Do U.S. Expats in Spain Pay Taxes Twice?
Short answer: often not, but dual filing can still apply and residual tax can arise. U.S. citizens are generally subject to U.S. tax on worldwide income, while Spanish tax residents are generally taxed by Spain on worldwide income. The U.S.-Spain Tax Treaty and U.S. relief mechanisms such as the Foreign Tax Credit and, where available, the Foreign Earned Income Exclusion help coordinate the two systems. This guide explains the main rules and reporting thresholds for 2025 and 2026.
Why This Question Even Comes Up
U.S. citizens are generally subject to U.S. federal income tax on their worldwide income even when they live abroad. Spain separately taxes the worldwide income of individuals who qualify as Spanish tax residents. That overlap can place the same item of income within both countries' tax systems.
If you're a U.S. citizen who has become a Spanish tax resident — for example, because you spend more than 183 days in Spain during the calendar year or because the main base or centre of your economic activities or interests is in Spain — both countries may require the same income to be reported. Double-tax relief then depends on the type and source of the income, the domestic rules of each country and the U.S.-Spain Tax Treaty.
That mechanism exists. It just isn't automatic, and it doesn't work the same way for every type of income — which is exactly where most self-filed returns go wrong.
If you are planning a move from the United States, our US to Spain Tax Guide explains the wider Spanish tax, treaty, Social Security and reporting framework. For other cross-border matters, see our Spanish and international tax services.
What the U.S.-Spain Tax Treaty Actually Protects
The 1990 U.S.-Spain Income Tax Treaty (updated by a protocol that entered into force in November 2019) is designed to prevent double taxation — but Article 1(3), the treaty's "saving clause," lets the United States continue to tax its citizens as if the treaty didn't exist. The real protection against double taxation comes from Article 24, which sets out how each country grants credit for tax paid to the other.
Most tax treaties contain a saving clause. It means a U.S. citizen living in Spain cannot point to the treaty and say "Spain taxes this, so the U.S. can't." The U.S. still can. What changes is that Article 24 then requires the U.S. (or Spain, depending on the type of income) to give credit for tax already paid to the other country, so you are not out of pocket twice — but you still have to file, and you still have to claim the credit correctly.
The 2019 protocol also modernized several mechanical rules that matter if you hold U.S. investments while living in Spain: dividend withholding was capped at 5% for substantial shareholders and 15% otherwise, withholding on most cross-border interest and royalty payments was eliminated, and a mandatory arbitration process was added for cases where the two tax authorities can't agree. None of that changes the core double-taxation question, but it does affect how much is withheld at source before any credit is even calculated.
Two Real Scenarios, Two Different Fixes
Article 24 doesn't work the same way for every type of income. Which country reduces your tax bill depends on why that income is taxable in the first place — because of where it's earned, or only because you're a U.S. citizen.
You have U.S.-source income (e.g. rental income from a U.S. property)
A U.S. citizen generally reports rental real estate income on Form 1040, Schedule E, together with allowable rental expenses and depreciation under U.S. rules. The 30% gross-basis regime often associated with U.S. rental income is a rule that can apply to certain nonresident aliens; it is not the ordinary federal income-tax treatment of a U.S. citizen merely because that citizen lives in Spain.
If you are also a Spanish tax resident, Spain generally includes the U.S. rental income under Spanish rules. Article 24 of the U.S.-Spain Tax Treaty allows Spain, subject to Spanish domestic rules, to credit qualifying U.S. income tax actually paid, but the Spanish credit cannot exceed the Spanish tax attributable to that U.S.-source income. Any U.S. tax above that Spanish credit limit is not automatically refundable or creditable in Spain and must be analysed under the applicable U.S. and Spanish rules.
You earn a salary for work performed in Spain
Spain generally taxes employment income for work physically performed in Spain. A U.S. citizen remains subject to U.S. federal tax on worldwide income even when the salary is earned abroad.
Qualifying Spanish income tax on foreign-source salary may generally be claimed as a U.S. Foreign Tax Credit, usually on Form 1116, subject to the credit limitation, separate income categories and any treaty sourcing rules that apply. In many cases the credit materially reduces or eliminates residual U.S. federal income tax on the same salary, but that result should not be assumed without a calculation.
There is no single rule under which one country always “gives way.” The credit mechanism depends on the legal source of the income, the taxpayer's status, the relevant treaty provisions and each country's domestic foreign-tax-credit rules.
The Key Thresholds for 2025-2026
What Triggers a U.S. Filing or Reporting Duty
Spanish Thresholds Once You're Tax Resident
Figures reflect the rules as generally applied at time of writing (2025/2026 tax years) and depend on your specific situation — we confirm your exact numbers in the first consultation.
