U.S. Taxes When You Live in Spain: FBAR, FATCA, FEIE and the Treaty

U.S. taxes follow a citizen who lives in Spain: the United States taxes its citizens on worldwide income, so the Spanish return is added to Form 1040, not substituted for it. The IRS states that the foreign earned income exclusion (FEIE) and the foreign tax credit can only be claimed by filing a U.S. return. Around it sit the FBAR (Report of Foreign Bank and Financial Accounts) for Spanish accounts above $10,000 combined, Form 8938 for larger holdings, and a treaty that relieves double tax. This article is for informational purposes only and is not tax or legal advice; verify current requirements with the relevant Spanish authority or a licensed professional.

Does paying Spanish tax mean you can stop filing in the U.S.?

No. Article 1(3) of the U.S.-Spain income tax treaty, the saving clause, lets each country tax its citizens as if the treaty had not come into effect. Publication 54 states that U.S. citizens cannot generally use a treaty to reduce their U.S. tax. For 2025, the Form 1040 instructions set gross income thresholds of $15,750 for a single filer under 65, $31,500 for a couple filing jointly with both spouses under 65, and $5 for married filing separately. Foreign income you can exclude counts toward the test.

Publication 54 also warns that unfiled international information returns can suspend or extend the IRS’s time to assess your return and reduce the foreign tax credit allowed.

State returns are a separate risk. New York keeps your domicile until you show you abandoned it, and California treats someone domiciled there but away for a temporary purpose as a resident, as the state residency guide explains.

The U.S. and Spanish deadlines on one calendar

Form 4868 does not extend the time to pay.

The U.S. forms, one line each

The FBAR: every Spanish account counts

The IRS requires an FBAR from any U.S. person whose accounts outside the United States exceeded $10,000 in aggregate at any time in the year, taxable income or not. Two accounts with a combined balance above $10,000 are both reported. 31 CFR 1010.350 counts bank and securities accounts, cash-value insurance and annuity policies, and shares in mutual funds or similar pooled funds, a Spanish fondo de inversión (investment fund) included. Each U.S. person named on a joint account has a financial interest in it. Signature authority, the power to control an account’s money by instructing the bank, counts even without ownership.

Spouses whose accounts are all joint can file one FBAR with Form 114a, per the FinCEN instructions, and parents file for a child who cannot. The FBAR goes through the BSA E-Filing System of the Financial Crimes Enforcement Network (FinCEN), never with the tax return, and you keep each reported account’s records for five years from the due date. The regulation, 31 CFR 1010.306(c), still prints a June 30 due date; the FinCEN instructions and the IRS give April 15, set by a later statute.

FinCEN has balances converted at the Treasury reporting rate for the last day of the year and rounded up to the next dollar. That rate was 0.851 euro per dollar on December 31, 2025, so for 2025 maximum balances adding up to more than 8,510 euros crossed the line. Income uses the rate prevailing when received or an IRS yearly average, 0.886 for 2025.

What a late or missing FBAR can cost

The FinCEN instructions, last revised in January 2017, print the statutory caps. A non-willful violation carries up to $10,000, and nothing when there was reasonable cause and the balance was properly reported. A willful one carries up to the greater of $100,000 or 50 percent of the balance. For penalties assessed from January 17, 2025, 31 CFR 1010.821 raises the fixed amounts to $16,536 and $165,353. In Bittner v. United States (2023), the Supreme Court held that the non-willful penalty accrues per report, not per account. The Internal Revenue Manual applies that ruling and caps non-willful penalties across open years at 50 percent of the highest aggregate balance. The IRS advises filing late FBARs as soon as possible if it has not contacted you and you are not under investigation. If tax returns are missing too, the route changes: the streamlined procedure guide explains it.

Form 8938 and Spanish investment funds

Form 8938, the FATCA (Foreign Account Tax Compliance Act) statement filed with the return, does not replace the FBAR; its instructions are still the November 2021 revision. The higher thresholds for filers abroad need the tax home and one of the two residence tests of the exclusion, below. No return due means no Form 8938, and foreign real estate held directly goes on neither form. The penalty is $10,000, plus up to $50,000 more after an IRS notice, a potential maximum of $60,000.

Publication 54 warns that a fund or ETF not domiciled in the United States, a Spanish fondo included, may bring a Form 8621 obligation; under the December 2025 instructions, a PFIC has 75 percent or more passive income or at least 50 percent passive assets. A shareholder files one Form 8621 per PFIC per year in five listed circumstances, with the return or directly with the IRS in Ogden when no return is due. How the PFIC tax works is in the brokerage account guide.

The exclusion, the credit and what neither one touches

The foreign earned income exclusion, claimed on Form 2555, needs a tax home abroad, which the instructions say you lack while your abode is in the United States. It also needs one of the two tests in Publication 54: bona fide residence for an uninterrupted period including an entire tax year, or 330 full days abroad in 12 consecutive months. It covers pay for personal services only; the IRS classes pensions, Social Security, interest, dividends and capital gains as unearned income. Publication 54 adds that the exclusion bars the earned income credit and the additional child tax credit for the year; after a revocation, it cannot be chosen again within 5 years without IRS approval under 26 CFR 1.911-7. The housing amount is your housing expenses minus the base amount, with expenses counted only up to the limit:

Notice 2026-25, in Internal Revenue Bulletin 2026-17, lets a qualified individual apply the 2026 limits to 2025, so Madrid’s 2025 limit can be $59,700. Housing paid with employer-provided amounts, salary included, is excluded; housing paid from self-employment earnings is deducted.

