These days, there are an increasing number of reasons why a U.S. citizen may research “moving to Europe from USA.”
Whether it’s a more balanced lifestyle, increased access to affordable healthcare, or a change of scenery, moving to Europe as an American can offer weary rat racers an opportunity to recharge and refocus, both personally and professionally.
Of course, understanding how to move to Europe is crucial. When it comes to a longer-term move, it’s not as simple as buying plane tickets and reserving an Airbnb. There are several important factors to consider, including long-term visas and employment opportunities, potential European citizenship pathways, cross-border tax and financial planning implications, and more.
In the following article, we break down the most important ingredients to a successful move overseas, so that US citizens and taxpayers moving to Europe can design the best plan for them.
Employment & Visas
There is a big difference between visiting and moving to Europe. Americans who plan to visit Europe as tourists are limited to 90 days within the Schengen Zone.
This zone applies to EU member states and countries considered part of the European Economic Area (EEA). It covers many of the most popular countries in Europe, including Spain, France, Italy, Switzerland, and others.
In total, there are currently 27 countries in the Schengen Zone, with Romania and Bulgaria officially on deck to become the 28th and 29th countries in the zone sometime early next year. (1)
Essentially, moving to Europe will require you to obtain a long-term visa. The exact visa will vary depending on the country and your employment status. For example, if you have the opportunity to work remotely, you may be interested in the Spanish digital nomad visa. (2) If, on the other hand, you’ve been hired for a full-time role, your paperwork trail will look very different.
Note: Many EU countries offer fast-tracked migration schemes to allow foreign workers to fill specific skill and labor shortages. Additionally, moving for love can also provide you with a visa pathway, as foreign countries generally allow family reunification for marriage or committed partnerships.
A note on residency status in Europe
It’s critical to understand how your visa governs your ability to work when you move to Europe from the US. Review your visa and check with an immigration lawyer as needed to learn how your residency status changes should you leave the employer or be made redundant by your employer.
Obtaining EU citizenship
For some lucky Americans, obtaining a European passport with an EU member state can streamline moving to Europe. Below are some important considerations to bear in mind if you embark on this pathway.
- Not all countries allow Americans to hold dual citizenship: Check the requirements if you have your heart set on achieving this status.
- Learning the language may be a prerequisite: Claiming citizenship often requires a high level of fluency in the official language of your target country.
Family considerations
Family considerations are broad when moving to Europe from the USA.
If you’re moving to Europe with a spouse, they may need their own work authorization to obtain employment.
If you have children, you will need to decide between enrolling them in a local school or an international school. Both options come with a laundry list of pros and cons, each of which will look a little different depending on a family’s specific needs and priorities.
Do you have aging parents or young adult children who will stay in the U.S.? The COVID-19 pandemic taught us that both visas and contingency plans were important to have in place when living abroad.
Banking & financial services when moving to Europe from the USA
Candidly, banking as a U.S. citizen abroad can be a headache.
The IRS can and does monitor American taxpayers who have foreign financial accounts. At a certain threshold, certain US reporting obligations are triggered, such as the Foreign Bank Account Report (FBAR). (3)
The additional scrutiny and reporting mean that not all foreign banks are receptive to American clients, and it’s not uncommon for Americans to experience difficulty opening a local bank account when they move.
Tread cautiously: Another surprise is that your current bank, brokerage, or financial institution may limit or discontinue services when you notify them of your address outside of the United States.
Related reading: What is Currency Risk? (And How Can Expats Manage It?)
Insurance
While one of the biggest advantages of moving to Europe is increased access to quality healthcare, Americans will need to understand how their move impacts pre-existing U.S. coverage. Additionally, moving to Europe will have different implications depending on whether you are moving to Europe as an employee of a company or as a self-employed person.
In both cases, you will want to double-check all your current insurance policies, review what you can and want to keep, and research what you need to purchase for your move abroad.
Note: Depending on the length of your stay abroad, you may be able to keep U.S. policies in place.
Tax and financial planning
U.S. citizens and permanent residents (Green Card holders) have mandatory U.S. income tax filing requirements, regardless of where they live and work.
Most countries outside the U.S. operate on residence-based taxation, meaning you will also need to file a foreign tax return.
There are tax treaties between the U.S. and many countries to help alleviate double taxation, but they can be complicated to understand and apply correctly.
Planning is key because many income items will be taxed and treated differently between the U.S. and foreign tax regimes.
If you self-prepare or work with a local U.S. accountant who does not specialize in expats you may unknowingly omit important foreign information filings, underreport income, or overpay taxes. When it comes to cross-border taxation planning and preparation, working with a specialized professional is essential.
Investment planning
Investment regulations vary widely from country to country. Ensure your investment advisor acts as your fiduciary, meaning they are working in your best interest, not theirs.
Take the time to understand the local tax implications of your portfolio and understand that many foreign investments are taxed and penalized from a U.S. tax perspective. Familiarize yourself with U.S. reporting requirements, such as the Net Investment Income Tax (NIIT).
Additionally, it’s common for U.S. citizens’ U.S.-based retirement accounts to be their biggest investment account. Connect with an expert in cross-border finances (specializing in your resident country) to understand how your new country categorizes your accounts to avoid a surprise tax bill.
Final thoughts on moving to Europe from the USA
Very few situations are as straightforward as they seem when it comes to international moves and cross-border tax and financial planning.
Be sure to do your homework before you make a move, and carefully vet the team of professionals you intend to trust with questions about immigration and residency status, taxes, and financial planning. Life abroad can be rewarding but quickly become frustrating without the right planning.
Resources
- Bulgaria and Romania to join Schengen area (europa.eu)
- Spain Digital Nomad Visa
- Global US Taxpayers Must Plan Carefully to Comply With FBAR
About the Author
Arielle Tucker is a Certified Financial Planner™ and IRS Enrolled Agent. She's spent the last decade living between the US, Germany, and Switzerland. She is passionate about helping other U.S. expats and Americans living abroad achieve their dreams with the right financial and tax planning. You can learn more about Arielle and Connected Financial Planning by clicking here.