For Americans, learning to navigate taxes in Spain is typically thought of as one of the few negatives to swallow in exchange for great weather, a relaxed lifestyle, and a lower cost of living compared to most of the US.
The need for US taxpayers living in Spain to file an annual tax return can cause a lot of stress and anxiety. The US is one of the few countries that taxes its citizens on their worldwide income, regardless of where they live. However, many Americans living in Spain have $0 in US tax liability; they simply need to demonstrate that they reside and pay taxes in Spain.
If you’re an American living in Spain, here’s everything you need to know about filing US taxes, Spanish tax obligations, and when to seek professional help.
Additionally, there is a free event happening on Friday, February 21st for Americans in Barcelona who would like to get their US tax questions answered in person. Register via Eventbrite to save your seat!
Why Do Americans in Spain Still Need to File US Taxes?
Unlike Spain, which only taxes residents on their global income (“residence-based taxation”), the US uses citizenship-based taxation. This means that it is your connection to the US (as a citizen, green-card holder, business owner, etc) that determines whether or not you having a filing obligation in the US.
Key reasons US citizens must file:
- Worldwide income reporting: US citizens and green card holders must report all income, including salaries, rental income, business earnings, and investments earned in Spain.
- Foreign Bank Account Reporting (FBAR) & FATCA compliance: If your foreign bank accounts exceed $10,000 at any time during the year, you must file FBAR (FinCEN Form 114).
Failing to file can result in anything from administrative headaches to steep financial penalties, even if you owe no US taxes.
Although international tax may seem stressful, being proactive about organizing your annual US tax return will pay dividends in your time and long-term peace of mind.
US Tax Filing Deadlines for Americans in Spain
US taxpayers in Spain have different tax deadlines than US-based filers:
- April 15 – Standard filing deadline (expats get an automatic extension) and deadline to make payment.
- June 15 – Automatic expat filing deadline.
- October 15 – Extended deadline if requested by filing Form 4868.
- December 15 – Final extension for expats in exceptional cases.
The FBAR (Foreign Bank Account Report) is due April 15, with an automatic extension to October 15.
Common Misconceptions About US Tax Filing for Expats
Many expats mistakenly believe they are exempt from filing US taxes. Here are some common myths:
“I don’t need to file unless I make over $100,000.”
False – US citizens must file if they earn above the standard filing threshold ($14,600 for single filers, $29,200 for married filers, in 2024). The $100,000 figure comes from the Foreign Earned Income Exclusion (FEIE), which allows qualified expats to exclude up to a certain threshold every year. This threshold is indexed for inflation. For the 2024 tax year, the FEIE limit is $126,500, and for the 2025 tax year, the FEIE limit is $130,000.
“I pay Spanish taxes, so I don’t owe anything to the US”
Partially true – Spain’s tax rates are often higher than the US, so you may not owe additional US taxes. However, you still must file a return and claim the Foreign Tax Credit to avoid double taxation.
“I don’t have to file FBAR if I’m under $10,000 per account.”
False – If the combined value of all your foreign accounts exceeds $10,000 at any point in the year, you must file FBAR. This means that if on one day, one Spanish account held 4000 euros and another held 6001 euros, you technically surpassed the threshold and need to file.
It’s worth noting that the FBAR is an administrative form that is straightforward to complete and does not trigger additional filing requirements in and of itself. But it does carry a significant penalty for those who are found to have neglected their FBAR filings, so when in doubt, it’s simplest to complete the form as part of your US tax season checklist.
“I only have retirement accounts in Spain, so I don’t need to report them.”
False – Many Spanish retirement accounts and investment funds fall under PFIC (Passive Foreign Investment Company) rules and may require Form 8621 reporting.
Which Tax Return Should You File First: US or Spanish?
Since Spain and the US both tax worldwide income, coordinating which return to file first is essential for avoiding double taxation.
Spain First
In most cases, expats file their Spanish tax return first since Spain has the first right of taxation of its residents. Then you may claim the Foreign Tax Credit (FTC) on your US return based on the taxes paid in Spain.
