze services once a client moves abroad due to regulatory and reporting rules.
Rob explained that:
US firms may no longer legally maintain accounts for residents abroad
Non-US institutions often refuse US clients due to FATCA reporting obligations
Without the right custodian, even well-structured portfolios may be inaccessible
The solution is to work with expat-friendly custodians who can hold investments legally and compliantly in both jurisdictions.
What Are PFICs and PRIPs — and Why Do They Matter for US Expats in Spain?
PFICs and PRIPs are regulatory rules that limit which investments US expats in Spain can hold, and ignoring them can trigger severe tax consequences or account restrictions.
PFICs (Passive Foreign Investment Companies)
PFICs are essentially non-US mutual funds and ETFs. From a US tax perspective, they are treated very differently than US-domiciled funds. In the webinar, Rob explained that US citizens investing in PFICs can face:
Punitive taxation on capital gains, sometimes up to 50–60%
Complex reporting obligations that increase accounting costs
Unexpected tax bills, even if the investment performs normally
Many US expats assume European mutual funds or ETFs are safe, because they are common in Spain, but for US tax purposes, PFICs are extremely costly if not managed correctly.
PRIPs (Packaged Retail Investment and Insurance-based Products)
PRIPs are EU regulations designed to protect retail investors by requiring investment funds to provide standardized disclosure documents. However, this creates a problem for US-domiciled funds:
Many US mutual funds (including common IRAs and 401(k) funds) do not produce PRIPs-compliant documents
European custodians or banks often refuse to sell these funds to US residents in the EU
This creates a regulatory deadlock:
You can’t invest in EU funds (PFICs are too expensive for US tax purposes)
You may lose access to US funds due to PRIPs
Why This Matters for US Expats in Spain
During the webinar, we emphasized that without careful planning, US expats are left with very limited options for compliant investing:
Many standard European investment funds are PFICs, making them tax traps
Many US-based funds become unavailable once your address is in Spain
Custody becomes a major issue — using the wrong custodian can freeze your accounts
The solution, as discussed, is to:
Use US-compliant portfolios through specialized custodians that serve expats
Invest in direct stocks and bonds rather than PFIC funds
Coordinate with cross-border financial advisors to ensure compliance with both US and EU rules
Can You Move a US 401(k) or IRA to Spain Without Paying Taxes?
No. Moving US retirement accounts abroad generally triggers a taxable distribution, often with significant US and Spanish tax consequences.
Instead, the recommended approach is to plan withdrawals, account structuring, and timing before becoming a Spanish tax resident. Carlos and Rob stressed early review of retirement accounts to avoid penalties and unexpected taxation.
Why Is Financial Planning Easier Before Moving to Spain?
Planning before you move gives you more options and fewer complications once you’re a Spanish tax resident.
After residency begins:
Reporting obligations expand
Account restructuring becomes harder
Some investment options and trusts may no longer be recognized
Rob explained that early planning ensures continuity of income, proper account custody, and compliant investment structures, avoiding headaches after arrival.
What Should US Expats Do Before or After Moving to Spain?
US expats should review tax residency, account access, investment compliance, and retirement strategy as early as possible.
I recommend starting with the following:
Review US tax returns and investment accounts
Identify all global assets
Review custody options and cross-border investment compliance
Coordinate tax and financial advisors in both countries
Plan retirement accounts and withdrawals
Even if you can’t act on everything immediately, having this visibility prevents costly mistakes.
Final Thoughts From Hosting the Webinar
Most challenges US expats face in Spain are planning problems, not tax-rate problems.
Carlos emphasized that early, coordinated planning is the difference between a smooth transition and unexpected penalties. The earlier you understand residency, account access, and compliance, the more freedom you have to structure your finances and enjoy life in Spain.
