Note

US expat taxes and a Spanish property

§ 1Citizenship-based taxation

The US taxes its citizens and residents wherever they live. The IRS page on filing requirements for those abroad says they generally must file income tax returns, estate tax returns and gift tax returns, and that the income test for filing counts gross income from worldwide sources. The amounts depend on filing status and are in IRS Publication 54, which we do not summarise. This page belongs to the chapter in American buyers explained.

§ 2What it means for a Spanish home

Owning a home in Spain does not by itself create a US filing duty, but income from it does count. If you let the home, the rent is income. If you sell it, the gain is reported in the US as well as in Spain. The costs section explains the Spanish side. The IRS pages say that income you exclude as foreign earned income still counts for the filing test, and they refer to Publication 54 for the exclusion and for credits.

§ 3Relief for Spanish tax

The US allows relief for foreign tax in certain forms, and the US-Spain treaty may shape the result. We do not explain the mechanics because we did not read the IRS pages that do, and the results depend on the facts. A US tax adviser can tell you which relief applies to your rent or gain and how to claim it. The treaty is outlined in the US-Spain tax treaty explained.

§ 4Currency

The IRS requires amounts in US dollars, and foreign-currency income and expenses must be translated. Record the exchange rates for the purchase, each rent payment and the sale. For a gain, both the purchase and the sale are converted at their own rates, so the dollar result differs from the euro result.

§ 5Other forms

Foreign financial accounts bring separate reporting, covered in FBAR and Form 8938 explained. Some taxpayers living abroad have a later deadline for certain forms, as the IRS notes for Form 3520, but we do not set out those cases.

§ 6Estate and gift

The IRS notes that estate and gift returns are among those citizens abroad may need to file. Spanish inheritance and gift taxes are separate and are covered in the costs section. A cross-border estate needs advice from both countries.

§ 7Keeping the file

Keep a folder with the deed, the Spanish returns, the receipts and a table of exchange rates. Your US adviser will need all of them each year, and they are also the proof of cost if you sell.

§ 8Living in Spain

If you move to Spain, you become tax resident there, with Spanish tax on worldwide income as well as US tax. The residency section explains the Spanish tests. A move needs planning with advisers in both countries.

§ 9More on this topic

More on taxes for American buyers explains the Spanish side of tax for American owners and visas for Americans explained explains stays and residence for American owners.

Legal note. How the process works in general. It is not legal advice, and it never replaces an independent Spanish lawyer acting for you.