Neither the exclusion nor the housing amount reduces self-employment tax. The U.S.-Spain Social Security agreement can exempt you: a self-employed American covered only by the Spanish system attaches a Spanish certificate of coverage to Form 1040 for each exempt year, as the Social Security agreement guide explains. Publication 514 allows no credit or deduction for the Spanish contributions.

The foreign tax credit on Form 1116 offsets U.S. tax with Spanish income tax. It is capped at the share of U.S. tax on foreign-source income and covers only the legal and actual Spanish liability. Unused tax carries back 1 year and forward 10, per the instructions.

The Renta for 2025 is settled between April 8 and June 30, 2026, months after the tax year it covers. On the cash method, you credit Spanish tax in the year you pay it. Publication 514 lets you elect instead to credit it in the year it accrues, generally the last day of Spain’s calendar tax year. You make that choice by checking “Accrued” on Form 1116 of a timely original return, and it binds later years. When the tax paid differs from the credit, a redetermination follows, generally on Form 1040-X, by the date 26 CFR 1.905-4 sets.

The 3.8 percent net investment income tax applies above $200,000 single, $250,000 joint and $125,000 married filing separately, thresholds not indexed for inflation, and 26 CFR 1.1411-1 allows no foreign tax credit against it. The treaty covers “the Federal income taxes imposed by the Internal Revenue Code” without naming this tax, and no official page read for this guide says whether its relief reaches it, so assume the Code’s rule applies.

What the treaty changes, and the Form 8833 question

The treaty decides which country relieves which tax. Under Article 24(2), the United States credits Spanish income tax; under Article 24(1)(a), Spain deducts U.S. tax only on income the United States may tax other than solely by reason of citizenship. Article 24(3) treats income taxed by reason of citizenship as arising in Spain to the extent needed to avoid double taxation, never leaving less U.S. tax than a non-citizen would pay. Publication 514 lists Spain among the treaties with this re-sourcing. The saving clause still holds, subject to Article 24(3), as the Treasury’s technical explanation confirms, and Article 1(4)(a) exempts Article 24 from it.

A protocol signed on January 14, 2013, entered into force on November 27, 2019, according to the Treasury and the Boletín Oficial del Estado, Spain’s official gazette. Its own text places the signing in Madrid; the technical explanation says Washington.

The regulation and the Form 1116 instructions differ on disclosure. 26 CFR 301.6114-1 requires Form 8833 for a treaty position that modifies the Code and reduces tax. It waives the form for an individual’s income re-sourced under a double taxation article, for pensions, annuities and Social Security, and for an individual’s items totaling $10,000 or less. Publication 514 says the additional credit from re-sourcing needs none. The 2025 Form 1116 instructions say filers of treaty re-sourced income may be required to file Form 8833. Rely on the waiver for Article 24(3), and have any other treaty position checked.

Married to a nonresident alien: separate returns or the 6013(g) choice

A couple generally cannot file jointly if either spouse is a nonresident alien at any time in the year, so an American married to a Spaniard files married filing separately, with the $5 threshold, unless they elect otherwise. Head of household needs a qualifying person other than the spouse.

Section 6013(g) lets both spouses elect to treat the nonresident spouse as a U.S. resident. Each then reports worldwide income for that year and every later one, and neither can claim treaty nonresidence, the IRS says. The first year needs a joint return with a statement signed by both. The choice ends by revocation, death, divorce or legal separation, or IRS termination for inadequate records. The statute then bars the same two people from electing again, and the IRS calls it once in a lifetime even with a different spouse, so treat it as a one-time choice. An electing spouse becomes a specified individual for Form 8938, but the Internal Revenue Manual says the election does not count for FBAR residency.

Without the choice, Publication 555 and section 879 assign wages to the spouse who earned them and other community income, such as dividends, interest and gains, according to the community property law, which can be a foreign country’s; no IRS page names Spain. The Civil Code makes the sociedad de gananciales, where earnings and income are shared, the default without a marriage contract, while regions with their own civil law can set another default, and Catalonia’s is separation of property; for marriages after January 29, 2019, an EU regulation decides which law applies. Whether a Spanish regime counts for section 879 is a professional’s question.

Your next U.S. filing from Spain, and who can do it alone

Your next action: list every account outside the United States with its highest 2025 balance, converted at 0.851 euro per dollar. Then come October 15, 2026, for the FBAR and an extended 2025 return, and, when due, the January 1 to March 31, 2027 window for the Modelo 720 on 2026 assets.

A salaried filer with Spanish bank accounts, no funds, no business and no nonresident spouse can prepare Form 1040 with Form 2555 or Form 1116 and file the FBAR alone. The software must accept a foreign address, which the IRS says a limited number of companies offer. Self-employment, a Spanish fund, a treaty position, a 6013(g) decision or missed years call for a cross-border preparer. MyExpatTaxes, an EasySpainNow partner (affiliate link: EasySpainNow may earn a commission), prepares and e-files the federal return, the FBAR and the FATCA forms; the rules above stay the same whoever files.

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