Nobody plans a move to Europe around the IRS. You think about the apartment, the schools, and the visa. Then a Portuguese bank asks for your Social Security number, and you discover that the decisions you made in the six weeks before you flew, which brokerage you kept, when you sold the index fund, and which month you landed, set your US tax position for the next two years. The tax considerations before moving to Europe are almost all cheaper to handle from a US address than from a European one.
Key Takeaways
- The $132,900 FEIE cap is prorated by qualifying days, so your departure date sets your year-one exclusion.
- European UCITS funds count as PFICs, and unwinding one costs far more than never buying it.
- Settle brokerage accounts, pension elections, and large cash movements before you become a tax resident abroad.
- Reporting obligations start in your first year abroad, regardless of what you pay in local tax.
Your departure date sets your first-year exclusion
The foreign earned income exclusion (FEIE) is not granted in full to anyone who moves mid-year. For 2026, the maximum is $132,900 per qualifying person, and if you qualify for only part of the year, the cap is reduced in proportion to your qualifying days. A move in late October leaves you roughly a sixth of the exclusion for that tax year, on a full twelve months of salary.
Qualification runs on one of two tests. The physical presence test requires 330 full days in a foreign country during any twelve-month period, which can straddle two tax years, and the bona fide residence test requires an uninterrupted period covering a full calendar year. Choosing the twelve-month window that captures the most qualifying days is a planning decision. Plus, it is easier to make when the flights are still refundable.
European index funds create a US filing problem
The most common expensive mistake happens at a European bank, months after arrival, when someone opens a local investment account and buys the obvious low-cost fund. Nearly every European-domiciled UCITS fund is a passive foreign investment company under US rules, reported on Form 8621 and taxed under the excess distribution regime, which strips out the favorable capital gains treatment and adds an interest charge. Unwinding a PFIC portfolio after the fact costs several times as much as it would to never buy one.
The workaround is structural: US expats who want broad market exposure generally hold US-domiciled funds in a US-based account, which means deciding before departure which brokerage relationship survives the move.
Accounts and pensions are easier to fix from a US address
European institutions apply FATCA screening to American clients, and a number of them decline the paperwork rather than take it on, so a replacement account is much harder to open once you have a European address. Four things are worth settling while you are still standing on US soil.
- Your US brokerage: many brokers restrict or close accounts once the address on file becomes non-US, so confirm your provider’s policy before you update anything.
- Your mailing address: some firms accept a US address indefinitely, while others reconcile it against your tax residence, and the answer decides whether the account survives.
- Your pension election: whether a foreign scheme is recognized under a treaty, and how contributions are treated on the US side, varies by country, and the choice you make in your first week of a new job is often difficult to reverse.
- Large cash movements: a house deposit or a transferred lump sum spikes your balances, so time it deliberately rather than discovering the effect afterward.
Ask about the US treatment of the pension before you sign the employment contract, not after your first contribution clears.
The reporting that follows you across the Atlantic
US expat taxes in Europe rest on one principle: the US taxes its citizens on worldwide income wherever they live, and the reporting sits on top of that. Two separate filings apply to most Americans in Europe, at thresholds far enough apart that people routinely owe the first while sitting nowhere near the second. A combined balance of 6,000 euros in checking and 5,000 in savings clears the FBAR line, as does a house deposit that sits in the account for a single day.
|
Filing |
FBAR |
Form 8938 (FATCA) |
|
Goes to |
FinCEN, filed separately |
The IRS, with your Form 1040 |
|
Threshold abroad |
$10,000 combined, at any time in the year |
$200,000 single, $400,000 joint at year-end |
|
Deadline |
April 15, auto-extended to October 15 |
Your return deadline, extensions included |
|
Counts toward it |
Bank, savings, most brokerage, some pension and insurance wrappers, plus accounts you control rather than own |
Foreign financial assets, including accounts and certain investments |
What happens if you discover a missed report late is a separate question, and the answer changed in July 2026 when the IRS withdrew its delinquent FBAR submission procedures. For anyone still in the planning phase, the point is narrower: your first reporting year usually begins the moment you open a local account, so build the filing into your calendar alongside the residence permit and the tax number.
Book a free 30-minute discovery call, and we will map your reporting and investment exposure before you board the plane. Our Thrive360 relocation planning service builds US compliance into the move itself, so you hear about your obligations on day one rather than in year two.
Frequently asked questions
How much of my salary can I exclude in the year I move to Europe?
Can I keep my US brokerage account after moving to Europe?
Do I have to report my European bank accounts once I move?
Sources
IRS, Figuring the foreign earned income exclusion (2026 limit and proration) https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion
IRS, Tax inflation adjustments for tax year 2026 https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
IRS, Report of Foreign Bank and Financial Accounts (FBAR) https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar
IRS, Summary of FATCA reporting for U.S. taxpayers (Form 8938 thresholds) https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-us-taxpayers
