Moving from the US to Europe: The Complete Financial Guide

The Tax Reality

The single biggest surprise for Americans moving abroad: you still owe US taxes. The US is one of only two countries (the other is Eritrea) that taxes citizens on worldwide income regardless of where they live.

Here's how to navigate it.

Foreign Earned Income Exclusion (FEIE)

The FEIE lets you exclude up to $132,900 (2026) of earned income from US tax. Married couples where both qualify can exclude up to $265,800 combined.

Requirements:

Meet the Physical Presence Test (330 full days in a 12-month period outside the US) OR the Bona Fide Residence Test

Filed on Form 2555 with your Form 1040

Only applies to earned income (wages, salary, self-employment) -NOT investment income, rental income, or capital gains

Foreign Tax Credit (FTC)

An alternative to FEIE that lets you credit taxes paid to foreign governments against your US tax bill. Filed on Form 1116.

When it's better than FEIE: If you're in a high-tax European country (France, Germany, Sweden), the FTC is often more valuable because the foreign taxes you pay may exceed what you'd owe the US anyway. You can't use both FEIE and FTC on the same income -choose wisely, ideally with a cross-border tax professional.

FBAR -Report Your Foreign Bank Accounts

If your aggregate balance across all foreign financial accounts exceeds $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114).

Filed separately from your tax return through BSA E-Filing

Deadline: April 15, automatic extension to October 15

Penalty for not filing: up to $10,000 per violation. Willful violations can reach $100,000 or 50% of account balance.

This catches many Americans by surprise. Even a checking account and a savings account in your new country that together briefly exceed $10,000 trigger the requirement.

FATCA -Report Your Foreign Assets

Form 8938 (FATCA reporting) applies if your foreign financial assets exceed these thresholds:

Living abroad, single: $200,000 at year-end or $300,000 at any time

Living abroad, married filing jointly: $400,000 at year-end or $600,000 at any time

Penalty for non-filing: $10,000, plus up to $50,000 after IRS notification.

The Banking Problem

Many European banks refuse to open accounts for US citizens due to FATCA compliance costs. It's not personal -the compliance overhead for a bank to report to the IRS on American clients makes small accounts unprofitable.

Banks that have sent termination letters to American clients include major European institutions. The problem is structural: EU courts are examining whether FATCA-required data transfers to the US even comply with GDPR.

Solutions:

Charles Schwab International maintains accounts for US expats

HSBC Expat serves Americans abroad

Wise (formerly TransferWise) works well for day-to-day transfers

Some local banks will still take you -ask the local expat community

Retirement Accounts

Your 401(k) and IRA don't close when you move. But there are complications:

Some custodians restrict activity for non-resident clients

You cannot contribute to an IRA using income excluded under FEIE

2026 401(k) contribution limit: $24,500 (catch-up for 50+: $8,000)

Traditional withdrawals are taxed as ordinary income even abroad

Roth IRA withdrawals remain tax-free after 5 years

Early withdrawal penalty (before 59.5): 10% plus income tax

Social Security

You can collect Social Security in most foreign countries. Direct deposit is available in many nations.

The Social Security Fairness Act (signed January 2025) repealed the Windfall Elimination Provision (WEP), which had reduced benefits for those receiving foreign pensions. This is good news for Americans who work in Europe and qualify for both US Social Security and a European pension.

Healthcare Transition

US employer health insurance typically ends when you move. Most European countries require proof of health coverage for residency.

Key rule: Travel insurance does NOT count as health coverage in most EU countries. You need local private insurance or enrollment in the public system (usually available after you start contributing to social security through employment).

Portugal, Spain, France, and Germany all provide public healthcare access to legal residents.

Cost of Living Advantage

The financial picture isn't all complexity. Living costs in most of Europe are dramatically lower:

Lisbon: 54% cheaper than NYC

Barcelona: 49% cheaper

Prague: 54% cheaper

Berlin: 40% cheaper

Compare the Numbers

Use CostMaps to compare cost of living between any US city and European destination across all spending categories.