Understanding Wealth Tax for U.S. Expats in European Countries
- Oct 28
- 4 min read
As a U.S. citizen living abroad, you’re likely familiar with the complexities of managing taxes across two systems — the U.S. and your country of residence. But if you’ve moved to countries such as Spain, Italy, Norway, or Switzerland, you may encounter an additional layer of complexity: the wealth tax.
While most Americans are used to income-based taxation, many European countries also impose annual taxes on the value of your assets. This concept can come as a surprise — and unfortunately, the U.S. tax system offers no direct offset or foreign tax credit for these wealth taxes. Let’s break down what this means and how you can plan effectively.
What Is a Wealth Tax?
A wealth tax (or “net worth tax”) is a levy on an individual’s total net assets — not just income. It’s calculated based on the market value of your worldwide assets on a specific reference date, typically December 31 each year.
Taxable assets can include:
Real estate and vacation properties
Bank accounts and investment portfolios
Shares in private companies
Valuable personal items such as art or jewelry
Certain retirement accounts or life insurance contracts
Debt, such as mortgages, can usually be deducted to determine your net taxable wealth. The resulting net figure is then taxed at progressive rates, often ranging from 0.1% to 2% depending on the country and region.
Which Countries Have a Wealth Tax?
As of 2025, several countries still maintain some form of wealth or net worth tax. The rules vary widely by jurisdiction:
Spain: Applies an annual Impuesto sobre el Patrimonio on worldwide assets for tax residents. Each region (autonomous community) can set its own rates and exemptions, but generally, there is an exemption of around €700,000 plus €300,000 for your main home. Rates can reach up to 3.5% in some regions such as Catalonia or Valencia.
Italy: While Italy doesn’t have a general wealth tax, it imposes specific asset-based taxes on foreign financial assets (IVAFE) and foreign real estate (IVIE) — typically 0.2% on financial accounts and 0.76% on real property abroad.
Norway: Has one of the highest-profile wealth taxes, levied at both the municipal and national level, with rates around 0.85% on net assets over a threshold.
Switzerland: Each canton has its own wealth tax rates, typically between 0.1% and 1% on net assets above a minimum exemption.
Other countries, such as France, have repealed or narrowed their wealth tax to apply mainly to real estate (Impôt sur la fortune immobilière).
The U.S. Does Not Have a Wealth Tax — and There’s No Offset
Here’s the key issue for U.S. expats: The United States taxes its citizens on worldwide income, but it does not impose a tax on net wealth.
That means:
Wealth taxes paid abroad cannot be credited against U.S. taxes, since the U.S. foreign tax credit (Form 1116) only applies to income taxes.
Even if your wealth tax is calculated based on the same assets generating your investment income, it’s considered a non-income tax under U.S. tax law.
In short: there is no mechanism to claim a deduction or offset in your U.S. return for wealth tax payments, though you may be able to deduct it as an itemized expense in limited cases (subject to the $10,000 SALT limitation and other restrictions).
How to Navigate Wealth Tax as a U.S. Expat
If you’re living in a country with a wealth tax, proactive planning is essential. Here are a few practical strategies:
1. Understand the Residency Rules
Wealth tax generally applies only to tax residents. In some cases, nonresidents are taxed only on assets located in that country. If your time in the country is limited, it may be possible to avoid wealth tax exposure through careful residency and domicile planning.
2. Optimize Your Asset Structure
Certain assets may be treated more favorably for wealth tax purposes:
In Spain, pension plans approved under Spanish law are excluded.
In Italy, the IVIE and IVAFE apply only to foreign assets — domestic ones may be exempt.
Some countries offer exemptions for business assets, small shareholdings, or principal residences.
A cross-border advisor can help you analyze your global portfolio to identify which assets trigger wealth tax and which don’t.
3. Keep Accurate Valuation Records
Each country has its own valuation methods — for instance, Spain often uses the higher of purchase price, cadastral value, or government-assessed value for real estate. Maintaining documentation and tracking your debt balances (like mortgages) can minimize over-taxation.
4. Consider the U.S. Reporting Impact
Remember that your foreign assets are often also subject to U.S. reporting obligations such as:
FBAR (FinCEN Form 114) for foreign bank accounts
Form 8938 (FATCA) for foreign financial assets
Form 8621 for certain foreign mutual funds (PFICs)
While these forms don’t create tax on their own, failing to file them can result in penalties. Your wealth-tax reporting can help ensure you have accurate asset data for these U.S. filings.
5. Plan for Property and Retirement Accounts
For expats owning foreign real estate, the same property may be subject to:
Wealth tax in the country of residence
Capital gains tax upon sale locally and in the U.S.
Similarly, retirement accounts may receive different treatment — some may count toward taxable wealth locally, even if they are tax-deferred under U.S. law. Coordination between local and U.S. tax advisors is key to avoid double taxation and surprises in retirement.
Bottom Line
If you’re a U.S. expat living in Spain, Italy, or another country with a wealth tax, you’ll need to account for these levies in your annual tax planning. While the U.S. system doesn’t offer relief for wealth taxes paid abroad, thoughtful structuring, proper asset valuation, and early planning can help minimize exposure and ensure compliance on both sides of the Atlantic.
At Hock Tax Services, we specialize in helping U.S. citizens navigate the complexities of international taxation — from foreign asset reporting to optimizing your structure under local tax rules.
If you live in a country with a wealth tax and aren’t sure how it affects your U.S. filings, reach out — we can help you develop a coordinated strategy that keeps you compliant and tax-efficient.
