Disclaimer: I'm a property search specialist, not a tax or financial adviser. This article is simply to share something I've come across that may be useful to know about. It isn't tax advice, and everyone's situation is different. Please speak to a qualified adviser who can look at your own circumstances. I'm happy to put you in touch with one.
Retiring on a US Government Pension? You may want to consider retiring in Spain.
One of the best parts of my job is the conversations I have with clients about their plans. Recently, a client who had just retired from public service in the US mentioned something I think many Americans considering a move to Spain simply don't know about. So I wanted to share it.
The US–Spain tax treaty and government pensions
The United States and Spain have a tax treaty called the " Convention between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income", and within it, there's a specific rule within Article 21, paragraph 2 for pensions from government service.
In short: if your pension is paid for work you did for a US federal, state or local government, it is generally taxed only in the US, even if you become a resident of Spain. Spain's own tax agency confirms this in its guidance for residents with US income.
Who might this apply to?
Think of people whose pension comes from working for a US government body, such as:
- Firefighters
- Police officers
- Teachers in public schools
- State, county and city employees
- Federal employees
If that's you or your partner, it could make a real difference to how you plan your move and your budget in Spain.
It's not the whole picture
This is where I hand over to the experts. Tax is rarely as simple as one rule, and there are details that are well worth checking with an adviser, such as:
- How other income is treated, such as Social Security, IRAs, 401(k) or 457 plans, and investments
- How the pension may still be taken into account when Spain works out the tax on any other income you have
- What changes if you ever take Spanish nationality
- What you'll need to file in Spain once you're resident, and when your tax residency begins
Each of these depends on your own situation, which is exactly why individual advice matters.
Want to find out more?
If you're a retired or soon-to-retire public servant and this has sparked your curiosity, I'd be happy to put you in touch with a financial adviser who works with Americans moving to Spain. They can look at your pension and your plans and explain exactly what applies to you.
And when you're ready to start thinking about where you'd like to live on the Costa Brava, that's where I come in. Get in touch and let's have a chat.
Frequently asked questions
Do I pay tax in Spain on my US government pension? Under the US–Spain tax treaty, pensions for US government service are generally taxed only in the US, even for Spanish residents. There are exceptions, so it's worth confirming with an adviser.
Does this apply to Social Security or a 401(k)? Not in the same way. Other types of retirement income follow different rules, which a financial adviser can explain for your situation.
Can you recommend a financial adviser? Yes. I'm happy to introduce you to an adviser who works with Americans relocating to Spain. Just get in touch.