2026 Taxes for Americans in Portugal

Are U.S. citizens living in Portugal required to pay taxes in both countries?  

Portugal has a comprehensive Double Taxation Agreement with the United States. This agreement was signed on September 6, 1994, and then entered into force on December 18, 1995, after the exchange of ratification instruments by both countries. It has been in effect since January 1, 1996, for tax purposes. It generally ensures that income earned by U.S. nationals residing in Portugal is not subject to double taxation. Under certain circumstances, taxes paid in Portugal can be credited against U.S. taxes, reducing the overall tax burden for U.S. citizens.  

What is the Non-Habitual Residency (NHR) regime?  

The NHR program was initiated in 2009 by the Portuguese government to attract skilled professionals, entrepreneurs, and retirees from around the world. It offered an extremely attractive tax regime for a duration of 10 years, providing a significant advantage for those who move to Portugal, in comparison to its normal tax regime. However, it was also extremely controversial within the EU (so much so that Sweden canceled its tax treaty with Portugal in June 2021), and, as of January 1, 2024, the program is no longer available to new residents, from any country.   

To bridge the gray area for new residents, a grandfathering system was facilitated to allow qualifying individuals becoming tax residents of Portugal until December 31, 2023, to apply for the NHR regime until March 31, 2024.  

I’m currently on NHR. What happens when the NHR Status expires?  

Upon the completion of the ten-year period, individuals revert to standard Portuguese tax rules. This system includes progressive income tax rates that vary depending on the level of income earned. If you plan to stay in Portugal after your NHR status ends, it is highly advisable to reassess your financial strategies, as it’s possible that most income will be subject to income tax, potentially as high as 48 percent.   

Mainland Portugal Income Tax Rates (Progressive)  

Source: PwC

If you intend to stay in Portugal long term, planning for the NHR to standard-income-tax-rate transition in Portugal is essential for your long-term financial well-being.   

For further reading about how to plan for post-NHR, we invite you to read this article by our fiduciary financial advisor, Ricardo Jesus (based in the Algarve).   

What is NHR 2.0? Can I retire to Portugal on it?  

“NHR 2.0” is kind of a misnomer. After ending the NHR regime, Portugal introduced a new tax regime aimed at enticing an entirely different profile of immigrant: Incentivo Fiscal à Investigação Científica e Inovação (IFICI). In English, IFICI is translated as the “Tax Incentive for Scientific Research and Innovation (TISRI).”   

Unlike the former NHR regime, IFICI is not designed for retirees or passive lifestyle migrants. Instead, it is a profession- and activity-based incentive intended to attract individuals who are actively contributing to the Portuguese economy. In practice, this means the regime is better suited for business owners, founders, startup executives, researchers, engineers, and other highly qualified professionals working in innovation-driven or value-add sectors—often in connection with Portuguese companies or certified entities.  

For Americans evaluating Portugal as a retirement destination, this distinction matters: IFICI is not a replacement for NHR, and it generally does not function as a retirement-friendly tax regime. Rather than offering broad tax advantages tied to residency alone, IFICI is narrowly targeted at those engaged in specific types of economic activity within Portugal.  

Tip: If you believe IFICI could be a good fit for your situation after reviewing this information, we recommend this detailed article about IFICI, written by our U.S. tax partner, and perhaps checking out their moving abroad service, tailored for U.S. business owners.   

Is my Social Security benefit taxed in Portugal?  

Typically, yes, according to the Double Taxation Agreement between Portugal and the U.S., Portugal has the first right to tax your Social Security payments. Social Security is not considered a government pension in the context of the Double Taxation Agreement and is taxed at regular Portuguese income tax rates.   

How will my 401(k) or IRA distributions be taxed in Portugal?  

According to the Double Taxation Agreement, Portugal has the primary right to tax 401(k) and IRA distributions, meaning you will pay income tax in Portugal on distributions from these plans. If possible, planning ahead is crucial here to ensure that you are not subjecting pre-tax accounts to Portuguese income tax rates; effective cross-border planning for retirement in Portugal will leverage post-tax retirement accounts, such as Roths, which are typically taxed at the much more palatable capital gains rate of 28 percent.   

Is my Roth IRA or Roth 401(k) still considered tax-free in Portugal?  

No, Portugal does not recognize the tax-free nature of these accounts and distributions can be considered taxable. However, these post-tax accounts, as discussed briefly above, enjoy a significantly lower tax rate than pre-tax U.S. accounts and should feature prominently in any cross-border financial planning being done with your financial advisor.   

