US taxes for Americans in Portugal
What moving to Portugal does to your IRS filing — the exclusions and credits that stop double taxation, the reports you must file, and the Portuguese rules that apply once you're resident.
Front-loaded answerAs a US citizen in Portugal you file two tax systems: the IRS (on worldwide income, every year, because the US taxes by citizenship) and Portugal (as a tax resident once you spend 183+ days there). The US–Portugal treaty, the Foreign Earned Income Exclusion, and the Foreign Tax Credit are what keep almost all Americans from paying tax twice on the same income.
Your US filing doesn't go away — but double tax usually does
The US is one of the only countries that taxes citizens on worldwide income regardless of residence, so your Form 1040 continues. Two tools do the heavy lifting: the Foreign Earned Income Exclusion (FEIE) for earned income, and the Foreign Tax Credit (FTC) for tax you've already paid to Portugal.
| Tool | What it covers | 2025 figure |
|---|---|---|
| FEIE (Form 2555) | Earned income (salary, freelance) | $130,000 (2025); $132,900 (2026) |
| Foreign Tax Credit (Form 1116) | $-for-$ credit for Portuguese tax paid | No fixed cap |
| Foreign Housing Exclusion | Qualifying housing costs abroad | On top of FEIE |
- FEIE applies to earned income only — pensions, Social Security, and dividends don't qualify
- For passive income, the Foreign Tax Credit (not the FEIE) is the tool that prevents double tax
- Once Portuguese rates exceed US rates on the same income, the FTC often wipes out the US bill entirely
The reports that catch Americans out: FBAR & FATCA
Opening a Portuguese bank account triggers two US disclosures. These are information reports, not extra taxes — but the penalties for skipping them are severe.
The Portugal side: residency, rates, PFIC & IFICI
Portugal sideSpend 183+ days in Portugal and you become a Portuguese tax resident, taxed on worldwide income at progressive rates of 13%–48%. The Social Security totalization agreement between the US and Portugal stops you from paying into both systems on the same earnings.
- PFIC trap: most EU-domiciled mutual funds/ETFs are punitively taxed by the IRS — hold US-domiciled funds instead
- NHR closed to new applicants in 2024; the successor IFICI grants a 20% flat rate only to qualifying tech/science/health/green roles and excludes pensions
- Use a preparer who specializes in US–Portugal returns; the treaty, FTC ordering, and PFIC rules are not DIY territory
Frequently asked
- Does the US–Portugal tax treaty stop double taxation?
- Largely, yes. Combined with the Foreign Tax Credit and Foreign Earned Income Exclusion, the treaty ensures most Americans in Portugal don't pay tax twice on the same income — though you still must file a US return every year.
- Can retirees use the Foreign Earned Income Exclusion in Portugal?
- No. The FEIE only covers earned income such as wages or self-employment. Pensions, Social Security, and dividends are passive income, so retirees rely on the Foreign Tax Credit and the treaty instead.
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Verified against official sources. Every figure on this page is checked against primary US (IRS, State Dept., SSA) and Portuguese (AIMA, Autoridade Tributária) government sources and dated. Maintained by the Plan B Atlas editorial team.
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