IRS in Portugal
Imposto sobre o Rendimento das Pessoas Singulares, the personal income tax, administered by the Autoridade Tributária e Aduaneira (AT). The annual return is Modelo 3, filed through the Portal das Finanças.
COUNTRY GUIDE · 2025 FEDERAL RETURN
US taxes for Americans in Portugal.
How your Portuguese records map to the US return: what Modelo 3, the nota de liquidação and retenção na fonte mean, how euros become dollars, and which US rules still apply.
General US tax education, reviewed 22 October 2026. Not Portuguese tax advice.
TWO SYSTEMS
Same letters, different agencies.
Portuguese and US paperwork both say IRS, but they mean different things. Getting this straight makes every record below easier to place.
IRS in the United States
The Internal Revenue Service, the US federal tax agency. US citizens and resident aliens generally follow US income tax rules on worldwide income, wherever they live.
PORTUGUESE RECORDS
What each document tells the US return.
These records inform US preparation. They do not set your US filing status or decide US tax treatment, and this guide does not determine your Portuguese filing obligations.
| Record | What it is | Why it matters for the US return |
|---|---|---|
| Modelo 3 | The Portuguese annual income declaration (the Portuguese IRS return), filed through the Portal das Finanças. | Shows the income you declared in Portugal for the year. Keep the comprovativo, the copy showing what was submitted. |
| Nota de liquidação | The assessment showing AT's calculation and the amount due or refundable. | Helps match Portuguese income tax to the income and the US tax year when you look at the foreign tax credit. |
| Retenção na fonte | Tax withheld at source by a payer such as your employer. | Withholding may differ from the tax that finally qualifies for a credit. Keep it apart from social contributions. |
| Employer annual income statement | The yearly statement from a payer of amounts due, tax withheld and applicable deductions. | Separates earnings from tax withheld and other deductions, so wages and tax are not mixed up. |
| Payment and refund records | Evidence of when tax was actually paid, any refund, and which income year it relates to. | Refunded tax matters for the credit, and the payment date matters for the exchange rate on tax claimed as paid. |
KEEP IT TOGETHER
Three groups of records.
A suggested grouping, not an official requirement.
Income and tax
Employer statements, monthly payslips, Portuguese assessments, payments and refunds.
Home and travel
Move dates, where you worked, your lease, and every trip outside Portugal.
Accounts and assets
Bank and investment statements, account ownership, and maximum balances during the year.
US RULES
What still applies from Portugal.
Wages, interest, dividends and other US and Portuguese amounts may belong on the same federal return. An exclusion or credit may reduce US tax when you qualify; neither is automatic just because you moved abroad.
CREDIT
Foreign tax credit
A credit may be available for qualifying Portuguese income tax. US tests include whether the tax was imposed on you, paid or accrued, and is your legal and actual income tax liability. Withholding may differ from what finally qualifies, and refunds matter. Keep the nota de liquidação with payment and refund evidence.
Understand the foreign tax credit EXCLUSIONForeign earned income exclusion
Requires eligible earned income, a foreign tax home, and a qualifying residence or physical presence test. Useful records include when you moved, where you lived and worked, US visit and other travel dates (including transit), your lease, documents on the nature and expected length of your work abroad, and prior US returns showing an exclusion election, revocation or unused housing deduction. These are suggestions, not an official list.
Read the exclusion guide ACCOUNTSFBAR and Form 8938
FinCEN says a US person with a financial interest in or signature authority over foreign accounts generally must file an FBAR when their aggregate value exceeds $10,000 at any time during the calendar year. Your relevant foreign accounts are counted together, not just one Portuguese account. Form 8938 is a separate disclosure on the tax return with its own definitions and thresholds; one does not replace the other.
Compare the two requirementsCURRENCY
From euros to dollars.
A US return reports amounts in US dollars. The IRS generally calls for the rate when an item is received, paid or accrued, with specific rules for particular items. Keep the euro amount, the rate, its source and the dollar result together.
2025 IRS YEARLY AVERAGE, EURO0.886
euros per US dollar (2025 IRS yearly average)
To convert, divide the euro amount by 0.886.
