Portugal taxes for expats work like this: if you retire there you file in both countries, but the U.S.–Portugal tax treaty credits one country’s tax against the other’s, so you pay roughly the higher of the two bills, not both.

If you are moving in 2026, Portugal’s old tax break for newcomers is closed to you, and this guide is written for retirees — if you are working from Portugal, your rules differ, starting with the foreign earned income exclusion.

Does the U.S. still tax me if I retire to Portugal?

Yes. Moving to Portugal does not change your U.S. filing obligation at all. Publication 54 states: “If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are living in the United States or abroad.” You are taxed on your worldwide income, and you file a Form 1040 every year your income clears the normal filing threshold for your status.

Two practical wrinkles come with that:

• A U.S. payer must generally withhold income tax on IRA, employer-plan, and annuity payments delivered outside the United States (Publication 54). The exemption from that withholding is tied to giving the payer a U.S. residence address or certifying you are not a U.S. citizen — neither of which fits someone who has genuinely moved, so expect withholding and reconcile it on the return.
• Some U.S. citizens abroad qualify for an automatic extension to June 15, but interest still runs from April 15 on any tax unpaid by the regular due date.

Does Portugal tax my U.S. income too?

Yes, once you are a Portuguese tax resident — on your worldwide income, at 2026 rates running from 12.5% to 48% (Código do IRS art. 68). Portugal’s own tax code (art. 15) taxes residents on all of their income, including income earned outside Portugal.

You become a resident under art. 16 if you spend more than 183 days in Portugal in any 12-month period starting or ending in the year — any day that includes an overnight stay counts — or, even with fewer days, if you keep a home there that suggests you intend it as your usual residence.

Once resident, your U.S. Social Security, pension, IRA withdrawals, dividends, interest, and gains are all in the Portuguese base. Portugal puts pensions in their own income bucket (category H), separate from wages and investments. The 2026 Portuguese rate table (art. 68) runs from 12.5% on the first €8,342 of taxable income up to 48% on taxable income above €86,634, and net capital gains, and capital income such as dividends and interest not taxed by Portuguese withholding, are generally taxed at a special 28% rate (art. 72).

Those brackets apply to Portuguese taxable income after Portuguese deductions, which work nothing like the U.S. standard deduction — so do not try to compute a Portuguese bill from this table. That computation belongs with a Portuguese-qualified adviser. What matters for planning is the shape: Portugal’s rates climb well above what many U.S. retirees pay federally, which is exactly why the order in which the treaty assigns the credits, covered below, decides how much of the combined bill actually gets charged.

Can I still get Portugal’s NHR regime if I move in 2026?

No. The Non-Habitual Resident regime is closed to new arrivals. Portugal repealed it in its 2024 State Budget law (Lei n.º 82/2023, of December 29, 2023), and the transitional window only protected people who were already registered, already met the residence conditions by December 31, 2023, or became resident by December 31, 2024 with qualifying paperwork already in place in 2023. A move in 2026 misses every door. Existing NHR beneficiaries keep the regime for their remaining period, but that does nothing for a new mover.

The replacement regime — the scientific research and innovation incentive, often called IFICI (Estatuto dos Benefícios Fiscais art. 58.º-A) — is a 20% rate for ten years on wage and self-employment income from listed activities: university teaching and research, highly qualified professions in qualifying companies, certified startup jobs, and similar work. It is built for people taking specific jobs. A retiree living on Social Security, a pension, IRA withdrawals, and a brokerage account has no listed activity, so this is not a retiree regime and should not figure in your planning.

Who taxes my Social Security — the U.S. or Portugal?

Both may tax it, but the U.S. taxes first and Portugal gives you a credit for the U.S. tax. Under Article 20(1)(b) of the U.S.–Portugal income tax treaty, U.S. social security benefits paid to a resident of Portugal “may be taxed” by the United States. On the U.S. side, up to 85% of your benefits can be taxable under IRC §86 — the same rule as if you still lived in the States. Portugal may tax them too as part of your worldwide income, but under Article 25(3)(a) Portugal allows a deduction from its tax equal to the U.S. income tax paid on that income, up to the part of the Portuguese tax that falls on that income. Net effect: the U.S. takes its normal bite under the usual Social Security rules, and Portugal credits that against its own tax.

One thing not to confuse this with: the U.S.–Portugal totalization agreement is about Social Security coverage and credits — which country’s system you pay into while working, and how credits from both countries combine. It is not a tax treaty and changes nothing about the income tax on benefits you are already collecting. If you need help with the benefits side while living in Portugal, the Social Security Administration’s contact is the Federal Benefits Unit at the U.S. Embassy in Lisbon.

