If you’re an American who’s moved to Portugal, maybe to Lisbon’s sunny coast, Porto’s riverside charm, or the Algarve’s beaches, you might think you’ve left the IRS behind. Unfortunately, not quite. The U.S. is one of the few countries that taxes based on citizenship, not where you live.

So even if your life, home, and work are now in Portugal, you still need to file a U.S. tax return every year. Here’s how to do it right and avoid double taxation.

1. Filing Obligations and Deadlines


Do Americans living in Portugal still need to file U.S. taxes?

Yes. All U.S. citizens and green card holders must file a federal tax return every year, no matter where they live or earn income. Even if your income is fully taxed in Portugal or you owe $0 to the IRS, filing is still required if you have worldwide income greater than the standard deduction.


Do expats get extra time to file?

Yes. Americans abroad get an automatic two-month extension — until June 15 — to file their U.S. return. You can also request a further extension to October 15. But keep in mind that tax payments are still due April 15, and interest starts accruing immediately after that date. This makes cross-border coordination important, because even though you may have more time to file, you still need to understand and estimate your U.S. tax obligation with consideration for your tax situation abroad.


2. How to Avoid Double Taxation


Portugal taxes residents on worldwide income. The U.S. does the same. That’s where planning matters.


Foreign Earned Income Exclusion (FEIE)

This exclusion lets you exclude up to $130,000 (2025) of foreign earned income from US taxation if you qualify under the Physical Presence Test or Bona Fide Residence Test. It’s ideal for Americans in Portugal with salary income or freelance work.

Foreign Tax Credit (FTC)

If you pay higher Portuguese taxes, the FTC may be better. It offers a dollar-for-dollar credit for Portuguese taxes paid, including on rental or investment income. Unused credits can roll forward or back to other tax years.


Tax Treaty Between the U.S. and Portugal

The U.S. – Portugal tax treaty helps prevent double taxation and outlines how certain income  (like pensions, dividends, or social security)  should be taxed. But note, the “saving clause,” which allows the U.S. to continue taxing its citizens on most income types.


3. Filing Strategy and Order


In most cases, you should file your Portuguese tax return first. Once you know your exact Portuguese tax owed, you can correctly apply the Foreign Tax Credit on your U.S. return. Coordinating the two filings,  especially if you own property, investments, or a business,  ensures you make the most of available reliefs.


4. Reporting Foreign Assets (FBAR, FATCA, and More)


Even if you owe no U.S. tax, you may still have reporting obligations.


FBAR (Foreign Bank Account Report)

You must file an FBAR if the value of your non-U.S. accounts exceeds $10,000 at any time during the year. That includes Portuguese bank accounts, joint accounts, and investment accounts, and even your share of business accounts for which you ownership of or signature authority over. FBAR is filed directly with FINCen, not the IRS.

FATCA (Form 8938)

This IRS form applies at higher thresholds (starting at $50,000) and covers broader financial assets such as investment portfolios, business ownership, and insurance products. 

FBAR and FATCA filings often overlap in what is being reported, and many Americans in Lisbon, Porto, or the Algarve meet the criteria for both.

Catching up on Past Filings

If you’ve fallen behind on filings, you can often catch up using the Streamlined Filing Compliance Procedures. This program allows taxpayers to file the last three years of tax returns and six years of FBARs without penalties, but only if the IRS hasn’t contacted you yet and your failure to file was non-willful. The program has strict eligibility requirements that must be met for your filing to be accepted. It’s important to note that this is a formal compliance program, not “quiet filing” (simply submitting past returns without going through official channels), which the IRS does not recognize as a legitimate way to come into compliance.


5. Other Considerations for Americans in Portugal


Health Savings Accounts (HSAs)

Once you move to Portugal, you generally can’t contribute to your HSA unless you still have a U.S.-qualified high-deductible plan. You can still use existing funds for eligible medical expenses, but it’s often smart to spend down your balance before relocating.


Social Security and Totalization Agreement

Portugal and the U.S. have a Totalization Agreement that prevents double social security taxation and coordinates future benefits. It determines which country you contribute to and how benefits are calculated.

If you’re working in Portugal, you can request a Certificate of Coverage to confirm which system applies.

6. Simplifying U.S. Taxes From Portugal


Living between two tax systems can feel complicated. The U.S. and Portugal each have their own definitions of income, deadlines, and required forms. The key is to stay organized, plan early, and understand how both countries interact through the tax treaty and reporting rules.

Here are a few practical tips:
  • Keep both calendars handy. The US tax year runs from January to December, like Portugal’s, but deadlines differ. Plan ahead to have your Portuguese tax data ready before you file your U.S. return.
  • Track your residency status. Portugal’s tax residency is based on where you live more than 183 days per year. The US counts you as a tax resident for life unless you formally renounce citizenship. Using the FEIE to exclude earned income on your U.S. tax return may require you to track days abroad, but using FTCs does not.
  • Document everything. Keep copies of Portuguese payslips, tax assessments, and proof of taxes paid. They’re essential for claiming credits on your US return.
  • Coordinate early if you have investments or property. Rental income, pension contributions, or capital gains can be treated differently under US and Portuguese law, so timing matters.
  • Stay compliant with reporting. Even if you owe nothing, FBAR and FATCA reporting are still mandatory for Americans in Portugal. Missing them can lead to penalties.

If you handle both tax systems carefully and use the tools available - like the Foreign Tax Credit, the FEIE, and the Totalization Agreement - it’s entirely possible to live in Portugal without paying tax twice.

The goal isn’t just to avoid penalties but to align both countries’ rules, so your financial life runs smoothly wherever you choose to live.