- Income and housing in euros
- Converted by the product at the IRS yearly average rate, with the rate and its source recorded on the return.
- Accrued Portuguese tax
- Also converted at the yearly average rate, and the product writes its own Form 1116 conversion statement.
- Foreign tax paid
- You enter the dollar figure at the rate on the day it was paid.
- Exceptions to the yearly average
- You give the dollar figure. Check the Form 1116 instructions before choosing a rate for tax payments.
The product does not use daily or live rates.
WHAT WE PREPARE
What ExpatReturn.us prepares.
Plans for eligible 2025 US federal returns. The plans do not promise coverage of every situation on this page.
Standard
$119per federal returnUSD
- US and overseas employment income
- Bank interest and ordinary dividends
- Foreign income exclusion, if eligible
Premier
$149per federal returnUSD
- Everything in Standard
- One business each for you and your spouse
- Self-employment tax calculation
Investor
$199per federal returnUSD
- Everything in Premier
- Investment sales, with or without Form 1099-B
- Rental and royalty income, US or foreign
- Standard Eligible 2025 US federal individual returns, including eligible foreign wages, Form 2555 exclusion and housing calculations, and eligible Form 1116 credit cases within published restrictions.
- Residence and travel questions The interview asks for residence, tax-home and travel facts used for the exclusion.
- Investor Adds eligible investment sales, rental and royalty income on Schedule E Part I, and limited Form 8938 preparation.
FIRST STEPS
Four things to do first.
Suggested, not an official requirement.
- 1
Gather your Portuguese records
Employer income statement and payslips, retenção na fonte, Modelo 3 with its comprovativo, the nota de liquidação, and payment and refund records.
- 2
Keep euros traceable
Keep the original euro amount, the rate used, its source and the resulting dollars together.
- 3
Note where you lived and travelled
When you moved, where you lived and worked, and every trip outside Portugal, including US visits.
- 4
List your foreign accounts
Accounts you have a financial interest in or signature authority over, with their maximum balances during the year.
I pay tax in Portugal. Do I still need a US return?
Paying tax in Portugal does not by itself remove a US filing obligation, and a Portuguese return does not replace a US return. Whether you must file depends on your income and the other US filing requirements.
Does living in Portugal qualify me for the foreign earned income exclusion?
Not on its own. The exclusion needs eligible earned income, a foreign tax home, and a qualifying bona fide residence or physical presence test. A Portuguese address or residence permit alone does not establish all of that.
Can I use the exclusion and the credit on the same income?
No. Tax attributed to income you exclude under the foreign earned income exclusion cannot also support a foreign tax credit.
Is everything on my Portuguese payslip income tax?
Not necessarily. Keep social contributions and other payroll deductions separate, so they are not treated as income tax just because they appear on the same payslip. Generally, only income, war profits and excess profits taxes qualify for the credit, and this guide makes no determination for any specific Portuguese charge.
Does this guide cover Portuguese tax regimes or treaty positions?
No. It is general US tax education. It does not determine Portuguese tax obligations, treaty treatment, or eligibility for a Portuguese tax incentive, and it is not personal tax advice.
Official sources (12)
Official sources
- IRS: US citizens and resident aliens abroad (opens in a new tab)
- Portal das Finanças (AT): Modelo 3 (opens in a new tab)
- Portal das Finanças (AT): Código do IRS, artigo 119.º (opens in a new tab)
- IRS: Foreign currency and currency exchange rates (opens in a new tab)
- IRS: Foreign taxes that qualify for the foreign tax credit (opens in a new tab)
- IRS: Yearly average currency exchange rates (opens in a new tab)
- IRS: Foreign tax credit (opens in a new tab)
- IRS: Instructions for Form 1116 (opens in a new tab)
- IRS: Foreign earned income exclusion (opens in a new tab)
- IRS: Bona fide residence test (opens in a new tab)
- FinCEN: Report foreign bank and financial accounts (FBAR) (opens in a new tab)
- IRS: Comparison of Form 8938 and FBAR requirements (opens in a new tab)
Last reviewed 22 October 2026
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