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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22703
Experience:  Taxes, Immigration, Labor Relations
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I am a United States citizen, retired and living in California.

Resolved Question:

I am a United States citizen, retired and living in California. I am considering purchasing a home in Spain. I would need to also apply for Spanish residency in order to be able to use the home as often as I wish and not be restricted to 90 days. If I do so, how does that affect my residency and tax status in the United States.

Thank you for you quick response.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
Several issues to cover...
1.
As long as you are US citizen - you would be required to report all your worldwide income regardless of your residency and will be liable for US taxes regardless where you live.
2.
The issue would be with tax liability in Spain - when you come to Spain with an intention to reside there (obtaining a residence status is evidence of an intention to stay) - you will be tax-resident starting the day you arrive and will be liable for Spanish income tax, capitals gains and succession duty (inheritance tax) on your worldwide assets.
Sorry if you expected differently.
3.
If the same income is taxable abroad and in the US - you may claim a credit for taxes paid abroad - so the same income would not be taxed twice. Use the form 1116 - http://www.irs.gov/pub/irs-pdf/f1116.pdf please find instructions here - http://www.irs.gov/pub/irs-pdf/f1116.pdf
The credit is limited by the US tax liability on the same income - the form 1116 is used to calculate the amount of credit. Means - if tax liability abroad is higher - there will not be US taxes on that income, but if tax liability abroad is lower - in the US you will pay the difference after the credit will be applied.

Let me know if you need any help or clarification.

Customer:

Is there a way to just bown and use a 2nd home in Spain as a vacation home without any residence or tax consequences?

Customer:

I meant own. (not bown). Sorry.

LEV :

For US tax purposes - it would not matter - you may have as many homes as you wish - and will be able to deduct real estate taxes for all of them. Mortgage interest may be deducted only on your primary home and ONE secondary home - it may be your vacation home as well.
That is regardless where the home is located.
In Spain - if you are not official resident and would not spend more than 183 days in Spain - you will be a nonresident alien - and will be taxed ONLY on income sourced from Spain (if you have any)
Yes - you may own a property and not be a resident for tax purposes.

LEV :

If you are non-resident and plan to purchase a property - you will need a Numero de Identificacion de Extranjeros (NIE) - similar to the US tax ID. The NIE identifies you in the Spanish tax system is required when you dealings with the Hacienda (Spanish tax department). The NIE is needed to purchase a real property and may be requested at the nearest police station which has a foreigners’ department (comisaria).
Again - you still may be a nonresident alien for income tax purposes.

Customer:

It sounds like if I am purchasing a vacation home it is probably best and simplest to avoid residency. However, will that restrict the number of days I can stay in Spain? And does the number of days I stay in spain restrict the number of total days I can spend in the entire European union?

Customer:

Thank you for your help.

LEV :

Please be aware that residency requirements are different depending on purposes.
For income tax purposes - if you spend more than 183 days in Spain during the tax year - in the morning of 184 day - you will considered a resident alien - and all your worldwide income would becomes taxable.
For immigration purposes - there is a visa restriction. Thus, if you come as a visitor without obtaining any visa - 90 is limit to stay in the entire European Union. If you have a different visa - restrictions might be different based on what visa you would have.

Customer:

Thank you. You have been a big help. Goodbye

LEV :

Appreciate your warm words. You are very welcome.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22703
Experience: Taxes, Immigration, Labor Relations
Lev and 7 other Tax Specialists are ready to help you
Expert:  Lev replied 1 year ago.
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