Paying less Portuguese tax under IFICI can raise your US expat taxes. Portugal’s 20% IFICI rate sits below US rates on high pay.
Portugal’s ordinary rates reach 48% in 2026, above every US bracket. The foreign tax credit subtracts that Portuguese tax from your US bill, up to the US tax on the same income. IFICI, which replaced NHR for new residents, charges 20% on qualifying work and exempts most foreign income.
Updated · Sources
Americans resident in Portugal, 2026
- 48%
- is the top rate on Portugal’s income tax scale, for taxable income above €86,634.
- 20%
- is IFICI’s rate on pay from qualifying work, for 10 years from the year you register as resident.
- 2024
- is the year NHR stopped taking new residents, apart from transition cases.
Portugal’s rates are for 2026. Its 2027 budget, due in October, may change them.
Which rules apply to an American who lives in Portugal?
The US taxes you as a citizen or green card holder
You owe a US return for each year your gross income reaches the filing threshold. Pay you exclude under the foreign earned income exclusion still counts toward it. If your tax home and the place you live are both outside the US, your return is due June 15. Form 4868 extends it to October 15, but interest on unpaid tax still starts April 15.
Portugal counts you as a resident
More than 183 days in Portugal in any 12-month period that starts or ends in the year makes you resident. Keeping a home there as your usual residence can also make you resident, even with fewer days. Residents are taxed on worldwide income and file a Portuguese return from April 1 to June 30.
You moved for work that qualifies for IFICI
IFICI is for people not resident in Portugal in any of the previous 5 years. The work must be a listed activity, such as research and university teaching, R&D, or a job at a certified startup. Anyone who has had NHR is excluded, and the regime can be used only once. You must also register with the body that certifies your activity. A late registration counts only from the year you make it.
You registered for NHR in time
The non-habitual resident regime still covers people registered when it closed, and those resident by December 31, 2023. People resident by December 31, 2024 also qualify if they hold listed proof, such as a work contract signed by December 31, 2023. In every case, NHR lasts only until 10 years after the person became resident.
Your foreign accounts, added up, pass $10,000
The FBAR is due for any year your foreign accounts, each at its peak, add up to more than $10,000. It lists every account, however small, and goes to FinCEN by April 15, or by October 15 under an automatic extension.
On a $300,000 salary, IFICI leaves $8,134 of US tax, and ordinary Portuguese rates leave none.
US tax before any credit
$68,134
That is the tax on $283,900, the salary less the $16,100 standard deduction.
Ordinary Portuguese rates, with the credit
$0
Portuguese tax at ordinary rates far exceeds the US tax, so the credit wipes out the US tax. The unused Portuguese tax carries to other years.
IFICI, with the credit
$8,134
IFICI’s 20% comes to $60,000, which is credited against the $68,134.
IFICI, with the exclusion
$10,220
The $26,580 of Portuguese tax on the $132,900 excluded can never be credited. The rest of the pay is taxed from the 24% bracket up.
US figures use the 2026 brackets and standard deduction for a single filer. IFICI’s tax is taken as 20% of the full salary. Portugal taxes net pay, so its deductions would leave more US tax than shown. The exclusion row assumes a full year that passes the exclusion’s tests. In that row, the remaining $151,000 of taxable pay is taxed at the rates it would face on top of the excluded pay. That comes to $43,640 of US tax before the credit. The $33,420 of Portuguese tax on the pay not excluded is then credited. At this salary under IFICI, the credit beats the exclusion, leaving $8,134 of US tax against $10,220. For this single filer under IFICI, the credit covers the whole US tax on any salary below about $239,000.
IFICI cuts Portugal’s taxes for US expats on qualifying pay and most foreign income, but not on a US pension.
| Ordinary rules, 2026 | IFICI, 2026 | |
|---|---|---|
| Who it covers | Every resident | New residents in listed work Not resident in the prior 5 years |
| Tax on Portuguese pay | 12.5% to 48% Plus 2.5% above €80,000, and 5% above €250,000 | 20% flat On pay from the listed work |
| Foreign dividends, interest and gains | 28% flat Progressive if you opt in, or on short-term gains in the top bracket | Exempt But counted to set your rate on other income |
| A private US pension | Progressive rates | Progressive rates IFICI does not exempt pensions |
| Your US return | Usually no US tax on pay The credit covers it | US tax can remain Compare the credit and the exclusion |
IFICI also exempts pay that Portugal treats as earned abroad. If that work was done outside the US, the exclusion may suit it better.
Five places where Portuguese and US rules pull apart.
Expecting a credit for income IFICI exempts
IFICI exempts most income you earn outside Portugal, such as foreign dividends, interest and rent. The US still taxes that income, and no Portuguese tax is there to credit against it. The foreign earned income exclusion never covers investment income.
Portuguese funds, and savings in a PPR
Most funds and ETFs based outside the US are passive foreign investment companies (PFICs), with their own US tax rules and forms. A PPR is Portugal’s retirement savings plan. No treaty article shelters its growth from US tax. The funds inside a PPR may be PFICs too.
Self-employment tax on freelance work
A freelancer in Portugal can owe US self-employment tax even when no US income tax is due. The exclusion and the credit both leave it untouched. Under the US-Portugal totalization agreement, in force since August 1, 1989, a self-employed resident of Portugal is covered only by Portuguese social security. A Portuguese certificate of coverage, attached to your US return, proves the exemption.