Should I move my investment accounts to Portugal when I move?  

We typically advise clients not to move their investment accounts to Portugal when they relocate. There is no Portuguese equivalent to a U.S. IRA or Roth IRA, and these accounts cannot be rolled into European structures without triggering a taxable distribution.  

For taxable brokerage accounts, Americans face additional limitations once living in Portugal. Due to U.S. tax rules, most Portuguese and EU-based mutual funds and ETFs are classified as PFICs, making them highly inefficient—and often prohibitively expensive—from a U.S. tax standpoint. This significantly narrows the universe of investments that are appropriate for Americans residing in Portugal and makes local portfolio construction challenging.  

As a result, most Americans living in Portugal continue to hold and manage U.S.-custodied investment accounts, investing in U.S.-domiciled funds that avoid PFIC exposure and remain compliant with IRS regulations. In practice, the U.S. investment system also tends to be lower-cost, more transparent, and more flexible than European alternatives for U.S. citizens.  

This PFIC constraint is an important, but often overlooked, factor when evaluating not only investment strategy, but also immigration pathways (such as Golden Visas) that rely on local investment vehicles.  

Is there a wealth tax in Portugal?  

No, there is no wealth tax in Portugal. But its personal income tax system can include a “solidarity tax” (taxa adicional de solidariedade) that functions as an extra surcharge on top of regular IRS (Imposto sobre o Rendimento das Pessoas Singulares) rates for higher earners.  

What is the Solidarity Tax in Portugal?  

The Additional Solidarity Tax (Taxa Adicional de Solidariedade (TAS)) is an extra levy on top of the standard progressive income tax (IRS) and applies only to residents with higher taxable incomes.   

Here’s how it generally works:  

• Income above approximately €80,000:[Text Wrapping Break] → An additional 2.5% solidarity tax is applied.   

• Income above approximately €250,000:[Text Wrapping Break] → The additional solidarity tax rate increases to 5%.   

This tax is designed to target higher incomes and increases the effective marginal tax rate beyond the standard IRS brackets for those earners. In a U.S. tax planning context, it underscores the need to proactively plan for retirees in particular so that distributions from their U.S. retirement accounts aren’t being classified as income (and thus being counted toward the solidarity tax threshold).  

What about Golden Visas? Are they still an option for Americans?  

Portugal’s Golden Visa program has historically been one of the most visible immigration pathways for non-EU nationals, including U.S. citizens. While the program has undergone significant changes in recent years—most notably the removal of direct real estate investment as a qualifying route—it still exists in more limited forms, such as qualifying fund investments or business activity.  

However, from a U.S. tax perspective, Golden Visas often raise more complications than they solve. Many of the investment vehicles historically used to qualify for Golden Visas—particularly Portuguese or EU-based funds—can trigger punitive U.S. tax treatment under the Passive Foreign Investment Company (PFIC) rules. These rules can result in extremely unfavorable taxation, complex annual reporting, and long-term compliance burdens for Americans.  

As a result, while Golden Visas may still function as an immigration tool, they are rarely an optimal financial solution for U.S. citizens unless the investment structure has been carefully vetted with U.S. tax and cross-border planning professionals. For most Americans, residency pathways that do not require local fund investment are typically more compatible with long-term financial planning.  

What is your practical advice for Americans looking to move to Portugal?  

For U.S. citizens planning to move to Portugal, it is crucial to consult with financial advisors proficient in international taxation. Understanding the nuances of tax regulations and planning for long-term residency in Portugal are key factors for a smooth and successful integration into the Portuguese tax system.  

Recommended reading on taxes in Portugal for Americans

• 5 Things to Know About Taxes Before Moving to Portugal | Kiplinger  

• Americans in Portugal Face a Financial Puzzle  

• Retire in France or Portugal? A Cross-Border Financial Planning Analysis  

• The Portugal Golden Visa: Should Americans Invest in This Program?

• Moving to Portugal from USA: Taxes and Practicalities - Rook CPAS  

Disclaimer 

This material is purely intended to be general and educational in nature, and should not be construed as specifically-tailored investment, financial planning, tax, legal, or other professional advice. Information and data contained herein is as-of the date of publication, and may be subject to change in the future without notice. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained herein should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or other financial product or investment strategy. All investment, tax, and financial planning strategies involve risk that you should be prepared to bear. You are highly encouraged to consult with professionals of your choosing before taking any action based on this material.