Portugal’s sunny weather and thriving culture make it a popular destination for Americans living abroad. However, most expats find themselves wondering what taxes they may owe—and to whom. To help shed some light on this issue, here are our answers to the most common questions about taxes for Americans living in Portugal.
The first question many expats living in Portugal have is whether they’re required to file taxes at all. The short answer is yes. In fact, you’ll probably have to file taxes with both the Portuguese government and Uncle Sam. This is because:
The good news is that because of the US-Portugal tax treaty, you generally won’t have to worry about double taxation. Plus, the IRS provides multiple tax credits that expats can use to reduce or even erase their US tax debt.
As an expat, your Portuguese income tax will depend on your residency status.
The Portuguese government will consider you a resident for tax purposes if you meet either of the following standards:
If you don’t meet those standards, you will generally be considered a non-resident.
Once again, the taxes you owe in Portugal will depend on your residency status.
Just like in the US, the Portuguese tax year runs from January 1 to December 31. The deadline for filing and paying your annual income tax return is March 31.
(Self-employment income must be reported quarterly, in January, April, July, and October.)
Portugal imposes several types of taxation beyond the income tax, including:
There is also a solidarity tax on income above EUR 80,000, ranging from 2.5%–5%.
Yes, the US and Portugal have agreed to a tax treaty. This helps Americans living abroad in Portugal avoid being taxed twice on the same income.
As a US citizen, you will have to file a US tax return every year, no matter where you live. This is done using IRS Form 1040. You may also have to file additional tax forms. For example:
One of the best aspects of living abroad is that most expats don’t end up having to pay any US taxes. This is due to the tax treaties that the US maintains with various other countries, as well as the many tax credits the IRS offers, such as:
Using these deductions, you may be able to reduce your US tax liability to zero. (Though you will still have to file an annual return.)
And that’s the rundown! We hope this article has given you a better understanding of how expat taxes work for Americans living abroad in Portugal. Armed with this information, you should be able to take the first steps toward meeting your tax obligations. Don’t hesitate to contact us if we can help you with your US expat tax preparation while you live in Portugal
Best of luck, and enjoy your new life overseas!
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