Question
Is U.S. Social Security taxed in Spain?
Answers
These are the answers of Spainguru’s Facebook group members:
“U.S. Social Security benefits are taxable in Spain but not double-taxed. What you pay in the U.S. does not have to be paid again in Spain.”
“Spain has a progressive tax system, similar to the U.S. The tax rates range from 19% to 47%, depending on income. However, Spain does not recognize Roth IRAs as tax-free, so many people convert them before moving.”
“Even though there is a Social Security agreement between the U.S. and Spain, it is not currently in effect. This means that if you’re working in Spain, you must still pay into the Spanish Social Security system, just like you would in the U.S. if your employer uses Social Security as a retirement system.”
“You must file taxes in both Spain and the U.S. However, the U.S.-Spain Tax Treaty allows you to claim a foreign tax credit on your U.S. tax return for taxes paid in Spain.”
“If your Social Security is not taxed in the U.S., that does not apply to Spain. Spain considers it taxable pension income.”
“You need to file taxes in Spain first, then file in the U.S. and claim a foreign tax credit. If you file in the U.S. first, you might get double-taxed, as Spain will not credit the taxes paid in the U.S. You must show your Spanish tax filing when doing your U.S. return to avoid being taxed twice.”
“Spain taxes worldwide income, so even if you’re receiving Social Security payments from the U.S., they must be declared in Spain.”
“You may be taxed up to 30% in Spain, depending on your income. It’s higher than the U.S. tax rate, so it’s important to budget accordingly.”
“June 30 is the deadline for filing Spanish taxes. Many people file for an extension on U.S. taxes so they can complete their Spanish return first and then use the foreign tax credit when filing in the U.S.”
Conclusion
According to Spainguru’s Facebook group members, U.S. Social Security is taxed in Spain and must be declared as pension income. However, double taxation can be avoided by filing Spanish taxes first and then claiming a foreign tax credit on the U.S. tax return.
Key takeaways:
- U.S. Social Security benefits are taxable in Spain, even if they are not taxed in the U.S.
- The U.S.-Spain Tax Treaty prevents double taxation, but only if taxes are filed in the correct order.
- Spain’s tax rates are higher than in the U.S., so retirees should budget accordingly.
- June 30 is the Spanish tax filing deadline, and many expats file for a U.S. extension to claim foreign tax credits properly.
- The Social Security agreement between the U.S. and Spain is not yet in effect, meaning U.S. workers in Spain may still need to pay into the Spanish system.
It is highly recommended to consult a Spanish tax professional to navigate these complexities and ensure compliance with both U.S. and Spanish tax laws.
