For high-net-worth individuals from the United States, the Costa del Sol represents more than just a lifestyle upgrade; it is a diversification of assets into a “California-style” climate at a fraction of the holding cost.
However, the American buyer is unique. Unlike their European counterparts, you are subject to Citizenship-Based Taxation.
The fear of the IRS and the Spanish Hacienda double dipping is the primary friction point.
This guide demystifies the treaty, breaks down the Buying a property in Spain taxes for US citizens, and explains why the tax landscape is often more favourable than you might fear.
Before diving into the ledger, consider the unique perspective for 2026 and beyond.
High-tax US states (California, New York, New Jersey) often levy annual property taxes of 1.5% to 2.5% of the property value. On a $2M home, that is a $40,000+ annual “holding fee”.
In Spain, the annual property tax (IBI) is significantly lower, often barely scratching 0.1% – 0.2% of market value.
Even when you factor in potential Spanish Wealth Taxes, the total cost of ownership in Spain can be surprisingly competitive compared to US real estate.
When you first purchase the asset, the tax is transactional. This is a one-off cost and varies depending on whether the property is new (bought from a developer) or a resale.
Table 1: Acquisition Tax Structure (Andalusia Focus)
Property Type | Tax Name | Rate (Approx.) | Notes |
Resale Property | ITP (Transfer Tax) | 7% (Andalusia) | Flat rate in Andalusia (reduced from higher tiered rates). |
New Build | VAT (IVA) | 10% | Paid to the developer. |
New Build | AJD (Stamp Duty) | 1.2% | Paid to the regional government on top of VAT. |
For US buyers, these acquisition taxes are generally added to your "basis" in the property. When you eventually sell, this higher basis reduces your capital gains tax exposure in both Spain and the US.
This is the concept that terrifies US buyers, yet it is the key to understanding buying a property in Spain taxes for US citizens without fear.
Buried in the US-Spain Tax Treaty (Article 1, Paragraph 3), the Saving Clause essentially states:
“Notwithstanding any provision of the Convention, the United States may tax its citizens… as if the Convention had not come into effect.”
In plain English: The US reserves the right to tax you on your worldwide income, regardless of what the treaty says. It sounds like the treaty is useless, but it isn’t.
The Saving Clause has exceptions. Crucially, it allows you to claim a Foreign Tax Credit (IRS Form 1116).
The result: You generally pay whichever tax rate is higher, but you do not pay twice.
One of the most confused aspects of buying a property in Spain taxes for US citizens is the annual tax on net assets.
Historically, Andalusia had a Wealth Tax.
Then, to attract investment, they effectively cancelled it (100% bonification). In response, the Spanish Central Government introduced the Solidarity Tax to capture that revenue from high-net-worth individuals.
Current Situation (2026 Outlook):
Andalusia has essentially reinstated the Wealth Tax optionally so that the money stays in the region rather than going to Madrid via the Solidarity Tax.
Table 2: The Wealth Tax Hierarchy
Feature | Wealth Tax (Impuesto sobre el Patrimonio) | Solidarity Tax (Impuesto de Solidaridad) |
Threshold | Approx €700,000 (plus €300k for main home). | Net assets exceeding €3,000,000. |
Jurisdiction | Regional (Andalusia collects/keeps it). | National (Central Govt collects it). |
Interaction | Deductible: Whatever you pay in Wealth Tax is deducted from your Solidarity Tax bill. | Designed as a “top-up” if regions charge zero. |
US Impact | Not Creditable: The US has no wealth tax, so you usually cannot offset this against US Income Tax. | Sunk Cost: This is a pure holding cost. |
Pro Tip for US Buyers: If your Spanish assets are under €3M, you may face zero Solidarity Tax and potentially zero Wealth Tax depending on current regional bonifications. If you are over €3M, you will pay roughly 1.7% - 3.5% on the excess, but Property Tax (IBI) remains incredibly low, balancing the equation.
You cannot simply file a US return and hope for the best.
The PCC Property Approach:
We do not just sell villas; we structure lifestyles.
Through our in-house experts at PCC Wealth, we ensure your “deemed income” is paid and your treaty credits are documented, preventing liens on the property that could spook a future buyer.
Is there double taxation when buying a property in Spain taxes for US citizens?
Generally, no.
While you must file in both countries, the US-Spain Tax Treaty allows you to offset Spanish income taxes against your US tax liability using the Foreign Tax Credit.
However, you must pay the “Wealth Tax” in Spain, which has no direct US equivalent to offset against.
How does the "Saving Clause" affect buying a property in Spain taxes for US citizens?
The Saving Clause allows the IRS to view your income as if the treaty didn’t exist.
However, Article 24 of the treaty grants relief via tax credits. It means the US won’t ignore the tax you paid to Spain; they just reserve the right to top it up if the US rate is higher.
What are the ongoing buying a property in Spain taxes for US citizens?
You will face three main annual taxes:
Can I mitigate the Wealth Tax as a US citizen?
Yes.
Limiting your mortgage exposure can sometimes hurt you here; ironically, having a mortgage reduces your net asset value for Wealth Tax purposes.
However, US buyers must be wary of currency fluctuations when taking a Euro mortgage.
The narrative that Spanish taxes are prohibitive for Americans is largely outdated or misunderstood.
When you view buying a property in Spain taxes for US citizens through the lens of total holding costs (low IBI offsetting the Wealth Tax) and treaty protection (Foreign Tax Credits), the Costa del Sol emerges as a highly efficient location for capital deployment.
The complexity lies not in the amount of tax, but in the bureaucracy of filing it correctly to satisfy both the Hacienda and the IRS.
Are you ready to structure your Spanish investment efficiently?
Before you view your first villa, let us align your US tax strategy with Spanish reality.
We’ve Moved Offices on 1st August 2025!
Private Client Consultancy is excited to announce that we have moved to a brand-new office space, designed to better serve our clients and reflect our continued growth.
Effective Date: Friday, 1st August 2025
New Address: Urb Jazmin De Miraflores, C. Jazmín, 2, Mijas Costa 29649, Malaga, Spain
Our phone numbers and email addresses remain unchanged.
All in-person meetings scheduled from 1st August onwards will take place at our new location. Please update your records accordingly.
We look forward to welcoming you to our new space!
Check out our detailed area guides along the Costa del Sol and Algarve.
Keep up to date with property news along the Costa del Sol with our blogs.
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