I'm a Cross-Border Financial Adviser: 5 Things I Wish Americans Knew About Taxes Before Moving to Portugal

Quite often these days, when Americans tell me they want to move to Portugal, the conversation tends to start with: "I just want to get my money out of the U.S."

Whether it's fatigue due to the ongoing political maelstrom, lifestyle aspirations or a desire to invest in euros, the motivations are understandable. But the financial implications of moving from the U.S. to Portugal are often misunderstood.

As a cross-border financial adviser who's lived and worked in both the U.S. and Portugal, I've seen firsthand how complex this transition can be.

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Here are five things I wish every American knew before moving to Portugal.

1. Even if you're living in Portugal, you're still a U.S. taxpayer

Fortunately, this one is becoming an increasingly "obvious" fact to point out thanks to the increase in resources available to Americans researching a move abroad.

That said, it's always worth noting because there are still plenty of Americans who assume that once they leave the U.S., they leave their tax obligations behind, which isn't the case.

Unlike nearly every other country in the world, the U.S. applies a citizenship-based taxation model, meaning that U.S. expats are subject to tax on worldwide income, regardless of where they live.

U.S. expat tax provisions do offer some relief. While the foreign earned income exclusion (FEIE) is often touted as a tax-saving strategy, it's most beneficial in countries with lower tax rates than the U.S.

Since Portugal ended its non-habitual residence (NHR) scheme, Portuguese tax rates easily exceed those in the U.S., often making the Foreign Tax Credit (FTC) a more strategic choice.

Navigating which to use — FEIE or FTC — requires careful planning and often depends on your residency status, income type and long-term goals.

Also, don't confuse the FEIE threshold or standard deduction with exemption from U.S. tax filing. Filing can unlock benefits like credits and deductions, and it's essential for maintaining compliance, especially if you may return to the U.S. or inherit assets.

2. Beware of costly missteps involving foreign funds and PFICs

One of the most common — and costly — mistakes Americans make after moving to Portugal is investing in local mutual funds or ETFs.

These are often classified as Passive Foreign Investment Companies (PFICs) under U.S. tax law, which subjects them to punitive taxation and complex reporting requirements.

It takes practice to reframe the assumption that all ETFs and mutual funds are good for your portfolio. In this case, foreign ones can be financially unhealthy.

The IRS treats PFICs harshly, and the paperwork alone can be overwhelming.

If you're planning to move to Portugal with U.S.-based investments, consulting a cross-border adviser is essential, particularly where significant wealth management is concerned, and ongoing financial planning that takes into account your new cross-border context may be required.

3. Investing in euros isn't necessarily the best money move

Many Americans want to invest in euros to diversify or hedge against the dollar. And this is a perfectly understandable instinct given the economic volatility the U.S. has experienced (and wrought at a global scale) this year.

But it's not as simple as opening a Portuguese brokerage account. You'll need a U.S. address to buy U.S. mutual funds, and European platforms often come with higher fees and limited transparency.

While savings account rates in Portugal hover around 1.6% for standard retail deposits, even Portugal's best term-deposit or niche offers (typically less than 3.0% for one-year terms) still fall well short of top U.S. high-yield accounts, many of which exceed 4.0% APY.

In short, yes, Portugal offers stable and safe options, but there's nothing that truly rivals the highest U.S. yields.

Moreover, client service in Portugal is markedly different compared to what Americans are used to. Bureaucracy and red tape can slow down even basic transactions.

There's also a saturation of services targeting Americans, many of which assume Americans are wealthy enough to absorb financial losses — I know firsthand this is not necessarily the case.

This misunderstanding does a disservice to the growing number of middle-class Americans moving abroad for affordability and quality of life.

4. Portugal's tax landscape is rapidly shifting

Portugal's popular NHR regime has officially ended.

In its place is the Tax Incentive for Scientific Research and Innovation (Incentivo Fiscal à Investigação Científica e Inovação (IFICI), which offers limited benefits and applies only to specific professional categories.

As a result, many Americans are reconsidering Portugal in favor of countries like France and Italy, where long-term planning is more straightforward.

If you're still set on Portugal, proactive planning is more important than ever.

5. U.S. investments can be a stabilizing anchor

Political instability is a common reason Americans cite for leaving the U.S. But while emotions may drive the move, the factors that shape the decisions you make about your portfolio should be grounded in data.

Historically, the U.S. stock market has delivered strong annualized returns, even through periods of volatility. European markets have shown more variability in recent years, especially in southern economies.

Maintaining U.S.-based investments can provide regulatory clarity, familiar structures and a stabilizing anchor in uncertain times.

Conclusion

Moving to Portugal can be a beautiful life change. But financially, it's not a clean break for Americans, as much as they may be moving for the mental relief of living somewhere new and foreign.

As someone who's lived and invested in both countries, I recommend maintaining your money in the U.S. and building a cross-border strategy that can encompass the scope of your financial goals — not just your geography.

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