US Taxes for Americans in Spain 2026: 1040, FEIE, FBAR and PFICs

Yes: moving to Spain does not end your US tax filing. The United States taxes citizens on worldwide income wherever they live, so you keep filing Form 1040 every year. For 2026 you can exclude up to $132,900 of foreign earned income, or claim a credit for Spanish tax, but both routes require you to file.

You still file a 1040

The IRS states that US citizens and resident aliens living abroad must report worldwide income. Filing is due on 15 April. If you live abroad on that date, the due date moves automatically to 15 June, and Form 4868 extends it to 15 October.

Spain taxes you as well once you are a Spanish tax resident, on income from anywhere in the world. So the same income can be taxed twice. Two US tools remove most of that overlap: the exclusion and the credit.

Foreign Earned Income Exclusion (FEIE)

The FEIE lets you exclude earned income, meaning wages and self-employment income, from US tax. The 2026 limit is $132,900 per person (Rev. Proc. 2025-32, section 3.39). A couple where both spouses qualify gets one exclusion each.

To use it you must have a foreign tax home and pass one of two tests:

• Physical presence test: you are in a foreign country for at least 330 full days in any 12 consecutive months.
• Bona fide residence test: you are a resident of a foreign country for an uninterrupted period that includes a full tax year.

It covers earned income only. Pensions, dividends, interest, capital gains and rent are not earned income, so the FEIE does nothing for a retiree on the non-lucrative visa.

Foreign Tax Credit (FTC)

The credit reduces your US tax dollar for dollar by the foreign income tax you paid, claimed on Form 1116. The IRS notes that in most cases taking foreign tax as a credit is better than deducting it. If Spanish tax on the income is as high as the US tax on it, the credit can wipe out the US bill; if it is lower, you pay the difference to the IRS.

You cannot use both on the same income. The IRS says that if you elect to exclude foreign earned income or housing costs, you cannot take a foreign tax credit for taxes on the income you exclude. Choose per income type: the credit usually suits investment income and pensions, and either can work for salary.

The US-Spain treaty and its saving clause

The 1990 treaty (with its protocol) is real but narrower than people hope. Its saving clause, in article 1(3), lets each country tax its own citizens as if the treaty did not exist. The IRS Technical Explanation says this means the treaty “generally does not reduce the statutory tax liability” of US citizens to the United States. It adds that even if you count as a Spanish resident under the tie-breaker rules (article 4), you stay subject to US tax as a citizen.

What survives the saving clause (article 1(4)): the relief from double taxation in article 24, the non-discrimination article and the mutual agreement procedure. In practice the treaty’s main help for a citizen is the credit for Spanish tax. Article 20 gives pensions to the country of residence, but because article 20 is subject to the saving clause, the United States can still tax a US citizen’s pension.

Reporting your Spanish accounts: FBAR and Form 8938

These are information filings, separate from your tax bill, and they are where most expats get caught.

Filing	Threshold	Where and when
FBAR (FinCEN Form 114)	Foreign accounts total more than $10,000 at any time in the year	Filed electronically with FinCEN, not with the return. Due 15 April, automatic extension to 15 October
Form 8938 (FATCA), single, living abroad	More than $200,000 on the last day of the year or $300,000 at any time	Attached to your 1040
Form 8938, married filing jointly, living abroad	More than $400,000 on the last day or $600,000 at any time	Attached to your 1040

The IRS defines “living abroad” for Form 8938 as a bona fide resident of a foreign country for the whole tax year, or physically present abroad at least 330 days in a 12-month period ending in the tax year. The $10,000 FBAR test counts all your foreign accounts together, so a Spanish checking account plus a Spanish savings account can cross it even if neither does alone.

Spain has its own separate report, the modelo 720, with different thresholds and rules.

The PFIC problem with Spanish funds

A passive foreign investment company (PFIC) is a foreign corporation where 75% or more of gross income is passive, or at least 50% of its assets produce passive income (Form 8621 instructions). A Spanish fondo de inversión or a European-domiciled ETF is a foreign pooled investment that earns almost only passive income, so it generally meets those tests. A US citizen who owns one has to file Form 8621 for it.

The default tax treatment is harsh. Without an election, the IRS applies the section 1291 rules to “excess distributions” and gains on sale. The two elections, the qualified electing fund (QEF) and mark-to-market, change how the income is taxed, but the QEF election depends on the fund providing the figures the IRS needs, and the mark-to-market election only works for marketable stock. Funds domiciled in the United States are not foreign corporations and are outside the PFIC rules. If you already own Spanish funds, talk to a preparer who files Form 8621 before you sell or add to them.

Social Security: the totalization agreement

The United States and Spain have a social security totalization agreement, in effect since 1 April 1988 (SSA Program Operations Manual). Its purpose is to stop you paying social security tax in both countries on the same work and to let you combine work credits from both for benefits. The coverage rules for each situation, such as employees sent temporarily or the self-employed, are in the SSA’s Spain agreement pages at ssa.gov/international. Those pages were not reachable when we prepared this guide, so check them for your case.