U.S. EXPAT TAX GUIDE – SPAIN

What does the IRS expect me to report when I live in Spain?

Even if you live full-time in Spain, the IRS still wants you to report all of your income—no matter where it comes from.

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This includes:

Money you earn from a job or freelance work
Interest from bank accounts
Dividends from investments
Profits from selling assets (like stocks)
Pensions or retirement income

This is called your gross income—basically everything you earn before deductions.

Even if some of your income isn’t taxed by the US, it may still need to be reported on your return.

What kinds of income do I need to report?

You need to report everything you earn, no matter the source. This includes:

Earned income – wages from a job, freelance income, or any type of work you’re paid for
Unearned income – interest from a bank, dividends from stocks, capital gains from selling things, or retirement income like pensions

Even if something ends up not being taxed by the US, it usually still needs to be listed on your return.

I’m freelancing in Spain—do I have to report that income too?

Yes. If you’re doing freelance work, remote gigs, or any self-employed work while in Spain, you need to report that income to the IRS.

Even if it’s a small amount—just a few thousand dollars yearly—it still counts.

How much do I need to earn before I have to file a tax return?

This depends on how you earn your money:

If you’re working for an employer, the filing threshold is around US$15,000 (for 2025).
But if you’re self-employed, the threshold is just US$400 in net income.

The US$400 rule surprises a lot of people, especially younger travelers or digital nomads doing short-term gigs while moving around Spain.

What is self-employment tax?

Self-employment tax is a separate tax that covers Social Security and Medicare in the US.

If you’re self-employed, you have to pay this tax yourself—it’s not taken out by an employer. The rate is 15.3% of your net profit (your income after business expenses).

Even if you qualify for the Foreign Earned Income Exclusion (which helps with income tax), that doesn’t cancel out self-employment tax. Many people get caught off guard by this and realize too late that they still owe money.

Is there a way to avoid paying self-employment tax to the US?

Yes—if you’re properly registered as self-employed in Spain.

The US and Spain have a totalization agreement, which is kind of like a treaty for Social Security. It says that if you’re paying into the Spanish social security system, you don’t have to pay US self-employment tax on the same income.

You still report your income to the IRS, but you also attach a statement saying it’s covered under the agreement. That way, you won’t be taxed twice.

What if I’m self-employed in Spain?

If you’re working as an autónomo (self-employed person) in Spain and making contributions to Spain’s social security, this agreement applies to you.

Here’s what that means:

You still file a US tax return.
You report your income.
You don’t pay the US self-employment tax—as long as you’re paying into Spain’s system and you include the right statement with your return.

This is a great benefit for Americans living in Spain who work for themselves, but only if you’re officially registered and following Spain’s rules.

How can US expats avoid double taxation while living in Spain?

In general, here are the main deductions or reasons US expats use to avoid double taxation while living in Spain.

Foreign Earned Income Exclusion (FEIE): This lets you remove up to US$130,000 (for 2025) of your Spanish salary or self-employment income from your US tax return. You still have to report it, but you won’t pay tax on that amount if you qualify.
Foreign Tax Credit (FTC): If you’ve already paid income tax to Spain, the US gives you a credit for those taxes. This means you can often reduce your US tax bill to zero.
Tax Treaty: The tax treaty between the US and Spain helps avoid conflicts over who taxes what. It supports the use of credits and exclusions, especially for pensions and retirement income.
Totalization Agreement: This deal between the US and Spain ensures you only have to pay social security taxes (like pension contributions) to one country, not both. If you’re working in Spain and paying into Spain’s system, you don’t have to pay US self-employment tax either.

How do I file a US tax return while living in Spain?

Filing from Spain is very similar to filing from the US, but with a few extra forms:

Form 1040: This is the main US tax return form.
Form 2555: Use this if you want to claim the Foreign Earned Income Exclusion.
Form 1116: Use this if you’re claiming the Foreign Tax Credit instead.
FBAR (FinCEN 114): File this online if your foreign bank accounts total over US$10,000 at any time during the year.

You get an automatic extension until June 15 to file your US return from abroad. If you need more time, you can request an extension until October 15.

At the same time, if you’re a Spanish tax resident, you’ll need to file your Spanish tax return (called Modelo 100) through the Agencia Tributaria (Spain’s tax agency). This is usually done between April and June for the prior year.

If you own rental property in Spain but aren’t a resident, you’ll likely need to file Modelo 210 to declare that income.

If you’re behind on US tax filings, there’s a special program called the Streamlined Procedure. It allows you to catch up on your tax returns and FBARs without penalties, as long as your mistake was not intentional.

What are the tax rules for US expats who invest or own property in Spain?

Buying Property: Americans can buy property in Spain and many do. If you spend more than €500,000 on a home, you might qualify for a Golden Visa, which can lead to residency.
NIE Number: To buy property, you’ll need an NIE (Spain’s foreign ID number). It’s also needed for other financial transactions.
Renting Your Property: If you rent out a home in Spain, that income must be reported both in Spain and on your US return. You’ll likely use Modelo 210 in Spain, and Schedule E in the US.
Capital Gains: If you sell your property and make a profit, both Spain and the US may tax the gain. You can usually use the Foreign Tax Credit to avoid being taxed twice.
Investments: If you hold US-based stocks or bonds, you may face Spanish taxes on foreign income. The Spanish Directorate of Commerce may ask about your foreign holdings. In the US, you’ll need to report foreign investment income, and possibly capital gains or losses.
Modelo 720: If you own foreign assets (like US bank accounts or retirement accounts) worth over €50,000, Spain requires you to report them on Modelo 720—this is a Spanish form, not a US one.

How do pensions and social security work for US expats in Spain?

