Moving to Portugal with a 401(k) or IRA: how both countries tax it in 2026

If you’re retiring to Portugal from the US, most of your savings probably sit in a 401(k) or an IRA.

For years, Portugal’s NHR scheme taxed those withdrawals at a flat 10%. Portugal closed it to newcomers from 2024, and its replacement, IFICI, gives pensions nothing at all.^[7][8] Yet pages that still rank for “401k Portugal” quote the 10% as if you could sign up tomorrow.

So here’s what really happens to your withdrawals if you move in 2026 or 2027: who taxes them, in what order, at what rate, and which US rules follow you across the Atlantic.

If you’re moving on a D7, the visa side is on our D7 visa page, with a section for American applicants. This post is only about the tax on your retirement accounts once you live here.

In this guide10 sections

1. Does Portugal tax my 401(k) or IRA?
2. Do I pay tax on my 401(k) twice, to Portugal and to the US?
3. What rate will I pay on my 401(k) in Portugal?
4. What happened to NHR's 10% rate on pensions?
5. Is my Roth IRA tax-free in Portugal?
6. What about my US Social Security?
7. Which US tax rules still apply after I move to Portugal?
8. Can my old state still tax my 401(k) after I move?
9. Should I cash out my 401(k) before I move to Portugal?
10. How do I get the Portuguese side checked?

Does Portugal tax my 401(k) or IRA?

Yes. Once you’re a Portuguese tax resident, Portugal taxes your 401(k) and IRA withdrawals as pension income, in the year you take them.^[3]

Three things follow from that:

• You pay nothing while the money stays in the account. Portugal taxes a pension when it’s paid to you. The dividends and gains inside your 401(k) aren’t paid to you, so they aren’t taxed each year.^[3]
• Your withdrawals join your other income. Portugal adds them to everything else you earn that year and taxes the total on its normal scale.^[4]
• You declare them on your Portuguese return in the foreign-income annex, with any foreign tax you paid on them.^[19]

Do I pay tax on my 401(k) twice, to Portugal and to the US?

No. You pay roughly the higher of the two countries’ tax, because the US–Portugal tax treaty makes one country credit the other’s.^[1]

Here’s how it works for a 401(k). The treaty’s pensions rule gives Portugal, as the country you live in, the right to tax your withdrawals. The US keeps taxing you anyway, because it taxes its citizens wherever they live. To stop you paying twice, the treaty tells the IRS to treat your 401(k) income as Portuguese income, so you can claim a credit for the Portuguese tax against your US tax on it.^[1][2][14]

The order matters when you file. You work out the Portuguese tax first, then claim it on your US return.

With an IRA, the same treaty stops you paying twice. Which country gives the credit depends on how your IRA was funded, for example whether it came from a 401(k) rollover or from your own contributions, so bring your account history to your adviser.

What rate will I pay on my 401(k) in Portugal?

Between 12.5% and 48% on each slice of your taxable income in 2026, after a pension deduction of €4,587 per person.^[4][6]

Portugal’s scale is progressive, so a modest withdrawal pays a much lower average rate than the top band suggests. Here’s what a single person with no other income would pay on three yearly amounts:

A few things move those numbers:

• The deduction is per pensioner. If you’re a couple and both of you draw a pension, each of you takes off the €4,587.^[6]
• Above €80,000 of taxable income you pay an extra 2.5%, rising to 5% above €250,000.^[4]
• Lower rates are coming for 2026 income. On 29 October 2026 the government approved cuts to the first six bands, backdated to January.^[5] Until the decree is published, this post uses the rates in force. At the new rates, the three examples above come to about €3,122, €6,617 and €11,658.

Try your own figures in our 401(k) and IRA tax calculator: enter your withdrawals and Social Security in dollars, for you alone or as a couple.

“So what would I actually pay on €36,000 a year?”

That’s about 19% of your withdrawal at mainland rates, before the deductions that come off the tax itself, such as your general family and health expenses, and before any foreign tax credit. Then the IRS looks at the same money. If the Portuguese tax is higher than the US tax on it, the credit can cover the US tax on that income in full. Your US adviser will run the US side with your own figures.

What happened to NHR’s 10% rate on pensions?

