The Short Version
A single American retiree living on $31,000 of Social Security and an $8,400 private pension would pay roughly $6,800 a year in Portuguese tax. That's a bit less than Spain (about $7,600) and a regular Italian region (about $10,200), but well above an Italian 7% flat-tax town (about $2,750) or France (close to $0). Add a $1 million IRA with $60,000 a year of withdrawals, and the bill rises to roughly $32,200, about the same as Spain.
If that surprises you, you're not alone. For a decade Portugal was the go-to low-tax destination for retirees, thanks to its Non-Habitual Resident (NHR) program, which taxed foreign pensions at 10% or less. That program closed to new applicants in 2024, and its replacement doesn't cover pensions. Much of what's online still describes the old Portugal.
This page shows how the numbers are built, using the same example retiree as our Italy, Spain, and France examples so the figures compare directly.
The Example Retiree
- Single US citizen, age 65 or older, not a Portuguese citizen
- US Social Security: $31,000 a year
- Private-employer pension: $8,400 a year
- Total income: $39,400, or about €34,560 at an assumed rate of $1.14 per euro
- No withdrawals from a Traditional or Roth IRA (the second half of this page adds them)
- Tax year 2026 rules in both countries, mainland Portugal
This retiree comfortably clears the income requirement for Portugal's D7 visa, the usual route for retirees, which is pegged to the Portuguese national minimum wage.
What Happened to NHR (Settled)
The NHR program closed to new applicants in 2024. People who registered in time keep it for the rest of their ten-year window, and for them foreign pensions are taxed at a flat 10%. Its replacement, IFICI (sometimes called "NHR 2.0"), is aimed at people working in qualifying professions and doesn't cover pension income at all. A retiree moving to Portugal today is taxed under the regular rules below.
The US Side: $0 (Settled)
For this retiree, the US tax bill is zero. Half of the Social Security ($15,500) plus the pension ($8,400) comes to $23,900, under the $25,000 threshold at which Social Security becomes federally taxable for a single filer, and the pension falls below the 2026 standard deduction. With no US tax to credit against, whatever Portugal charges is an added cost.
Who Taxes the Social Security? (Settled, despite some confusion online)
Article 20(1)(b) of the US–Portugal treaty says US Social Security paid to a Portuguese resident "may be taxed" in the United States. It doesn't say only in the US, so Portugal, as the country of residence, can tax it too. The IRS has published this reading: when the recipient is a Portuguese resident and a US citizen, both countries may tax the benefits, the US has the primary right, and Portugal must relieve double taxation with a credit for the US tax.
For this retiree the US tax on the Social Security is zero, so there's nothing for Portugal to credit, and Portugal taxes the benefits at its normal rates.
Some relocation sites say Portugal doesn't tax US Social Security at all. That isn't what the treaty or the IRS says, and it isn't a safe basis for a budget.
The private pension is simpler: under Article 20(1)(a) it's taxable only in Portugal as the country of residence (though the US keeps taxing its citizens under the treaty's saving clause).
The Portuguese Tax Calculation
Portugal's income tax (IRS) has nine brackets for 2026, from 12.5% on the first €8,342 of taxable income up to 48% above €86,634, set by the 2026 Budget Law (Law 73-A/2025). Pension income gets a standard deduction of €4,587 before the brackets apply.
| Step | Euros |
|---|---|
| Social Security and pension income | €34,560 |
| Minus standard pension deduction | −€4,587 |
| Taxable income | €29,973 |
| 12.5% on the first €8,342 | €1,043 |
| 15.7% on the next €4,245 | €666 |
| 21.2% on the next €5,251 | €1,113 |
| 24.1% on the next €5,251 | €1,265 |
| 31.1% on the next €6,308 | €1,962 |
| 34.9% on the remaining €576 | €201 |
| Minus personal deduction for general expenses (approx.) | −€250 |
| Total Portuguese tax | ≈ €6,000 (≈ $6,840) |
That's an effective rate of about 17%, leaving roughly $32,560 a year, or about $2,710 a month, to live on.
Rates may drop slightly. In September 2026 the government sent Parliament a proposal to cut the rates on the first six brackets for 2026 income. If it passes, this retiree's bill would be somewhat lower.
Madeira and the Azores apply rates 30% lower than the mainland in 2026, which would bring this retiree's bill down to roughly $4,700.
Portugal vs. Spain, Italy, and France
| Portugal | Spain | Italy, regular region | Italy, 7% town | France | |
|---|---|---|---|---|---|
| Local tax on $39,400 | ≈ $6,840 | ≈ $7,590 | ≈ $10,240 | ≈ $2,760 | ≈ $0 |
| Effective rate | ≈ 17% | ≈ 19% | ≈ 26% | 7% | ≈ 0% |
| Left to live on each month | ≈ $2,710 | ≈ $2,650 | ≈ $2,430 | ≈ $3,050 | ≈ $3,280 |
For comparison, a retiree who secured NHR status before it closed pays a flat 10% on foreign pensions, about $3,940 on the same income.