If you’re working toward retirement or already receiving retirement income, here’s how things work:

US Social Security: You can keep receiving your US benefits while living in Spain. The IRS and Spanish tax office may both want to tax this income, but the tax treaty helps prevent double taxation—usually through the Foreign Tax Credit.
Spanish Pension System: If you work in Spain and pay into their social security system, you can eventually qualify for a Spanish pension. The amount you get depends on your years of contributions and earnings.
Totalization Agreement: If you’ve worked in both countries but haven’t met the full requirements for a pension in either one, this agreement lets you combine your work history from both places so you can qualify.
IRA Withdrawals: If you take money out of your US Individual Retirement Account (IRA), the US will tax it. Spain might tax it too, but again, you can usually use a tax credit to avoid paying twice.
Disability & Healthcare: Spain’s social security system also covers public healthcare and benefits for people with a complete and permanent inability to work, including severe disability pensions.

If you plan to retire in Spain, it’s smart to talk with a tax advisor who understands both countries’ systems. Since retirement across borders is complex, small mistakes can often lead to bigger tax bills.

What makes you a Spanish tax resident and why does it matter?

You’re a Spanish tax resident if you live in Spain for most of the year or if your main job or family is based there. More specifically, you’re considered a tax resident if:

You spend more than 183 days in Spain in a calendar year.
Your main income or work is in Spain.
Your spouse and kids live in Spain, and you support them.

Being a tax resident means Spain can tax all of your income, no matter where it comes from. That includes income earned in the US or from investments outside Spain.

To register as a resident with the Spanish tax office, you may need to fill out Modelo 030. If you own foreign assets like bank accounts or property outside Spain, you might also need to submit Modelo 720 to report them.

If you’re not a resident, you may still owe taxes on income from Spanish sources—this is called IRNR (non-resident income tax).

Spain also offers a special deal called the Beckham Law tax regime. If you move to Spain for work and qualify, you may only be taxed on income earned in Spain for up to six years. This could reduce your taxes if you still earn income from outside Spain.

Being a tax resident also matters for things like the exit tax, which could apply if you leave Spain permanently and have a high level of assets.

What tax deductions and credits can US expats in Spain claim?

If you’re a US citizen living in Spain, you may qualify for more than just the common tax benefits like the foreign tax credit (FTC) or foreign earned income exclusion (FEIE). Here are other deductions and credits to consider:

Child Tax Credits: If you have a child under 17 with a US Social Security number, you may be able to claim up to US$2,000 per child (US$1,700 refundable), depending on your income and filing status.
Employment-Related Deductions: If you pay for job-related training or certifications, those may qualify as professional training deductions.
Business Expenses: If you’re self-employed, you can deduct things like office supplies, internet, travel expenses, and software you use for work. These are claimed on your US return.
VAT Credits (in Spain): Businesses in Spain may be able to deduct value-added tax (IVA) paid on eligible business purchases. This is separate from your US taxes but helps reduce your Spanish tax bill.
Real Estate Deductions: If you rent out property in Spain, you can deduct certain costs like repairs, insurance, and maintenance expenses on your Spanish return.
Dividend Tax Credit Elimination: If Spain taxes your investment dividends and you report the same income in the US, you can use Form 1116 to reduce or cancel out the double tax.
Habitual Residence Tax Credit (in Spain): If you qualify as a permanent Spanish resident, this credit may reduce your local income taxes based on your income level.

It’s best to always check with a tax advisor who knows both the US and Spanish tax systems to help you get all the deductions and credits you qualify for.

What types of income are taxable in Spain for US citizens?

If you’re a Spanish tax resident, then Spain taxes your worldwide income. That means income from both Spain and outside of it—including anything you earn in the US.

Here are the common types of income Spain may tax:

Wages or salary from a job.
Self-employment income, including freelance work.
Rental income from property you own and rent out.
Investment income like dividends and interest from stocks or bank accounts.
Capital gains, which are profits from selling property, shares, or other investments.
Equity compensation like stock options or restricted stock units (RSUs).
Pensions, including Spanish pensions and possibly Spanish state pension benefits.

Spain separates income into two types:

General income, which includes wages, business income, and rental profits.
Savings income, which includes dividends, interest, and capital gains.

If you’re not a Spanish tax resident but still earn money from Spain (for example, you rent out a property), you’ll be taxed as a non-resident. This means you’ll likely file Modelo 210 and pay IRNR (non-resident income tax).

Even if you qualify for the Beckham Law, only Spanish income is taxed—income from the US and other countries is excluded for a limited period (usually six years).

You might also need to report foreign assets like bank accounts or investments using Modelo 720 if you’re a resident and the assets exceed €50,000.

What kinds of taxes will I encounter in Spain as a US expat?

Income Tax (IRPF): This is Spain’s personal income tax, officially called impuesto sobre la renta de las personas físicas (IRPF). Rates go from around 19% to 47%, depending on how much you earn.
Value-Added Tax (IVA): Like a sales tax, this is charged on most goods and services. The standard rate is 21%, though lower rates apply to some items like groceries or public transport.
Wealth Tax: If your assets exceed certain thresholds (which vary by region), you may owe a wealth tax on your total assets—including property, bank accounts, and investments.
Property Tax (impuesto sobre bienes inmuebles): If you own a home or apartment in Spain, you’ll pay an annual property tax based on its cadastral value (a government-assessed value used for taxes).
Estate and Gift Tax: If you inherit money or receive a large gift, you may owe tax. Rates and rules vary by autonomous community (the Spanish regions).
Exit Tax: If you leave Spain and own over €4 million in global assets, or have shares over certain limits, you might be subject to a tax on unrealized gains (the exit tax). This is only for certain high-asset taxpayers.

All of this is managed by Spain’s national tax agency, the Agencia Española de Administración Tributaria (AEAT). In addition, local regions may add extra rules or deductions based on where you live.

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