Understanding the interplay between Portuguese and U.S. tax rules is essential to ensure compliance and optimize outcomes.

Portugal taxes residents on their global income, as does the U.S. The double tax treaty between the two countries provides mechanisms of relief from double taxation, but effective use of these provisions depends on aligning Portuguese tax liabilities with U.S. foreign tax credits and reporting requirements. U.S. citizens should also consider state tax implications, as maintaining ties to some states can result in continued state tax obligations.

Portugal’s residency options, such as the D7 visa, are suited to individuals with passive income from pensions, dividends, or rental income. Applicants must demonstrate adequate income to support themselves during their stay. For those pursuing investment-based residency, regulated investment funds offer an alternative. A minimum € 500,000 investment can secure residency while diversifying portfolios. U.S. taxpayers must report these investments, including passive foreign investment companies, on IRS forms to avoid penalties.

Expatriation is another consideration. U.S. citizens relinquishing their citizenship or green card status may face the expatriation tax, which taxes unrealized gains as if assets were sold before expatriation. Detailed financial modeling and professional advice are vital to assess potential liabilities.

Estate planning is critical for U.S. citizens living in Portugal. While the country lacks a general wealth tax, high-value properties are subject to additional taxes. Portugal’s forced heirship laws may restrict how estates are distributed, though U.S. inheritance laws can be applied under certain conditions. U.S. citizens should also account for gift and estate tax implications, particularly given the scheduled reduction of U.S. estate tax exemptions in 2026.

Foreign account reporting is mandatory for U.S. citizens with financial accounts abroad. Forms such as the FBAR and Form 8938 must be filed to disclose foreign holdings. Portugal’s integration into the Foreign Account Tax Compliance Act (FATCA) ensures that Portuguese financial institutions report U.S. account holders to U.S. authorities.

Comprehensive tax and legal planning can facilitate a smoother transition and ensure compliance with Portuguese and U.S. regulations. Professional advice is recommended to address the complexities of cross-border tax obligations effectively.


by Bernardo Masteling Pereira - bpereira@mazars.pt (Partner, Forvis Mazars in Portugal) and Ann Bondurant - Ann.Bondurant@us.forvismazars.com (Senior Manager, Forvis Mazars in US).

For more information please contact Forvis Mazars.