Marty W. Says:
Regarding Portugal: if the NHR stays in place, what total tax rate might a retiree expect if the sole source of income is retirement account distributions? Would any income taxes paid to Portugal be offset by the foreign income tax credit when the US return is filed?
Personal Finance Expert Jeff Opdyke Says:
Hi Marty,
Thanks for the question. A very good question, too. And timely. The status of the NHR program remains up in the air. The previous government that proposed scrapping the NHR is no longer governing, and the new government hasn’t really said what the status of the NHR is.
Assuming the NHR stays in place is it currently exists, your tax rate as a U.S. expat retiree would be a flat 20% for 10 years.
You could likely be able to include those payments on your U.S. tax return, but please chat with a pro about that.
If the NHR goes away, there’s talking of replacing it in some fashion because a lot of Portuguese politicians and visa proponents realize the program has been hugely beneficial to the country. But what the new plan might look like in terms of tax rates is entirely unknown at this point.
As for the foreign income tax credit, I assume you’re referring to the Foreign Earned Income Exclusion that allows a U.S. expat taxpayer to write off $126,500 for tax year 2024.
You would not be eligible for that. You need “earned” income from a job of some sort, even if it’s an online/digital job. Pension/retirement income is largely passive income and, thus, would not be eligible for the exclusion.
Again, I would encourage you to chat with a tax pro who understands the tax implications of being an expat.
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