What Changes With a $1 Million IRA and a $130,000 Roth
Now give the same retiree a $1 million Traditional IRA and a $130,000 Roth IRA, and have them withdraw $60,000 a year from the Traditional IRA. Total income rises to about $99,400 (roughly €87,200).
Traditional IRA withdrawals (Settled). Under Article 20(1)(a), these are taxable in Portugal as the country of residence, at the same progressive rates, and the top brackets arrive quickly: 44.6% from about €46,600 of taxable income, plus a 2.5% solidarity surcharge above €80,000.
| Portugal | Spain | Italy, regular region | Italy, 7% town | France | |
|---|---|---|---|---|---|
| Roughly what you actually pay | ≈ $32,200 | ≈ $31,900 | ≈ $36,300 | ≈ $10,500 | ≈ $10,500 |
| Annual tax on the IRA balances | $0 | $0 to ≈ €1,750, by region | ≈ $2,250 | $0 | $0 |
The US tax on this income is roughly $10,500. Because Portugal's tax is far higher, and a US citizen ends up paying roughly the higher of the two, Portugal sets the bill.
No wealth tax (Settled). Portugal has no general wealth tax and no annual levy on foreign financial accounts. Its only wealth-style tax, AIMI, applies to Portuguese real estate above €600,000.
The Roth IRA (Settled, and unfavorable). Portugal doesn't recognize the Roth's tax-free status. Your original contributions come back tax-free, but the investment growth in a withdrawal is taxed as pension income at the normal progressive rates. Details are in our Portugal retirement account guide.
Other Income: Brokerage and Savings Accounts
Portugal generally taxes residents' dividends, interest, and capital gains at a flat 28%, with an option to add them to regular income instead if that's cheaper. Unlike France, the US–Portugal treaty has no special rule cancelling the local tax on US-source investment income for US citizens, so a US brokerage account is taxed in Portugal too, with credits used to limit double taxation. That's a real difference from France for anyone with a sizable taxable account.
What Portugal Doesn't Tax
- Inheritances to close family. Portugal has no inheritance tax as such. Its stamp duty on inheritances (10%) doesn't apply to spouses, children, or parents.
- Foreign account balances. No annual wealth tax or foreign-asset levy.
What People in This Situation Commonly Do
- Check old NHR advice against today's rules. Much of the "Portugal is a tax haven for retirees" material predates 2024.
- Draw down before moving. Some people take larger IRA withdrawals or Roth conversions while still US residents, paying only US tax, before Portugal's rates apply.
- Consider Madeira or the Azores. Their 30% lower rates can meaningfully reduce the bill for retirees happy with island life.
- Compare with France for IRA-heavy or brokerage-heavy plans. For large Traditional IRA withdrawals or taxable investment accounts, France's treaty treatment can save tens of thousands of dollars a year compared with Portugal.
What This Example Doesn't Cover
- Government pensions. US federal, state, and local government pensions are generally taxable only in the US under Article 21 of the treaty, unless you're a Portuguese national.
- Healthcare. D7 applicants need health insurance for the visa. Legal residents can register with the national health service (SNS), which charges modest fees rather than premiums. Compare international health plans
- Currency moves the numbers. Your income is paid in dollars and taxed in euros. See what converting your Social Security with Wise would cost
- Other deductions. Portugal allows deductions for health, housing, and other expenses that could lower the bill a bit further.
How We Built These Numbers
Portuguese figures use the 2026 mainland IRS brackets from Law 73-A/2025, the 2026 standard deduction for pension income (€4,587), an approximate €250 deduction for general family expenses, and the 2.5% solidarity surcharge above €80,000. US figures use 2026 federal brackets, the standard deduction including the age-65 additions, and the Social Security taxability thresholds. All conversions use $1.14 per euro. Figures are rounded and meant to show the size of the differences, not to serve as a tax quote.
Sources: US–Portugal Income Tax Convention (1994), Articles 20, 21, and 25 and Protocol; IRS information letter on US Social Security paid to Portuguese residents; Portuguese IRS Code, Articles 53 and 68, as amended by the 2026 Budget Law (Law 73-A/2025); Proposta de Lei 108/XVII/2 (September 2026 rate proposal); IRS 2026 inflation adjustments.
This is general information, not tax advice. Tax rules in both countries change, and Portugal's 2026 rates may be revised. Confirm your situation with a US–Portugal cross-border tax professional before making relocation decisions.