With a thriving economy, a great job market, a welcoming culture, and generally a high standard of living, it doesn’t come as a surprise that the Netherlands attracts a lot of expats from around the world.
Currently, over 30.000 US expats are estimated to be living in this European country, predominantly in Amsterdam - some of them are working as employees, while others are self-employed. While both groups might achieve an excellent work-life balance, which the Netherlands boasts, the way they file and pay their US taxes differs.
In this article, we go over the process of filing your US expat taxes from the Netherlands for employees and self-employed individuals.
Non-tax residents in the Netherlands only pay taxes on their Netherlands-sourced income, while tax residents pay income taxes on their worldwide income. As an expat, you will generally be considered a tax resident of the Netherlands in the following cases:
The Netherlands categorises income into three separate "boxes" for taxation, each with its own set of tax rates:
The Netherlands operates a progressive income tax system, meaning your tax rate increases as your income rises. For Box 1, the rates are:
Tax requirements for self-employed individuals may depend on the business structure they choose. If you’re considered a resident, in 2024, you’ll be taxed at a rate of 19% for self-employment income up to and including €200.000 and 25,8% for any income above this.
No matter how long you’ve been living abroad or where you’re living, as long as you’re a US citizen, you’ll be subject to US taxes. Here’s how to navigate and optimise them while in the Netherlands.
If you’re an employee working for a company while living in the Netherlands, you share your tax obligations with the employer. You need to file a US federal tax return. The official deadline is April 15 each year, but as an expat, you get an automatic extension until June 15. Upon request, you might get another two extensions: until October 15 and December 15.
If you’re self-employed and generating income while based in the Netherlands, the tax implications don’t differ much from those who are based in the US.
Before you start worrying about paying taxes on the same income twice (to two countries), we have good news: there are tax credits and exclusions that can significantly reduce your US tax burden.
The FEIE allows US citizens abroad to exclude a certain portion of their income from income taxes. For the 2023 tax year (the taxes you file in 2024), you can exclude up to $120.000. This limit increases to $126.500 for the 2024 tax year. To qualify for the FEIE, you must pass either the Physical Presence Test or the Bona Fide Residence Test.
For both employed and self-employed taxpayers who pay tax in the Netherlands, the Foreign Tax Credit can be used to reduce their US tax bill based on income taxes paid in the Netherlands.
The Foreign Tax Credit provides US expats who pay taxes to foreign governments with dollar-for-dollar credits that they can apply toward their US tax bill. To qualify for the FTC, the taxes must be:
You can claim the FTC by filing IRS Form 1116.
US citizens living in the Netherlands must pay social security taxes to either the Netherlands or the US, but not both, thanks to the Totalization Agreement. The country to which you pay social security taxes depends on the duration of your stay in the Netherlands:
US expats living in the Netherlands with qualifying children or dependents living with them can claim the Child Tax Credit just like in the US. This will usually give you up to $1.600 in partially refundable credits per qualifying child / dependent.
The US-Netherlands tax treaty provides a framework to minimise double taxation on income earned by Americans living in the Netherlands. However, due to the Savings Clause, which lets both countries tax their citizens and treaty residents regardless, the benefits of the treaty may not always be available to US expats, except in specific cases. In that case, an expat may be better off claiming some of the tax credits, like the FTC or CTC.