Who taxes my pension, annuity, and IRA withdrawals?

A private pension is taxed first by Portugal, and the U.S. credits that Portuguese tax on Form 1116. Traditional IRA and 401(k) withdrawals are taxed by the U.S. as income, a qualified Roth distribution is not, and the Portuguese treatment of all three is the open question — the treaty does not name these accounts. Five treaty provisions decide the pension side:

• Treaty Article 20(1)(a): pensions and similar remuneration for past employment, beneficially owned by a resident of one country, “shall be taxable only in that State.” Once you are a Portuguese resident, that is Portugal.
• The saving clause (Protocol ¶1(b)) — the treaty clause that lets the U.S. keep taxing its own citizens as if the treaty did not exist: “the United States may tax its citizens, as if the Convention had not come into effect.” So the U.S. keeps taxing your pension even though Article 20 assigned it to Portugal.
• Article 25(2) is the fix: income the U.S. taxes solely because you are a citizen “shall be deemed to arise in Portugal to the extent necessary to avoid double taxation.” In plain terms, the U.S. treats that pension as Portuguese income, so your foreign tax credit can absorb the Portuguese tax.
• Annuities (Article 20(2)) follow the same residence-only rule as private pensions.
• U.S. government pensions (Article 21(2)) — federal, state, or local service — are taxable only by the United States unless you are a Portuguese resident and a Portuguese national.

The U.S. half of your retirement accounts is settled no matter where you live. Traditional IRA and 401(k) withdrawals are taxable income on your Form 1040 — IRC §408(d)(1) includes IRA distributions in gross income, and §402(a) does the same for 401(k) plan distributions — while a qualified Roth IRA distribution is not included in U.S. gross income at all (§408A(d)(1)). The open question is the Portuguese half: the treaty does not name IRAs, 401(k)s or Roth accounts, so how Portugal classifies those withdrawals is something to settle with a Portuguese-qualified adviser before the first one. I’d settle that question before the first withdrawal, not after the first Portuguese return.

How does the foreign tax credit keep me from paying twice?

Form 1116 lets you subtract the Portuguese tax on your pension, annuity, interest and dividends from your U.S. tax on the same income, so you end up paying roughly the higher of the two countries’ tax, not both. In Treasury’s own illustration (1994, hypothetical rates), Portugal would charge $80 and the U.S. $56 on $200 of dividends; with only Portugal’s partial credit the two bills total $106, and with the treaty’s re-sourcing the U.S. bill drops to $30, for a total of $80 — the higher of the two.

On an actual return, the re-sourcing happens on Form 1116. The Form 1116 instructions describe it under “Certain Income Re-Sourced by Treaty”: if a treaty sourcing rule treats U.S.-source income as foreign source and you elect to apply the treaty, the income is treated as foreign source — and you may also need to file Form 8833 to disclose the treaty-based position.

One new Portugal resident asked on the TurboTax community:

“I am a new tax resident of Portugal and pay Portuguese tax on parts on my US income. It’s all passive income: Social Security, annuity, interest, dividends, and capital gains. I have no Portuguese income. How do I claim a tax credit? I have gone down numerous rabbit holes in TurboTax Deluxe.”

The step this poster couldn’t find is the re-sourced-by-treaty category on Form 1116 — it’s the first thing I check on these returns. For the pension, annuity, interest, and dividends — income the U.S. taxes only because of citizenship — that category is the answer. For the Social Security the credit runs the other way: the U.S. taxes first and Portugal gives the credit on the Portuguese return under Article 25(3)(a). If you would rather have someone map which country taxes each stream and set up the credit correctly before the first Portuguese return is due, our tax advisory and planning team handles the U.S. side for clients anywhere, by phone or video.

Does the Foreign Earned Income Exclusion cover retirement income?

No. The Foreign Earned Income Exclusion is for people working abroad, and it does nothing for a retiree. The IRS’s own foreign earned income page defines earned income as “pay for personal services performed, such as wages, salaries, or professional fees,” and lists dividends, interest, capital gains, social security benefits, pensions, and annuities as unearned income — with “pension or annuity payments including social security benefits” expressly not included in foreign earned income. For a retiree, the tool against double tax is the foreign tax credit on Form 1116 under the treaty, not the exclusion.

What is the FBAR, and when do I have to file it?

The FBAR is an annual report — not a tax — due every year your foreign accounts together exceed $10,000 at any moment. Per the IRS FBAR page, a U.S. person must file FinCEN Form 114 if the aggregate (combined) value of foreign financial accounts exceeded $10,000 at any time during the calendar year. A Portuguese checking account plus a savings account that together pass $10,000 for one day trigger it, whether or not the accounts produced any income. It is due April 15 with an automatic extension to October 15, and it is filed electronically through FinCEN’s BSA E-Filing System — separately from your Form 1040.

