Last Updated on 28th September 2026
Relocating to Europe from the US is a major life transition, with both lifestyle and financial opportunities. However, there is no question that navigating two complex and very different tax systems at once means there is little room for error.
With the changes to Portugal’s tax landscape following the closure of the old Non-Habitual Resident (NHR) regime to new applicants, many expats are also facing increased uncertainty about how their income, assets and investments will be taxed or whether they’ll be eligible for the IFICI (Tax Incentive for Scientific Research and Innovation) programme.
American expats who move without a clear understanding of their US and Portuguese obligations often find that assumptions are costly, double taxation is a real risk, or that overlooking reporting requirements leads to penalties. With this in mind, we’ve summarised the most meaningful differences, the role of double tax agreements, and the key considerations for Americans planning a move to Portugal.
Why Moving to Portugal Doesn’t End Your US Tax Obligations
The US’s citizenship-based taxation system differs from those used in many parts of the world and means that US citizens generally remain subject to US tax and reporting obligations when living overseas.
There are nuances, because the way the IRS applies taxes will depend on your specific status and how the tax authority interprets this:
- US citizens living overseas generally remain subject to US tax filing obligations, although the way income is taxed and the reliefs available depend on individual circumstances. In some situations, the same income may be taxable in both jurisdictions.
- The US-Portugal tax treaty and foreign tax relief provisions are intended to help mitigate double taxation, although US citizens may still have ongoing IRS filing obligations regardless of where they live.
Portuguese tax residence commonly arises where an individual spends more than 183 days in Portugal during a relevant twelve-month period or maintains a home in circumstances indicating that it is intended to be occupied as their habitual residence.
Tax residents are typically subject to Portuguese tax on their worldwide income. In contrast, non-residents need to pay only domestic taxes on income originating in Portugal. This is why getting residency status wrong can lead to unexpected tax exposure.
This has become even more important following the closure of the NHR programme, with expats now needing to reassess their tax position.
Existing NHR beneficiaries may retain the regime for the remainder of their individual ten-year period, provided they continue to meet the relevant conditions. IFICI is a separate regime with different eligibility requirements and should not be treated as a continuation of NHR.
How Key Tax Rates Compare Between the US and Portugal
The following table provides an overview of headline taxes, but these will always depend on specific circumstances and may be subject to allowances, exemptions, tax reliefs, and social charges.
| United States | Portugal | |
| Employment Income | Varies for single and married taxpayers, but the top federal tax rate is 37%, applied to taxable incomes of $640,600 and over for single taxpayers. | Up to 48% on earnings over €86,634.
Plus a solidarity tax of 2.5% on taxable incomes of €80,000 to €250,000 and 5% on incomes over €250,000. |
| Social Security Contributions | Normally withheld at 6.2% on the first $184,500 of wages paid.
Additional Medicare taxes may also apply at 0.9%. |
Usually calculated at a contribution rate of 21.4% applied to the relevant calculated contribution base.
For self-employed workers, the contribution base is determined according to the applicable Portuguese Social Security rules and can depend on the nature and level of the income. |
| Dividends | Maximum federal income taxes are usually 20% to 23.8%. | Generally subject to a 28% flat rate, with an option in certain circumstances to aggregate eligible dividends with other income.
Where the relevant conditions are met, 50% of qualifying dividends may be taken into account for aggregation purposes. |
| Capital Gains | Long-term rates range from 0% to 20%. | Certain capital gains may be subject to a 28% rate. For Portuguese residents, 50% of qualifying property gains may instead be taken into account and aggregated with other income, subject to the applicable rules. |
| Property | Taxes vary by state, with no federal property tax. | Treatment depends on the type of property, tenancy, taxpayer status and applicable Portuguese tax rules. |
| Pension Income / IRA / 401(k) | Eligible contributions to some traditional retirement accounts may be tax-deductible, subject to the applicable rules and limits.
Roth contributions are generally made using after-tax income, with qualified withdrawals generally tax-free under US rules. Early withdrawals may attract income tax plus an additional 10% IRS penalty on the taxable value. |
Pensions are normally taxed at the progressive income tax rates, although this depends on the type of pension.
Portugal does not necessarily reproduce the tax-free treatment that a Roth IRA or Roth 401(k) receives in the United States. The Portuguese classification and taxation of contributions, income and withdrawals can be complex and should be confirmed by a qualified Portuguese tax professional. Existing NHR status does not automatically make every US retirement-account withdrawal exempt. Treatment depends on the payment, account and applicable tax and treaty rules. |
Tax rates are only one part of the story because other factors, such as healthcare, the cost of living, and education expenses, must also be incorporated into relocation budgets.
How Double Taxation Rules Work for US Expats in Portugal
Expats need to understand which double-tax provisions apply to their affairs and how to manage the risk of being subject to both Portuguese and American taxation. Some of the mechanisms in place include:
- Foreign Tax Credits (FTC): Eligible US taxpayers may be able to claim a credit for certain forms of taxes paid or accrued on foreign-source income, subject to the applicable rules and limitations.
- The Double Tax Treaty: The US-Portugal treaty coordinates taxing rights and relief. However, the United States generally retains the ability to tax American citizens, subject to specific exceptions.
- Foreign Earned Income Exclusion (FEIE): An exclusion that may allow eligible US taxpayers to exclude a certain amount of qualifying foreign-earned income from US federal income tax, provided they meet the applicable requirements.
Each of the above options has its own eligibility rules and limitations, and it’s strongly advisable to seek professional advice about the initiatives and processes most relevant to your own circumstances.
Planning Ahead for a Move to Portugal
Without specialist guidance, dealing with two tax systems can be challenging, especially as rules change or reporting obligations are reformed. We advise individuals to ensure they’ve consulted suitably qualified tax professionals with experience in Portuguese and US taxation, who can:
- Identify opportunities to offset tax liabilities against each other
- Offer clarity about reporting obligations and tax filing deadlines
- Ensure clients are compliant with the legislation in both tax jurisdictions
- Support long-term, personalised financial planning aligned with the expat’s circumstances and expectations in terms of tax residency.
Whether you’re planning a move from the US or already managing tax compliance as a US expat in Portugal, reliable guidance is essential, both from an adviser in the US and from a knowledgeable Portuguese professional.
A Chase Buchanan adviser can help you review the financial-planning implications of relocating to Portugal and identify areas where coordinated advice from qualified Portuguese and US tax professionals may be required.
The information in this article is for general guidance only and does not constitute personalised tax or legal advice. US and Portuguese tax treatment depends on individual circumstances, so specialist advice should be obtained before making decisions about your tax affairs.
© Chase Buchanan Private Wealth Management.
Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with CIF Licence 287/15 and offers its services in the EU on a cross-border basis as per the provisions of MiFID.
Chase Buchanan Insurance Services, Agents & Advisors is authorised and regulated by the Cyprus Insurance Companies Control Service with License No 6883 and offers services in the EU on a cross-border basis as per the provisions of the Insurance Distribution Directive (IDD).
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*Information correct as at September 2026
