Tax & Financial Planning for U.S. Expats in Spain: A practical Guide

This guide summarizes the key issues discussed in our webinar and outlines what U.S. expats should be considering now to stay compliant and financially efficient in 2026.

This guide is especially relevant if you are:

• A U.S. citizen currently living in Spain

• Planning to move to Spain in 2025 or 2026

• Part of a U.S.–Spain mixed-nationality couple

• A W-2 employee, self-employed professional, investor, or retiree

January is the most important month of the year for tax and financial planning—especially for U.S. citizens living in Spain or preparing to relocate.

Unlike domestic taxpayers, U.S. expats must navigate two tax systems that operate under completely different logics:

• Spain taxes based on tax residency, with strong emphasis on worldwide income and asset disclosure.

• The United States taxes based on citizenship, regardless of where you live.

Neither system is designed with expatriates in mind. The result is often double taxation, missed reporting obligations, penalties for informational filings, and inefficient financial decisions that could have been avoided with early planning.

Two Tax Systems, Two Completely Different Logics

The United States: Citizenship-Based Taxation

U.S. citizens are required to:

• File a U.S. tax return every year

• Report worldwide income

• Comply with extensive foreign asset reporting requirements

This obligation continues even if you have lived outside the U.S. for decades.

Spain: Residency-Based Taxation

Spain taxes individuals who qualify as Spanish tax residents on their worldwide income and assets.

You may be considered a Spanish tax resident if any one of the following applies:

• You spend more than 183 days in Spain during the calendar year

• Your center of economic interests is in Spain

• Your spouse (not legally separated) and/or dependent minor children reside in Spain

Living between these two systems without planning often leads to overlapping obligations and unexpected taxes.

Key U.S. Deadlines for 2026

Understanding U.S. deadlines is critical—even when you live abroad:

• April 15 – Standard deadline to file Form 1040

• June 15 – Automatic filing extension for taxpayers living abroad

  • This does not extend the payment deadline

  • Your foreign address must be properly reported to the IRS

  • First-year expat returns should include a statement explaining foreign residence

• October 15 – Final deadline if Form 4868 is filed

Other Critical U.S. Reporting Obligations

FBAR (FinCEN Form 114)

Required if the aggregate maximum balance of foreign financial accounts exceeds USD 10,000 at any point during the year.

• Includes bank accounts, investment accounts, and certain pensions

• Due April 15 (automatic extension to October 15)

• Informational only—but penalties for non-compliance are severe

FATCA (Form 8938)

• Filed with your U.S. tax return

• Higher thresholds than FBAR

• Applies to specified foreign financial assets

January is the ideal time to reconstruct maximum balances and gather account information.

Key Spanish Deadlines for 2026

Once you are a Spanish tax resident, additional obligations apply:

Personal Income Tax (IRPF)

• Filed April–June 2026

• Covers income earned in 2025

Informational Asset Reporting

• Form 720 – Foreign bank accounts, investments, and real estate

• Form 721 – Foreign cryptocurrency

• Both due by March 31

• Reporting threshold: €50,000 per asset category

Errors or omissions can trigger penalties even if no tax is due.

Wealth Tax and Regional Differences

Spain also imposes Wealth Tax and, in some cases, a Temporary Solidarity Tax on Large Fortunes.

Key points:

• National exemption: €700,000 per individual

• Additional exemption for primary residence (subject to limits)

• Actual tax exposure depends heavily on your autonomous community

• Madrid & Andalusia – 100% rebate (effectively no wealth tax)

• Catalonia – Among the highest wealth tax burdens

• Valencian Community – Moderate rates

This makes regional planning in Spain comparable to state-level tax planning in the U.S.

Your Obligations Depend on Your Situation

If You Are a Spanish Tax Resident

You are taxed on worldwide income, including:

• U.S. employment income

• Dividends and investment income

• Pensions and retirement distributions

• Foreign rental income

Additional reporting and wealth-related exposure may apply.

If You Are Moving to Spain

You may face:

• Split tax years

• Dual residency

• Overlapping filing obligations

Practical coordination matters:

Non-Lucrative Visa holders often file first in the U.S.

Digital Nomad Visa holders often file first in Spain

The order and treatment of income can significantly affect your final tax burden.

Foreign Assets and Wealth Tax: A Common Trap

A frequent mistake among U.S. expats is assuming that:

“If I already reported it to the IRS, I don’t need to report it in Spain.”

This is incorrect.

Spain requires separate disclosure of foreign assets and may tax them under wealth-related rules—even if the U.S. does not.

U.S.–Spain Tax Treaty: Helpful, but Not Perfect

Although a tax treaty exists, it does not eliminate all problems.

Common friction points include:

• Different definitions of taxable income

• Different timing of taxation

• Different valuation methods

Dividend income, investment funds, stock options, and pensions are especially prone to double taxation or incomplete relief.

Documents You Should Gather in January

To avoid chaos later in the year, gather early:

• Annual bank statements

• Maximum account balances

• Investment and brokerage reports

• Dividend and capital gain statements

• Retirement account documentation (401(k), IRA, Roth, etc.)

• Cryptocurrency records

• Documents reflecting changes in residence, employment, or family status

Key Financial Decisions to Address Early

Retirement Planning for U.S. Expats in Spain

U.S. retirement accounts are treated very differently under Spanish tax law:

• Contributions and distributions may not align tax-wise

• Some planning decisions are irreversible

• Accounts are generally included for Spanish wealth tax purposes

• Internal growth is usually not taxed annually in Spain

• Taxation typically occurs upon withdrawal

Proper planning requires coordination between U.S. and Spanish advisors to avoid conflicting treatment and unnecessary tax exposure.

Final Thoughts: Plan Early, Plan Holistically

For U.S. expats in Spain, tax and financial planning is not about filing forms—it’s about strategy.

January is when decisions have the greatest impact. Waiting until deadlines approach often leads to rushed filings, missed opportunities, and avoidable penalties.

A coordinated, proactive approach can:

• Reduce double taxation

• Minimize wealth tax exposure

• Ensure compliance in both countries

• Provide peace of mind throughout the year

CONTACT US, AND WE WILL LOVE TO HELP!