The Reporting Duties People Forget
Income tax is only half the picture. Both countries also require you to report the mere existence of foreign assets — separately from any tax you owe — and the penalties for skipping this step apply even when your income tax bill is zero.
What the U.S. wants to know about
- FBAR (FinCEN Form 114): required once your foreign accounts total more than $10,000 combined, at any point in the year. Filed directly with the Treasury, separately from your tax return, by April 15 (automatic extension to October 15).
- Form 8938 (FATCA): filed with your tax return once your foreign financial assets exceed the relevant threshold for expats — generally $200,000/$300,000 single, $400,000/$600,000 married filing jointly.
What Spain wants to know about
- Modelo 720: certain Spanish tax residents and other persons within the scope of the rules must report specified categories of foreign assets when the relevant thresholds are met. The initial threshold is generally €50,000 for each information category. Later-year filing is not necessarily annual and depends on the statutory change and disposal rules. When required, the return is generally filed between January and March for the prior year.
- Penalties: Spain amended the special Modelo 720 penalty regime after the Court of Justice of the European Union's 2022 judgment. The ordinary penalty framework in Articles 198 and 199 of the Spanish General Tax Law now applies, depending on the type of non-compliance.
Notice that these two obligations can apply to the exact same bank account or brokerage account — reported once to Washington and once to Madrid, under two entirely different sets of rules and thresholds. Neither filing satisfies the other.
If You're Considering the Beckham Law
The Beckham Law allows qualifying inbound taxpayers to use the Spanish non-resident income tax rules with specific modifications while remaining IRPF taxpayers. For purposes of the regime, employment income obtained during its application is generally deemed Spanish-source and the general base is taxed at 24% up to €600,000 and 47% above that amount. Certain foreign-source passive income may fall outside Spanish taxation under the regime. None of this changes a U.S. citizen's federal filing and worldwide-income obligations.
Two consequences are especially important for a U.S. citizen:
- Foreign-source passive income that Spain does not tax under the regime does not generate Spanish tax available as a U.S. foreign tax credit. U.S.-source dividends, interest or rental income may therefore remain fully within the U.S. tax computation, subject to the ordinary U.S. rules applicable to that income.
- The Spanish tax actually paid on employment income may be lower than under ordinary Spanish IRPF. A lower amount of qualifying Spanish tax can mean a lower U.S. Foreign Tax Credit, so residual U.S. federal income tax may remain depending on the taxpayer's U.S. rate, sourcing, credit limitation and other items.
The regime can still produce a lower combined tax burden in appropriate cases, but the result should be modelled using the taxpayer's actual Spanish and U.S. income profile rather than assuming that the Spanish election eliminates double taxation by itself.
If you are assessing eligibility or the filing deadline, see our Beckham Law application guide.
Do You Pay Into Social Security Twice?
Generally no. The U.S.-Spain Totalization Agreement has been in force since April 1, 1988, and exists specifically to stop the same salary from being subject to both countries' social security contributions at once — while also letting you combine work credits from both systems to qualify for a pension you might otherwise fall short of.
In practice: if you're employed by a Spanish company in Spain, you generally pay only into the Spanish system. If you're self-employed, or temporarily assigned to Spain by a U.S. employer, the agreement lets you request a Certificate of Coverage confirming which single system applies, so you're not paying into both. A separate, modernized agreement between the two countries was signed in April 2023 to update this framework — as of this writing it has not yet entered into force, so the 1988 agreement is still the one that governs your situation today.
Seven Practical Tips
- File even if you owe nothing. FBAR and Form 8938 penalties are separate from your income tax liability — a $0 tax bill does not excuse a missing information return.
- Compare the Foreign Tax Credit and the FEIE before choosing. The FTC is limited by income category and U.S. tax attributable to foreign-source income; unused qualifying foreign taxes can generally be carried back one year and forward ten years. The FEIE has different eligibility rules and can affect the treatment of foreign taxes and certain U.S. tax attributes, so the better approach depends on the taxpayer's facts.
- Track Spanish tax by income "basket." Form 1116 separates general category income (like salary) from passive category income (like dividends and interest) — credits from one basket cannot offset U.S. tax on the other, so lumping them together is one of the most common self-filing mistakes.
- If you're moving under the Beckham Law, track the election deadline from the correct legal starting date. For the principal taxpayer, the Modelo 149 option is generally due within six months from the start-of-activity date shown in the Spanish Social Security registration or in the documentation allowing continued coverage under the home-country system; where Spanish Social Security registration is not mandatory, the relevant documented start-of-activity date applies.
