If you are taxed in the United States
The US taxes its citizens and residents wherever they live, so a house in Mallorca is reported at home as well. Credits stop the double tax; reporting is the real work.
Worldwide taxation, foreign tax credits, and forms
The US taxes citizens and green-card holders on worldwide income regardless of residence. The US–Spain treaty, as amended by the 2019 protocol, relieves double taxation mainly through the foreign tax credit: you report the Spanish income and gain on your US return and claim credit for the Spanish tax on Form 1116. The burden that surprises buyers is not the tax — it is the reporting: foreign bank accounts, and any company used to hold the property, bring their own filings.
What you actually declare
While you own it
- Spanish imputed income tax at 24 % of the notional income, plus IBI, paid in Spain.
- The US does not tax you for simply owning it, but a Spanish bank account over the threshold triggers FBAR and possibly Form 8938.
- Spanish wealth tax may apply above €700,000 of Spanish assets per owner — there is no US credit for a wealth tax.
If you rent it out
- Spain: 24 % of gross rent, no deductions, quarterly.
- US: report rental income and expenses on Schedule E under US rules, with 30-year depreciation for foreign property, and claim the foreign tax credit.
- Because Spain taxes gross and the US taxes net, the credit often falls short. Model it first.
When you sell
- Spain: 19 % on the gain, with 3 % withheld at completion on account.
- US: capital gain computed in dollars, so exchange rate movement is part of your gain, plus depreciation recapture if you let it.
- Credit for the Spanish tax on Form 1116, within the passive basket limits.
Five questions for your own adviser
Does a Spanish S.L. holding the property make me file Form 5471, and is it worth it?
How much of the Spanish tax can I actually credit this year?
What does the dollar–euro movement do to my US gain?
Which accounts trigger FBAR and Form 8938 once I own here?
How do Spanish and US tax years and filing deadlines interact?