Filing in Portugal before your US tax is final
Under the ordinary rules, Portugal credits US tax on some income, such as US dividends, so its return needs your US figures. If that credit is still unsettled on June 30, you can file the Portuguese return by December 31 instead. To get the later date, you must notify Portugal’s tax authority by June 30.
Electing the exclusion for your IFICI years
An exclusion you elect stays in force each later year until you revoke it. After a revocation, you cannot elect it again for 5 years without IRS consent. When IFICI ends, Portugal’s ordinary rates usually make the foreign tax credit the better choice. Plan that move from the exclusion back to the credit before you first elect the exclusion.
We prepare your US return under IFICI, NHR or Portugal’s ordinary rates.
We file only your US return, and we work with the accountant who prepares your Portuguese one.
- We credit the Portuguese tax on your pay and investments on Form 1116, using the figures from your Portuguese return.
- We compare your US tax under the credit and the exclusion before you elect, then each year until IFICI ends.
- We report your Portuguese bank and brokerage accounts on the FBAR, and on Form 8938 once they are large enough to need it. Your instant quote shows the price for each account and foreign fund.
- We plan US estimated payments for income that IFICI leaves untaxed in Portugal.
- If the IRS or a state questions a return we prepared, such as the credit in an IFICI year, our reply is in your fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
The questions Americans in Portugal ask, from IFICI to Social Security.
Do US expats pay taxes in Portugal?
Yes, once Portugal treats you as resident, it taxes your worldwide income. Residence usually follows more than 183 days there in any 12-month period, or keeping a home there as your usual residence. The 2026 rates run from 12.5% to 48%, or 20% on qualifying work under IFICI. The US still taxes you as a citizen, and the foreign tax credit lets Portuguese tax on the same income offset it.
Is Portugal still tax free for expats?
No, the non-habitual resident (NHR) regime has been closed to newcomers since 2024, except for people already registered and a few transition cases. Its successor, IFICI, taxes qualifying work at a flat 20% and leaves most foreign income untaxed in Portugal, though pensions stay taxable. The US taxes an American’s worldwide income under either regime. Spain’s Beckham regime is a similar special rate for new residents, and the US taxes Americans under it the same way.
Will Portugal tax my US pension?
Yes, Portugal taxes a private US pension at its progressive rates once you are resident there. Article 20(1)(a) of the US-Portugal treaty gives pensions for past work to the country you live in. The US taxes the pension too, because the treaty’s saving clause keeps its right to tax citizens. Article 25 then lets the US credit the Portuguese tax by treating the pension as Portuguese income, as far as needed. IFICI changes none of this, because pensions fall outside its exemption. A pension for US government service falls under Article 21 instead. That article can leave it taxable only in the US, depending on your nationality and status in Portugal.
Does Portugal tax US Social Security benefits?
Portugal may tax US Social Security benefits paid to its residents, because the treaty does not make the US right exclusive. Article 20(1)(b) of the US-Portugal treaty keeps the US right to tax the benefits it pays, even to a resident of Portugal. Both countries can then tax the same payments, and Article 25 relieves the double tax. IRS Publication 915 leaves Portugal off its list of countries where US citizens’ benefits are exempt from US tax. For Americans in Germany, by contrast, only Germany taxes US Social Security.
What is Portugal’s tax rate for expats?
Expats who are resident pay Portugal’s standard scale for 2026, from 12.5% up to 48% above €86,634 of taxable income. Above €80,000 of taxable income, a solidarity surcharge adds 2.5%, rising to 5% above €250,000. Under IFICI, qualifying work is taxed at a flat 20% instead. Securities gains and most investment income face a flat 28%. Residential rent is taxed at 25% or less. You can opt to have either taxed at your progressive rates. Gains on securities held under a year must be taxed at progressive rates once your taxable income, counting them, reaches the 48% bracket.
Sources
- US-Portugal income tax convention and protocol (1994)
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- 26 U.S.C. § 911, Citizens or residents of the United States living abroad
- IRS, Publication 915, Social Security and Equivalent Railroad Retirement Benefits
- Social Security Administration, US international social security agreements
- Social Security Administration, US-Portugal totalization agreement
- IRS, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- IRS, Report of Foreign Bank and Financial Accounts (FBAR)
- 31 C.F.R. § 1010.350, Reports of foreign financial accounts
- IRS, Instructions for Form 1116
- 26 U.S.C. § 901, Taxes of foreign countries and of possessions of United States
- 26 U.S.C. § 904, Limitation on credit
- 26 U.S.C. § 1297, Passive foreign investment company
- Portugal, Lei n.º 82/2023 (2024 State Budget, art. 236 on NHR)
- Portugal, Estatuto dos Benefícios Fiscais, art. 58-A (IFICI)
- Portugal, Código do IRS, art. 16 (residence)
- Portugal, Código do IRS, art. 60 (return deadline)
- Portugal, Código do IRS, art. 68 (income tax rates)
- Portugal, Código do IRS, art. 68-A (solidarity surcharge)
- Portugal, Código do IRS, art. 72 (special rates)
- Portugal, Código do IRS, art. 81 (relief from international double taxation)
Reviewed and updated September 2026. General information, not advice for your situation.