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 protocol signed in 2013 and in force since 27 November 2019, 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: Balearic rules exempt the first €3 million of net Spanish assets per owner, and the state solidarity tax can apply above that — there is no US credit for either.
- US estate tax covers the house as part of your worldwide estate (exemption $15 million per person in 2026); there is no US–Spain estate tax treaty, though Spanish inheritance tax can be credited.
If you rent it out
- Spain: 24 % of gross rent, no deductions; from the 2026 tax year one return a year, filed 1–20 April.
- 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.
- The $250,000 / $500,000 home-sale exclusion rarely helps: it needs the house to have been your main home for two of the five years before the sale.
- 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?