The Supreme Court’s decision in Bittner v. United States, 598 U.S. 85 shows why this form deserves respect. Alexandru Bittner, a naturalized U.S. citizen, returned to Romania in 1990 and built a business career there — and did not know U.S. law required him to report his foreign accounts while living abroad. After moving back in 2011, he filed late reports for 2007 through 2011, then corrected ones covering 272 accounts.

The government never claimed his errors were willful, but assessed $2.72 million — $10,000 per account. The Supreme Court reversed 5–4 on February 28, 2023: the nonwillful penalty accrues per report, capped at $10,000 a report. The Court said the answer “makes a difference, especially for immigrants who hold accounts abroad and Americans who make their lives outside the country.”

The Portuguese bank and brokerage accounts you open in your move year are the same kind of foreign accounts he did not report on time. File it every year your Portuguese accounts cross the line — the first year included; it costs nothing to file.

Is the FBAR the only form my Portuguese accounts trigger?

No — Form 8938 is a second, separate report that rides with your Form 1040, and the same accounts can belong on both. Under the Form 8938 instructions, a taxpayer living abroad files if specified foreign financial assets (foreign bank and brokerage accounts and foreign-issued securities) exceed $200,000 on the last day of the year or $300,000 at any time during it — $400,000 and $600,000 for a married couple filing jointly. The living-abroad thresholds apply once your tax home is abroad and you either lived abroad for a full tax year or were abroad 330 full days in a 12-month period; lower U.S.-resident thresholds can still apply in your move year. The FBAR and Form 8938 are not the same filing, and filing one does not cover the other.

Can my old U.S. state still tax me after I move abroad?

Only if it can still claim you as a resident. Federal law — 4 U.S.C. §114 — bars any state from taxing the retirement income (pensions, IRAs, 401(k)s, 403(b)s, 457 plans, governmental plans, military retired pay) of someone who is not a resident or domiciliary (your legal permanent home) of that state. The catch is in the parenthetical: residency is “determined under the laws of such State.” Your old state decides whether you actually left. Our retirement relocation tax planning page covers the rest of a move, including how your old state lets go.

There is no day-count shortcut out of a state like California for a retiree. California’s nonresident “safe harbor” in FTB Publication 1031 applies only to people leaving under employment-related contracts for at least 546 consecutive days.

Everyone else — retirees included — is decided on facts and circumstances: where your home is, where your time goes, where your doctors, banks, and clubs are.

Our post on Florida residency requirements was written for retirees making Florida their legal home — including a New York couple who signed every Florida form and still lost — but the old-state side carries over to a move abroad. I’d break domicile in the same season you sign the Portuguese lease, and keep dated proof of each step: home, belongings, time, and ties.

Timing matters for one-time income too. California, for example, does not tax a Roth conversion received by a nonresident — so whether a conversion lands before or after the residency change decides which state, if any, taxes it. Our post on timing a Roth conversion around a move between states was written for movers between U.S. states, but the which-state-on-the-conversion-date lesson carries over to leaving the country. And if you are still weighing a U.S. state instead of Portugal, our comparison of the best states to retire for taxes covers which states leave Social Security, pensions, and IRA income alone.

What should I do before the move?

Seven things, in this order, before your first full year as a Portuguese resident:

• Break your old state’s domicile in fact — home, time, ties — and keep dated proof of each step.
• Time any large IRA withdrawal, Roth conversion, or asset sale relative to the date your old state’s residency actually ends.
• Decide with both advisers how your IRA, 401(k), and Roth withdrawals will be treated in each country before the first one.
• Expect U.S. withholding on IRA and plan payments delivered abroad, and reconcile it on the Form 1040.
• Set up the Form 1116 re-sourced-by-treaty credit (and Form 8833 where required) so Portuguese tax offsets U.S. tax on the income Portugal taxes first.
• File the FBAR every year your Portuguese accounts together exceed $10,000, and Form 8938 with your 1040 once you clear its thresholds.
• Engage a Portuguese-qualified adviser for the Portuguese return — Portuguese deductions, brackets, and filing mechanics are their side of the table.

What else do people ask about retiring to Portugal?

Retiring to Portugal and want the U.S. side done right the first year? N&T Tax & Advisory Group handles the U.S. return for Americans abroad — treaty positions, Form 1116 re-sourcing, FBAR and Form 8938 filings, and the state-exit timing — coordinating with your Portuguese adviser, by phone or video, wherever you live. Book a meeting with our team here.