USA Social Security Tax Liability

@bonniem. There is nothing astounding about paying tax in a country where one is a tax resident. That's how local services - which are also used by ex pats - get paid for. What I think is astounding is that the USA taxes its citizens regardless of where in the world they reside. But no escaping that...

@bonniem I think you should speak to a tax accountant who is familiar with both sets of tax laws. There are some "deductions" allowed under Portuguese law too, I believe, but I hasten to add I have just started looking into this. Also, given the lower cost of living and healthcare, you may still come out ahead (though I understand the pain of paying taxes on your hard-earned social security) - it may end up being similar to moving to a US state that taxes social security but has an overall lower cost of living.

Posted by: @bonniem

@jeanne

Seems ludicrous that I would owe more on taxes under the NHR scheme in Portugal than I do on money from my home country! Due to standard pre-tax personal deductions allowed in the USA at the end of the year, I don't owe any additional taxes at all on my (sole) social security income. (My savings don't count for tax purposes.)

So what everyone seems to be saying is that retirees really take a bit hit in Portugal with or without the NHR scheme  and there is really NO tax break at all for anyone in my situation. Nice plan, huh?

That should discourage those pesky retirees from spending their retirement money here!!

Some recent history may be in order here.

Originally, NHR gave a complete exemption from PT tax on these sorts of pensions but some high profile cases of wealthy individuals relocating to Portugal to escape taxes in their home countries generated some strong feelings in some of Portugal's fellow EU member states, to the point where at least one renegotiated its DTA with Portugal to eliminate the benefit. Had a compromise not been agreed upon, others may well have followed suit, hence the 10% flat rate being introduced last year.

If you were resident prior to 31st March 2020, you would have been eligible for that original regime, which could still be applied for up to 31st March 2021. If you became resident post 31st March 2020, you would only be eligible for the new regime but you can opt, in any of those years during its lifetime, to be taxed under the general regime, should that be more beneficial to you.

So the pertinent point from here on is not whether you are taxed more or less than you would be if you were residing in the US (a matter for which there is a very simple solution if it matters greatly) but which is the better choice out of the options currently available to you.

@bonniem

One other small point here :

Posted by: @bonniem

Due to standard pre-tax personal deductions allowed in the USA at the end of the year, I don't owe any additional taxes at all on my (sole) social security income. (My savings don't count for tax purposes.)

Any income from savings and investments, like interest or whatever, should be declared to the PT tax authority along with other income, no matter where it arises or how small the amount.