Portugal closed NHR to newcomers from 2024, so if you move in 2026 or 2027 you can’t get it.^[8]

NHR taxed foreign pensions at 10% for people who registered from April 2020, and not at all for those who registered before.^[8] Only people who were already in it, or who became resident by the end of 2024 under the transition rules, keep it for the rest of their ten years.^[8]

IFICI, the scheme that replaced it, leaves pensions out. Its 20% rate covers qualifying work income, and its exemptions for foreign income don’t include pensions.^[7] So even if you qualify for IFICI through work, your 401(k) withdrawals stay on the normal scale.

Is my Roth IRA tax-free in Portugal?

No. Portugal doesn’t recognise a Roth’s tax-free status, so expect Portuguese tax on at least the growth when you withdraw, and possibly on the whole amount.^[1][3]

The US–Portugal treaty has no Roth clause. Some other US treaties have one; this one doesn’t.^[1] So the IRS may treat your qualified Roth withdrawals as tax-free, while Portugal taxes them as pension income once you live here.

Keep the paperwork that shows what you paid in. Your Forms 5498 and 8606 and your 1099-R statements record your contributions and withdrawals. They’re how your Portuguese adviser shows which part of each withdrawal is money you put in.

What about my US Social Security?

Both countries can tax it, and here the order is reversed: the US taxes it first and Portugal credits the US tax.^[1][2]

Under US rules the IRS taxes up to 85% of your benefit. Portugal taxes it as a pension too, on the same scale as your 401(k), and then gives you a credit for the US tax you paid on it, up to the Portuguese tax on that income.^[1][2]

So if you’ve read that Portugal “doesn’t tax Social Security”, or that only the US does, that isn’t what the treaty says.

Which US tax rules still apply after I move to Portugal?

All the rules that come with your retirement accounts still apply, wherever you live, because the US taxes its citizens on their worldwide income.^[9]

Two of these catch people out:

• The foreign earned income exclusion won’t help you. It covers wages and self-employment income. Pensions, annuities and Social Security are left out of it.^[13]
• US payers withhold tax on payments sent abroad. If your plan pays to a Portuguese address, it must generally withhold US income tax unless you give it a US address or another valid reason not to.^[9]

Can my old state still tax my 401(k) after I move?

It can, if it still treats you as a resident.

Federal law stops a state taxing the retirement income of someone who isn’t its resident or domiciliary. But each state decides who counts as its resident.^[17] Virginia, for example, treats anyone domiciled there at any point in the year as a resident.^[18]

So the move on paper isn’t enough. Show your state you’ve left:

• Close or change your driver’s licence, voter registration and home address.
• File a final part-year return if your state expects one.
• Ask a US adviser how your own state judges domicile before your first withdrawal from Portugal.

Should I cash out my 401(k) before I move to Portugal?

Get advice on both sides before you decide, ideally before you become a Portuguese tax resident. A large one-off withdrawal is the single biggest tax decision in this whole move.

Here’s why the timing matters:

• Money you withdraw before you become a Portuguese tax resident is taxed by the US and your state, with no Portuguese tax on it. Portugal usually treats you as resident from your first day living here, so in the year you move, only withdrawals before that day stay outside its reach.^[21]
• A big withdrawal after you move lands in a single Portuguese tax year. On a progressive scale, one large year can push part of it into the 48% band and the extra 2.5% or 5%.^[4]
• Before 59½, the US adds its 10% early-withdrawal tax wherever you live, unless an exception applies. For a 401(k), one exception is leaving your job in or after the year you turn 55.^[10][11]

How do I get the Portuguese side checked?

Book a 45-minute consultation with a certified Portuguese accountant before your first withdrawal as a resident.

Frequently asked questions

Does Portugal tax my 401(k) if I don’t withdraw anything?

No. Portugal taxes a pension when it’s paid to you. Growth that stays inside your 401(k) or IRA isn’t paid to you, so it isn’t taxed each year.^[3]

Will the US still tax me after I move to Portugal?

Yes. The US taxes its citizens on their worldwide income wherever they live, and the treaty keeps that right. You claim a credit for the Portuguese tax on your 401(k) withdrawals.^[1][9]

Do I still pay the 10% early-withdrawal tax if I live in Portugal?

Yes, before 59½, unless an exception applies. Moving abroad doesn’t remove it. For a 401(k), leaving your job in or after the year you turn 55 is one exception.^[10][11]

Do required minimum distributions still apply in Portugal?

