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Living the Spanish Dream? Don’t Let Taxes Wake You Up.

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A Guide to US Expat Taxes in Spain

From the vibrant streets of Madrid to the sunny coasts of Valencia, Spain offers an incredible quality of life. But for American expats, the transition comes with a hidden carry-on item: the complexities of the US tax system.

At Expat Tax Relief, we know that moving abroad is an adventure, but navigating two different tax systems can feel like a burden. Many Americans living in Spain worry about “double taxation” or accidentally missing a filing requirement.

To help you navigate your financial landscape, we have compiled the most common questions asked by US expats in Spain.

  1. Do I really have to file US taxes if I live and work in Spain?

Yes. The United States is one of the few countries that taxes based on citizenship, not residency. This means that whether you live in Barcelona, Seville, or Bilbao, if you are a US citizen or Green Card holder, you are legally required to file a US federal tax return every year if you meet the minimum income thresholds. This applies even if you have no US-sourced income.

  1. Will I be taxed twice on the same income?

This is the #1 fear for most expats, but the good news is: Usually, no. While you have to file in both countries, the IRS provides specific tools to prevent you from paying taxes twice on the same dollar.

  • Foreign Tax Credit (FTC): Since Spanish income tax rates are generally higher than US rates, most expats in Spain use the FTC. This allows you to subtract the income tax you paid to Spain from your US tax bill, dollar-for-dollar. Often, this reduces your US liability to zero.
  • Foreign Earned Income Exclusion (FEIE): This allows qualifying expats to exclude the first $120,000+ (adjusted annually for inflation) of their earned income from US income tax.

  1. What is the “Beckham Law,” and does it help me?

Named after David Beckham, this is a special Spanish tax regime designed to attract foreign talent. If you are a new resident in Spain (and haven’t lived there in the last 10 years), you may be able to apply to be taxed as a non-resident for up to 6 years.

  • The Benefit: You pay a flat tax rate of 24% on income earned in Spain (up to €600,000), rather than the progressive scale that can go up to nearly 50%.
  • The Catch: It requires a specific application window (usually within 6 months of arriving), and it may impact how you file your US taxes. Proper planning is essential here.

  1. Do I need to report my Spanish bank accounts to the US?

Yes, and the penalties for missing this can be steep.

  • FBAR (FinCEN Form 114): If the combined value of all your non-US financial accounts exceeds $10,000 at any time during the year, you must file this form.
  • FATCA (Form 8938): If your foreign assets exceed certain thresholds (starting at $200,000 for expats living abroad), you must file this form with your tax return.

  1. How are US Social Security benefits treated in Spain?

This is a complex area governed by the US-Spain Tax Treaty. Generally, the treaty protects US Social Security benefits from being taxed by Spain, reserving the taxing right to the US. However, different regions in Spain may interpret “government” vs. “private” pensions differently. We help our clients analyze their specific pension types to ensure they are not overpaying tax in the wrong country.

  1. When are my taxes due?

The schedules for the two countries are different, which can be confusing:

  • Spain: The tax year matches the calendar year, and filings are typically due between April and June 30th.
  • USA: The standard deadline is April 15th, but expats living abroad get an automatic extension to June 15th.

How Expat Tax Relief Can Help

Managing taxes in one country is hard enough; managing them in two requires a strategy. At Expat Tax Relief, we specialize in helping Americans in Spain stay compliant and save money.

  • Full US Tax Preparation: We handle your Forms 1040, 2555 (FEIE), and 1116 (FTC) to ensure you utilize the best strategy for your situation.
  • FBAR & FATCA Compliance: We ensure your Spanish bank accounts are reported correctly to avoid IRS penalties.
  • Catch-Up Filings: Behind on your taxes? We can help you use the Streamlined Filing Compliance Procedures to get back on track penalty-free.

Don’t let tax anxiety ruin your siesta. Let us handle the paperwork so you can enjoy your life abroad.

[Contact Us Today for a Consultation]

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