US taxes for Americans in Spain

Front-loaded answerAs a US citizen in Spain you file two systems: the IRS on worldwide income every year, and Spain once you're a tax resident (183+ days). The US–Spain treaty, the Foreign Earned Income Exclusion, and the Foreign Tax Credit keep most Americans from being taxed twice — and qualifying employees can elect the Beckham regime's flat 24% instead of Spain's progressive rates.

Your US filing continues — treaty, FEIE & FTC

The US taxes citizens on worldwide income regardless of residence, so your Form 1040 continues. The Foreign Earned Income Exclusion covers earned income; the Foreign Tax Credit covers Spanish tax you've already paid; and the US–Spain treaty (in force since 1990) backs both up.

• !FEIE applies to earned income only — pensions and Social Security don't qualify; retirees use the Foreign Tax Credit
• !Avoid EU-domiciled funds/ETFs — US "PFIC" rules make them a tax headache for Americans

FBAR & FATCA — the reports that catch Americans out

Opening a Spanish bank account triggers two US disclosures. They're information reports, not extra taxes — but the penalties for skipping them are severe. (Spain separately has its own Modelo 720 foreign-asset report for residents.)

The Beckham Law & Spain's resident rates

Beckham LawSpain's Special Expats' Tax Regime (the "Beckham Law") lets qualifying employees who relocate to Spain pay a flat 24% on Spanish-source employment income up to €600,000 — and largely exempts foreign income — for the year of arrival plus five more. You elect it with Modelo 149 within six months of registering. The catch for Americans: it treats you as a non-resident, so you generally can't use the US–Spain treaty's tie-breakers, and it excludes Non-Lucrative retirees and most self-employed.

• !Without Beckham, Spanish residents pay 19%–47% progressive tax on worldwide income once over the 183-day line
• !Model both the Beckham flat rate and standard residency with the Foreign Tax Credit before electing — the right answer depends on your income mix
• !Use a preparer who specializes in US–Spain returns; the treaty, Beckham regime, PFIC, and Modelo 720 interact in non-obvious ways

Frequently asked

Does the US–Spain tax treaty stop double taxation?

Largely, yes. Combined with the Foreign Tax Credit and the Foreign Earned Income Exclusion, the 1990 US–Spain treaty ensures most Americans don't pay tax twice on the same income — though you still file a US return every year, and electing Spain's Beckham regime limits normal treaty use.