We Ran 96 Tax Scenarios for Americans Moving Abroad — Here’s When the FEIE Actually Costs You Money

96 pre-computed scenarios across Portugal and Spain. The crossover point is not where you think it is.

The most common question Americans ask when planning a move to Portugal or Spain is: should I use the Foreign Earned Income Exclusion or the Foreign Tax Credit?

We computed 96 scenarios to find out. Eight income levels from $50,000 to $250,000. Three filing statuses. Four tax regimes across two countries. Every combination, calculated against the 2026 IRS brackets (including the One Big Beautiful Bill adjustments from Rev. Proc. 2025–32), Portugal’s current tax code per PwC’s 2026 State Budget analysis, and Spain’s IRPF tables from the Agencia Tributaria.

The answer surprised us.

Below $150K, the question is irrelevant

At every income level below $150,000 for single filers — and below $166,000 for married filing jointly — FEIE and FTC produce identical combined tax bills. Not “roughly similar.” Identical. To the penny.

The reason is mechanical. The 2026 FEIE exclusion is $132,900. Add the standard deduction ($16,100 single, $32,200 MFJ, $24,150 HoH), and you get the income level at which non-excluded earnings first become taxable. Below that threshold, the FEIE wipes out your US liability completely — and so does the FTC, because your foreign tax exceeds your US tax at every income level we tested.

If you earn $100,000 and someone tells you the FEIE vs FTC decision is critical — they are solving a problem that does not exist at your income.

The stacking rule penalty above the crossover

Above $150,000, the math diverges. And it diverges fast.

When you use the FEIE, the IRS does something that trips up even experienced CPAs: it taxes your remaining non-excluded income as if the excluded portion still occupies the lowest brackets. Your $47,100 of income above the exclusion doesn’t start at the 10% bracket — it starts at whatever bracket $132,900 of phantom income pushed you into.

This is the FEIE stacking rule. It is the single reason the FTC wins at higher incomes, and it has nothing to do with which country you move to.

The dollar amounts:

• $150,000 single: FTC saves $240/year. Marginal — barely worth the filing complexity.
• $180,000 single: FTC saves $7,440/year. Now it matters.
• $250,000 single: FTC saves $25,506/year. That is $127,530 over five years.

For married filing jointly, the crossover starts at $166,000, and the FTC advantage at $250,000 is $18,806/year.

The crossover doesn’t depend on country or tax regime

This was the finding we did not expect. Whether you move to Portugal under the IFICI regime (flat 20%), Portugal under standard progressive rates (12.5%-48%), Spain under the Beckham Law (flat 24%), or Spain under standard IRPF — the crossover income where FTC beats FEIE is the same.

$150,000 single. $166,000 married filing jointly. $158,000 head of household. Every time.

The crossover depends entirely on the FEIE exclusion limit plus your standard deduction. The foreign tax regime determines how much you pay abroad — but both FEIE and FTC handle that foreign tax identically until your income exceeds the exclusion-plus-deduction threshold.

You will almost certainly pay MORE tax, not less

This is the part nobody wants to hear.

At $100,000 income, your effective tax rate under Portugal’s IFICI regime is 20.0%. In the US alone, it would be 13.2%. You are paying more by living abroad, not less.

Even Spain’s Beckham Law at a flat 24% exceeds US rates at every income level below $250,000. The breakeven — where moving becomes tax-neutral — is approximately $250,000 under Portugal’s IFICI regime.

The financial case for relocating does not rest on taxes. It rests on cost of living. Lisbon’s housing, food, and healthcare costs can save roughly $17,000/year versus a comparable US metro. That more than offsets the tax penalty at most income levels — but only if you go in with clear-eyed expectations.

The five-year lockout trap

One final finding from the data: the FEIE’s five-year lockout rule makes the stakes asymmetric.

If you elect the FEIE and your income later rises above the crossover, you cannot switch to the FTC for five years. At $180,000 income, that is potentially $37,200 in avoidable taxes over the lockout period. At $250,000, it is $127,530.

The FTC has no equivalent penalty for switching away. If your income drops below the crossover and you want the FEIE’s simpler filing, you can elect it the following year.

For anyone whose income might cross the $150,000 threshold during their time abroad, the FTC is the safer default. The FEIE is only clearly better if your income will stay below the crossover for the foreseeable future and you value simpler filing.

Self-employment adds a layer

One more variable the scenario data surfaced: self-employment tax. FICA applies at 15.3% on 92.35% of net earnings regardless of which method you choose. At $100,000, that adds $14,130 on top of everything in the tables above — pushing the effective rate from 20.0% to 34.1% under Portugal’s IFICI.

Neither FEIE nor FTC offsets self-employment tax. US totalization agreements with Portugal and Spain can prevent double social security contributions, but the US FICA bill itself does not go away.

The full 96-scenario decision matrix — with every income level, filing status, and tax regime laid out — is at FEIE vs Foreign Tax Credit: The Complete Decision Matrix (2026) on Relocate Handbook. We also built an interactive calculator so you can find your exact scenario in under a minute.

For country-specific details: US-Portugal Financial Guide (2026) | US-Spain Financial Guide (2026)

Published by the Relocate Handbook Research Desk — independent research on the financial side of international relocation. Every figure sourced from IRS Rev. Proc. 2025–32, PwC Portugal’s 2026 State Budget analysis, and Spanish Agencia Tributaria IRPF tables. Read our editorial policy.