Yes. You must start them at 73, or at 75 if you reach 74 after 2032. Portugal then taxes each distribution as pension income.^[10][12]

Can I use the foreign earned income exclusion on my pension?

No. The exclusion covers earned income. Pensions, annuities and Social Security are outside it.^[13]

Is US Social Security taxed in Portugal?

Yes. Both countries can tax it. The US taxes it first, and Portugal gives you a credit for the US tax.^[1][2]

Does IFICI lower the tax on my pension?

No. IFICI’s 20% rate is for qualifying work income, and its foreign-income exemptions leave pensions out. Your pension stays on the normal scale.^[7]

Can I still get NHR’s 10% rate on my pension?

No, if you become resident in 2026 or later. Only people already registered, or who became resident by the end of 2024 under the transition rules, keep it.^[8]

Is my Roth IRA tax-free in Portugal?

No. Portugal doesn’t recognise the Roth’s tax-free status, so expect tax on at least the growth, and possibly the whole withdrawal. Keep your Forms 5498, 8606 and 1099-R.^[1][3]

Do I have to report my Portuguese bank account to the IRS?

Yes, if your foreign accounts add up to more than $10,000 at any point in the year. That’s the FBAR. Above higher thresholds you also file Form 8938.^[15][16]

Do Portuguese investment funds create extra US paperwork?

Yes, if you hold them in your own name. Most foreign funds count as PFICs for US tax. Inside your IRA or 401(k), you don’t file the PFIC form for them.^[20]

Can Novomove’s tax consultation cover the US side too?

No. Our partner accountant advises on Portuguese tax, including how Portugal applies the treaty to your US income. For your US return, you’ll need a US-qualified adviser.

Sources and how we checked

We read the treaty, the Portuguese tax code and the IRS texts below directly, and our partner accountant checked the Portuguese side and the worked example. We give no tax advice: this post explains how the rules work, and your own case needs an adviser on each side. Rates are those in force for 2026 income.

1. The treaty, its pensions and Social Security rules, the saving clause and the relief from double tax: Convention between the United States and Portugal on income taxes, with Protocol, signed 6 September 1994 (IRS), articles 20, 25 and Protocol paragraph 1.
2. How the credits work in each direction: US Treasury, Technical Explanation of the US–Portugal convention, 1994.
3. Pensions as category H income, taxed when paid: Portuguese income tax code (CIRS), article 11, Portal das Finanças.
4. The 2026 scale and the solidarity surcharge: CIRS article 68 (wording from the 2026 State Budget, Lei 73-A/2025) and CIRS article 68-A.
5. The approved cuts to the first six bands: Lei 64-B/2026, 22 October 2026, Diário da República, and the government’s approval on 29 October 2026, backdated to January (RTP, 29 October 2026).
6. The pension deduction (8.54 times the IAS): CIRS article 53, CIRS article 25 and the 2026 IAS of €537.13 in Portaria 480-A/2025/1.
7. What IFICI covers: Tax Benefits Statute, article 58-A and CIRS article 81.
8. NHR’s 10% pension rate, its end and the transition rules: CIRS article 72 as worded until December 2023, Lei 2/2020, article 329, and Lei 82/2023, article 236, reproduced in the note to CIRS article 81.
9. Worldwide taxation of US citizens abroad and withholding on pensions sent abroad: IRS Publication 54.
10. The 10% additional tax before 59½ and required minimum distributions: IRS Publication 590-B.
11. The age-55 separation exception for 401(k) plans: IRS Publication 575.
12. RMD ages of 73 and 75: 26 U.S.C. §401(a)(9).
13. Pensions excluded from the foreign earned income exclusion: Instructions for Form 2555.
14. Treaty re-sourcing for US citizens living in the treaty country: Instructions for Form 1116.
15. The $10,000 FBAR threshold: IRS, Report of Foreign Bank and Financial Accounts.
16. Form 8938 thresholds for people living abroad: Instructions for Form 8938.
17. States can’t tax non-residents’ retirement income, as each state defines residence: 4 U.S.C. §114.
18. Virginia’s residence rule: Code of Virginia §58.1-302.
19. Declaring foreign pensions and the foreign tax paid: Portal das Finanças, instructions for Anexo J.
20. PFICs, and no Form 8621 for funds held in an IRA or 401(k): Instructions for Form 8621.
21. When your Portuguese tax residence starts: CIRS article 16.