- Use the U.S. filing extension deliberately. U.S. citizens abroad get an automatic extension to June 15, and can request a further extension to October 15 — filing later, once your Spanish return is finalized, means you calculate the Foreign Tax Credit from real numbers instead of estimates you'll have to amend.
- If you're self-employed, request a Certificate of Coverage under the 1988 Totalization Agreement before assuming you owe self-employment tax to both countries.
- Don't overlook Spanish wealth-tax exposure once you're resident. The state Wealth Tax rules include a €700,000 minimum exemption and up to €300,000 for a qualifying habitual residence, but autonomous-community rules can differ. The Solidarity Tax on Large Fortunes also has its own €3,000,000 zero-rate bracket and interactions with exemptions and Wealth Tax, so exposure should be calculated rather than inferred from a single headline threshold.
Frequently Asked Questions
Do I have to file a U.S. tax return if I already pay taxes in Spain?
U.S. citizens and resident aliens abroad are generally subject to the same federal filing rules as taxpayers in the United States. Whether a return is required depends on the applicable filing thresholds and other filing triggers. If a U.S. return is required, worldwide income must generally be reported. Paying Spanish tax does not by itself remove the U.S. filing obligation, but qualifying Spanish income tax may reduce U.S. tax through the Foreign Tax Credit, and eligible taxpayers may also consider the Foreign Earned Income Exclusion.
Can I use the Foreign Earned Income Exclusion and the Foreign Tax Credit in the same year?
Yes, but not for the same foreign taxes attributable to income excluded under the Foreign Earned Income Exclusion. A taxpayer may use the FEIE for qualifying foreign earned income and claim the Foreign Tax Credit for other qualifying foreign-source income, subject to the Form 1116 limitations and separate income categories. Whether the FTC, FEIE, or a combination is preferable depends on the taxpayer's facts.
What happens if I don't file the FBAR, even if I owe no U.S. tax?
The FBAR (FinCEN Form 114) is a reporting requirement, separate from your income tax return, and applies once the combined balance of your foreign financial accounts exceeds $10,000 at any point in the year. Non-willful failures to file can carry penalties, and willful failures carry substantially higher ones. Owing zero U.S. income tax does not remove this reporting duty.
Does the Beckham Law stop the IRS from taxing my Spanish salary?
No. The Beckham Law changes how Spain taxes qualifying inbound taxpayers, but it does not change U.S. citizenship-based taxation. Under the Spanish special regime, employment income obtained during the regime is generally deemed Spanish-source for Spanish tax purposes and is taxed at 24% up to €600,000 and 47% above that threshold. A U.S. citizen may still owe U.S. tax on worldwide income, with any Foreign Tax Credit depending on the amount and character of qualifying Spanish tax paid.
Is Modelo 720 the same as the FBAR?
No. They are separate reporting obligations to separate governments. The FBAR reports certain foreign financial accounts to the U.S. Treasury when the aggregate balance exceeds $10,000 at any time during the year. Modelo 720 is a Spanish information return for certain categories of foreign assets; the initial reporting threshold is generally €50,000 per category, with separate rules governing later-year filings. A person can be required to file both in relation to the same assets.
Do I need to pay U.S. Social Security tax if I'm self-employed in Spain?
Generally no — if you are self-employed and living in Spain, the long-standing U.S.-Spain Totalization Agreement (in force since 1988) generally assigns you to the Spanish system rather than requiring contributions to both. A Certificate of Coverage from the relevant authority confirms which system applies and should be requested before assuming either country's rules automatically apply to your situation.
General information only, not personalised legal or tax advice — every case turns on its specific facts. Share your situation and we'll tell you what needs to be reviewed.
Jorge Lacasa Alesón
Managing Partner, Law Cappital · Madrid Bar Association (ICAM) Nº135311 · Ex-Grant Thornton · Ex-Vialto Partners
Jorge founded and directs Law Cappital's tax, immigration and corporate practice, advising U.S., UK and internationally mobile clients on Spanish and cross-border tax. Before Law Cappital, he worked as an international tax lawyer at Grant Thornton and at Vialto Partners, the global mobility tax and immigration firm spun out of PwC.
View Jorge Lacasa Alesón on LinkedIn →This article is for general informational purposes and reflects the rules generally applicable at the time of writing (2025–2026 tax years). It is not individual tax or legal advice, and U.S. and Spanish tax rules change — confirm how they apply to your specific situation before relying on them.