US taxes for Americans in Panama

Front-loaded answerPanama taxes only Panama-source income, so your US pension, Social Security, investments, and remote salary aren't taxed locally — and Panama uses the US dollar, so there's no currency conversion either. The US still taxes you on worldwide income every year, and with no treaty you lean on the Foreign Earned Income Exclusion and Foreign Tax Credit.

Territorial tax, the dollar, and the missing treaty

Panama taxes only income earned inside Panama; foreign employment income, pensions, and investment income are exempt. There's no income tax treaty or totalization agreement with the US — but since Panama charges nothing on foreign income, there's rarely double tax to resolve. A bonus: everything is already in US dollars.

• !FEIE (Form 2555) covers earned income only — $130,000 (2025) / $132,900 (2026); pensions and Social Security don't qualify
• !The Foreign Tax Credit credits Panamanian tax — but on all-foreign income, Panama charges nothing to credit
• !Net effect for many retirees: Panama takes nothing; the US taxes your pension as usual

FBAR & FATCA

Opening a Panamanian bank account triggers the usual US disclosures. They're information reports, not extra taxes — but the penalties for skipping them are severe.

Frequently asked

Is there a US–Panama tax treaty?

No — there's no income tax treaty or Social Security totalization agreement between the US and Panama. But Panama's territorial system doesn't tax foreign income, so most Americans face no Panamanian income tax and little double-tax risk; they use the FEIE and Foreign Tax Credit on the US side.