When do you have to pay US taxes while living in the Netherlands?

As an American in the Netherlands, you might be wondering why you're still filing US tax returns alongside your Dutch ones. It's a common frustration, but understanding the basics can make tax season less stressful.

Citizenship-based taxation

Unlike most countries, which tax based on residency, the US taxes based on citizenship. This means:

• US citizens and green card holders must file US tax returns, no matter where they live
• Your worldwide income is subject to US taxation
• This obligation continues until you renounce US citizenship or surrender your green card

It might seem unfair, but it's been this way since the Civil War era. The good news? Many expats end up owing little or no US tax thanks to specific provisions designed for Americans abroad.

How US-Dutch double taxation works

Living in the Netherlands, you're subject to taxes from both countries, but you won't necessarily pay twice on the same income. Here's why:

Foreign earned income exclusion (FEIE)

For 2025, you can exclude up to $130.000 of foreign earned income from US taxation (up from $126.500 in 2024). If you earn less than this amount, you might not owe any US income tax. To qualify, you need to meet one of the following criteria:

• Have your tax home in a foreign country
• Pass the "physical presence" test (330 days outside the US in a 12-month period)
• Pass the "bona fide residence" test (living in the Netherlands for an uninterrupted full tax year)

Foreign tax credit (FTC)

Dutch income tax rates are typically higher than those of the US. The foreign tax credit lets you offset your US tax liability with taxes already paid to the Netherlands. This credit often eliminates your US tax bill entirely.

US-Netherlands tax treaty

This agreement helps prevent double taxation and clarifies which country has primary taxing rights for specific types of income. For instance, your Dutch salary is primarily taxed by the Netherlands, while certain US-source income might be primarily taxed by the US.

Dutch tax considerations

While focusing on US taxes, don't forget your Dutch obligations:

• The Netherlands has a box system, with different tax rates for different income types
• Dutch tax rates generally range from 37% to 49,5%
• As a resident, you'll file an annual Dutch tax return (typically due by May 1)

Filing requirements for US expats in the Netherlands  

Even if you don't owe any US tax, you still need to file if your income exceeds these thresholds:

Filing status (2025)	Income threshold
Single	$13.850
Married (filing jointly)	$27.700
Head of household	$20.800

Foreign account reporting requirements

Many expats are surprised to learn that their everyday Dutch bank accounts trigger mandatory US reporting requirements:

FBAR (FinCEN form 114)

The threshold for FBAR filing is quite low, just $10.000 across all your foreign accounts combined at any point during the year. Foreign accounts include:

• Your regular Dutch checking account
• Savings accounts
• Investment accounts
• Pension funds
• Joint accounts

Even if the total reaches $10.000 for just one day of the year, you must file an FBAR. The penalties for non-filing are severe. The penalty for willful violations can be up to $100.000 or 50% of the account balance at the time of the violation, whichever is greater.

Form 8938 (FATCA reporting)

For foreign financial assets, including bank accounts, investment accounts, and certain assets held outside financial institutions, Form 8938 filing thresholds for taxpayers living abroad are:

• $200.000 for single filers or married filing separately (on the last day of the year) or $300.000 at any time during the year
• $400.000 for joint filers (on the last day of the year) or $600.000 at any time during the year

Many expats with modest finances easily exceed these thresholds, especially when Dutch pension accounts and home values are considered.

Additional filing requirements

Beyond your regular tax return and foreign account reporting, you may need to report:

• Ownership in foreign corporations (Form 5471)
• Foreign retirement accounts (potentially reportable on various forms)
• Foreign mutual funds (Form 8621)
• Foreign trusts (Forms 3520 and 3520-A)

Failing to file these forms can result in severe penalties, even if you owe no tax.

Common tax situations for Americans in the Netherlands

These are how the Dutch income and assets of Americans in the Netherlands are typically affected:

Dutch income and US taxation

Your Dutch salary is usually covered by the FEIE or FTC. Just remember to convert amounts to USD using the appropriate exchange rates.

Retirement accounts

Dutch pension accounts don't automatically receive the same tax treatment as US 401(k)s. The tax treaty provides some relief, but these accounts often require specialised reporting.

Investment income

Dutch investment taxation differs significantly from the US approach. Dividend income, capital gains, and interest often need careful planning to avoid tax complications.

Filing deadlines for expats

The standard tax filing deadline in the US is April 15. However, US citizens living abroad receive an automatic two-month extension, making the deadline June 15. If needed, you can request an additional extension to October 15 by filing IRS Form 4868.

Staying compliant

This might all sound like a lot, but there are ways to stay on top of it all:

1. Get caught up if you're behind. The IRS offers amnesty programs like Streamlined Filing Procedures for expats who didn't know they needed to file. If you weren't aware of your US filing obligations while living in the Netherlands, don't panic. The IRS offers amnesty programs like the Streamlined Filing Compliance Procedures, specifically designed for US taxpayers residing abroad who have failed to file US tax returns. These procedures can help you become compliant without facing significant penalties. 
2. Plan your filing strategy. Decide whether the Foreign Earned Income Exclusion or Foreign Tax Credit works better for your situation. Consider your income sources, housing costs in the Netherlands, and the amount of Dutch taxes you've paid.
3. Track your US presence carefully. Document your days in the US to ensure you meet the Physical Presence Test if you're using the FEIE. Keep records of your travel dates.
4. Consider professional help. US-Dutch tax situations are complex, and mistakes can be costly. Working with a tax professional who specialises in US expat taxes, particularly those with experience with the US-Netherlands tax treaty, can save you time, stress and potential errors.
5. Stay informed about tax changes. Tax laws in both countries can change, affecting your obligations. Subscribe to expat tax news and updates.

Living in the Netherlands shouldn't mean spending countless hours deciphering tax regulations. If you aren't sure about your tax obligations, ask for professional help.