US First
In some circumstances, you may want to file your US taxes early. However, if you file before finalizing your Spanish taxes, you may need to amend your return later to reflect foreign taxes paid.
Best approach: Work with a tax professional to time your filings strategically.
Special Considerations for US Business Owners in Spain
For US entrepreneurs and freelancers living in Spain, tax obligations can be more complex depending on whether you operate as a Spanish autónomo (self-employed individual) or run a US-based company while living in Spain. Here’s what you need to know:
Freelancing in Spain as an Autónomo
If you are earning income directly in Spain, you are required to register as an autónomo (self-employed person) with Spanish tax authorities. Key considerations include:
- Social Security Contributions: Unlike in the US, autónomos must pay monthly social security fees, which start around €230 per month but can be higher depending on income. Autónomos are allowed to pay a reduced social security tax in the first two years to lessen the overall burden.
- Quarterly Tax Filings: Autónomos must file quarterly VAT (IVA) and income tax payments to Spanish authorities.
- Claiming Exemption from US Social Security Contributions: Being self-employed as a registered autónomo in Spain means that you can claim exemption from the roughly 15% Social Security and Medicare contributions based on the Totalization Agreement between the US and Spain.
Operating a US-Based Business While Living in Spain
If you are a digital nomad or own a US LLC, S-Corp, or C-Corp, your tax situation may differ:
- You may still owe Spanish taxes: If you are a Spanish tax resident (living in Spain for over 183 days per year), Spain may consider your US business income as taxable.
- Corporate Tax Considerations: Spain may classify your US company as having a permanent establishment in Spain, which could lead to local corporate tax obligations. In other words, Spain could subject the US company to the full force of Spanish corporate taxes. Proper planning and risk management is highly recommended.
- US Compliance: Even while abroad, you must still meet US business tax filing requirements, including self-employment taxes and quarterly estimated tax payments as applicable.
Key Takeaways for Business Owners in Spain
- Freelancers (autónomos) must register with Spanish tax authorities and make social security contributions.
- Digital nomads with US-based businesses may still be subject to Spanish taxation.
- Proper tax planning is critical to avoid penalties and ensure compliance with both US and Spanish laws.
If you own a business while living in Spain, consulting a cross-border tax professional can help you determine the best legal and tax structure to minimize liability and optimize financial efficiency.
When Should You Work with an Accountant?
While some expats file taxes independently, many benefit from professional help, especially if they have complex financial situations. Consider hiring an accountant if:
- You own property in Spain and receive rental income.
- You earn investment income from Spanish and/or US sources.
- You hold significant assets in Spain, which may trigger FATCA and/or PFIC reporting.
- You’re a self-employed expat, which requires additional US and Spanish tax filings & quarterly tax obligations.
- You are behind on your US taxes and need help with the IRS Streamlined Filing Compliance Procedures.
A cross-border tax specialist can help reduce your tax liability, avoid penalties, and ensure full compliance with both Spanish and US tax laws.
Final Thoughts: Compliance Avoids Costly Mistakes
Navigating US taxes while in Spain can be complex, but understanding your obligations and planning accordingly will help you stay compliant. Filing both US and Spanish tax returns correctly, using available credits, and meeting deadlines is crucial to avoid double taxation, eliminate penalties, and maintain the optimal global tax position.
If you need expert guidance, consult a tax professional who specializes in US-Spain taxation to optimize your filings and minimize tax burdens. Schedule a consultation with Rook CPAs today to ensure you’re on the right track for the 2024 tax season.
About the Author
For over seven years, Nicolás Castillo, CPA, has provided global tax services to ensure his clients’ filings are compliant with the IRS and optimized for cross-border situations. Originally from Miami, Nicolás and his wife, Sam, moved to Madrid in 2021. As a seasoned US expat CPA running his own digital nomad business from Spain, he sees an ongoing need for proactive cross-border tax planning and advisory services for the international business owner community.