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General Discussion => Post-FIRE => Topic started by: billy on November 29, 2020, 07:58:30 AM

Title: portugal and taxes
Post by: billy on November 29, 2020, 07:58:30 AM
I'm trying to figure out what my wife and I would be taxed on, if we move from USA to Portugal, when we fire in about a year? I believe I would apply for a D7 visa, and be under Portugal's non-habitual tax resident (NHR), of a flat 10% tax for the first 10 years and then increases to normal higher tax rate currently in 2020 is, 14.5% starts being levied on income up to 7,112, with the highest 48% rate applying to income over 80,822

We would live off our taxable investment account and receive a government pension of $40k a year in about 10 years. We also have pre tax/ roth 401(k)'s and roth IRA's, and plan to move $ into traditional IRA and slowly convert $20k per year to roth IRA.

It looks like the US would pay (2020):
Dividends are taxed as ordinary income for that year
Long term Capital gains for the feds, up to $80,000 are tax free
standard deduction is $24,800


I plan on spending $20k per year

Obrigado
Title: Re: portugal and taxes
Post by: CptCool on November 29, 2020, 09:32:02 AM
I'd highly recommend talking to a US tax professional who has experience dealing with individual expat income taxes. Even better if they're familiar with Portugal, but that part isn't necessary. Make sure they know your state tax rules as well.

I would also recommend getting a Portuguese tax professional once you move to Portugal. It is a small cost for peace of mind to make sure you are doing everything correctly

Title: Re: portugal and taxes
Post by: ROF Expat on November 29, 2020, 10:34:03 AM
I'd highly recommend talking to a US tax professional who has experience dealing with individual expat income taxes. Even better if they're familiar with Portugal, but that part isn't necessary. Make sure they know your state tax rules as well.

I would also recommend getting a Portuguese tax professional once you move to Portugal. It is a small cost for peace of mind to make sure you are doing everything correctly

+1 on the tax professional, preferably one or more who can discuss both US and Portuguese requirements in detail with the specifics tailored to your situation.  This is important enough to spend money to get authoritative advice. 

FWIW,  unless I'm missing something, all the income you've mentioned (including your government pension) is going to be from the US, so it will be subject to federal taxes according to normal IRS rules, regardless of where you take up residency.  The Foreign Earned Income Exclusion won't apply to money you earn in the US.

I don't know what the Portuguese position will be on income earned in the US, but you shouldn't normally have to pay tax on the same income twice.  This is where you need the Portuguese tax expert.  Another good reason to talk to a professional is to discuss your State of Residence.  You pretty much have to have a State of Residence, but you should look hard at how your current state will treat your income and whether there are better options. 
Title: Re: portugal and taxes
Post by: Reddleman on November 29, 2020, 01:23:59 PM
Oddly enough, I'm in exactly the same spot. 

My wife's a Portuguese citizen and we're looking at tax treatments and the NHR scheme for FI starting in 2022.

Definitely let me know if you find anything.
Title: Re: portugal and taxes
Post by: billy on November 29, 2020, 01:42:58 PM
Ya, our fire is 2022 as well, just read this https://expatsportugal.com/community/new-members/us-portugal-taxes-on-social-security-income/#post-180439, not much info at all. Some info here https://www.youtube.com/watch?v=HJmQ_1b3oBY, there's a dual tax treaty between the US and Portugal, where you would pay the difference in tax in Portugal so not doubled tax by 2 governments, also depending on what the source of the income is, so if the feds want 20% and Portugal wants 30%, I would pay 20% to the feds and 10% to Portugal.