Tax for Americans in Ireland: Two Systems, One Salary, and the Investment Trap

You're the only nationality here taxed on citizenship

Everyone else reading our guides has one tax residence at a time. You have a US filing obligation that runs regardless of where you live, alongside an Irish one that begins the moment you meet the residence test.

The Irish side is decided by days: 183 or more in a tax year, or 280 across the current and previous year provided you were here more than 30 days in the current one. Same credits, same rate bands, same reliefs as an Irish citizen — and the same obligation to claim them, because none apply automatically. Revenue's rules are on its tax residence page.

One practical note before anything else: we handle the Irish side. The US side needs a US preparer who works with expatriates, and the figures and thresholds below should be confirmed with them, since several are indexed or change with legislation. What we can do is make sure the Irish position is right and that you understand where it collides with the American one.

Your Irish arrival year

Irish payroll spreads your tax credits and rate band across twelve months, assuming you'll work all of them. Arrive in July and you've earned in six — but your liability is calculated on your real annual income against a full year's credits. The higher your salary, the larger the gap.

Say you started on 1 July on €95,000 — €7,916.67 a month — earning €47,500 in Ireland that year.

Refund: €6,400.

Split Year Treatment protects that position — it excludes pre-arrival employment income from the Irish computation while leaving you the full year's credits. Since the Finance Act 2024, you self-assess and claim it in your Income Tax Return.

Now the American twist, and it's the reason to think before you claim. That €6,400 is a reduction in the foreign tax you paid for the year. If you're using the foreign tax credit method on your US return, your creditable foreign taxes for that year drop accordingly. The refund is still worth having — but it isn't free of US consequences, and claiming several open years at once can affect more than one US filing year. Coordinate the timing with your US preparer rather than claiming first and mentioning it later.

FEIE or foreign tax credit

Two mechanisms stop the same salary being taxed twice, and choosing between them is the biggest annual decision in an American expatriate's return.

The Foreign Earned Income Exclusion removes a capped amount of foreign earned income from US taxation, subject to physical presence or bona fide residence tests. The cap is indexed and changes each year.

The Foreign Tax Credit (Form 1116) instead credits foreign income tax paid against your US liability.

For most Americans in Ireland the foreign tax credit tends to be the more useful of the two, because Irish effective rates on professional salaries are generally higher than US federal rates — which can leave excess credits to carry. But the exclusion has its own advantages in particular situations, they interact in ways that constrain later choices, and switching between them is not always freely reversible. This is a decision for your US preparer with your actual numbers, not a rule of thumb.

Note also that the credit generally applies to income taxes. USC and PRSI are not straightforwardly the same thing as Irish income tax, and how they're treated is a question worth asking explicitly.

The PFIC trap

This is the section that saves people the most money, and it's the one nobody warns Americans about when they arrive.

Almost every investment fund available to you in Ireland is a PFIC — a Passive Foreign Investment Company — for US tax purposes. That includes Irish-domiciled UCITS ETFs, which are the standard, sensible, low-cost investment product that any Irish colleague or Irish financial adviser would point you towards.

For a US person, PFIC treatment is punitive. The default regime taxes excess distributions and gains unfavourably with an interest charge on top, and the compliance burden is separate again: a Form 8621 for each PFIC, each year. Five funds in one brokerage account means five forms. IRS burden estimates for a single Form 8621 run to dozens of hours once you account for transaction histories, currency conversions and interest calculations.

There's a limited de minimis position — broadly, where total PFIC value is under $25,000 at year end ($50,000 for joint filers) and you received no distributions and disposed of nothing — but it's narrow, and it stops applying the moment you sell anything.

The practical consequence: do not buy an Irish or European fund or ETF before speaking to a US preparer. The most common way Americans in Ireland create an expensive problem is by doing exactly what a well-meaning Irish adviser recommends.

Two further complications specific to being here. Ireland taxes many investment funds under a separate regime from ordinary capital gains, with its own rate and a deemed disposal at regular intervals — so an Irish fund can trigger an Irish charge in a year you sold nothing, and a US charge on a different basis in a different year. And FATCA means Irish financial institutions report US-owned accounts to the IRS, so this is visible rather than theoretical.

FBAR and FATCA

Two separate reporting regimes, filed with two different agencies, and both routinely missed.

FBAR (FinCEN Form 114) is required if the aggregate value of your foreign financial accounts exceeded $10,000 at any point during the year. Note aggregate and at any point: an Irish current account, a savings account and a leftover account at home can cross the threshold together even when no single one looks significant. And note that a single day's balance counts — the salary that landed before you paid your deposit is enough.

Form 8938 is the FATCA reporting form, filed with your tax return, with higher thresholds for people living abroad than for those in the US. It covers a broader range of foreign assets.

They don't substitute for each other, and neither substitutes for Form 8621. FBAR reports where your money is held. Form 8938 reports what assets you hold. Form 8621 reports PFICs specifically. A single Irish brokerage account holding two ETFs can trigger all three.

If you've been here a few years and are hearing about some of this for the first time, that's common, and the US system has procedures for catching up. Getting advice about them is considerably better than another year of silence.

Irish pensions and US treatment

Contributing to an Irish occupational pension is the single largest Irish relief available to you: relief at your marginal rate on contributions up to an age-related percentage of earnings, capped at €115,000 of earnings. A €5,000 contribution at the higher rate costs you €3,000 in Irish terms. See AVC and pension tax relief.

The US treatment is a separate question, and it depends on the type of scheme, the relevant treaty provisions and how contributions and growth are characterised. It is not safe to assume that an arrangement which is tax-advantaged in Ireland is also tax-advantaged for you. This is worth establishing before you increase contributions, not after.

Similarly, US retirement accounts you left behind — 401(k)s, IRAs, Roth accounts — need their Irish treatment established. Ireland reaches its own conclusions and doesn't automatically mirror the US ones.

What's unclaimed on the Irish side

• The Rent Tax Credit — up to €1,000 a year from 2024, €500 for 2022 and 2023, doubled for jointly assessed couples. See the Rent Tax Credit guide.
• Medical and dental expenses at 20% for the household. Non-routine dental needs a Form Med 2 from your dentist.
• Remote working relief, a deduction worth your marginal rate.
• Joint assessment, if your spouse earns significantly less — Ireland taxes individuals, so it has to be elected.
• RSUs and share disposals. Vesting is employment income through Irish payroll; growth after vesting is Irish CGT at 33% on sale. And a CGT return is due by 31 October of the following year even when no tax is payable — separate from the payment deadline of 15 December. See crypto tax in Ireland, where the same mechanics are set out.

The full list is in the top Irish tax deductions you could be missing.

One thing that grows over time: after three consecutive years of Irish residence you become ordinarily resident here from the start of year four, which brings disposals of assets wherever located within Irish CGT — including US holdings. That status continues for three years after you stop being Irish resident. See moving to Ireland: how cross-border taxes work.

What you need before you claim

• Your PPSN and myAccount access.
• Your IBAN entered in your Revenue profile — refunds are paid by transfer only.
• Your Employment Detail Summary for each Irish year, from myAccount.
• Your US employment records for your arrival year, if claiming Split Year Treatment.
• A complete list of every financial account and investment holding, with maximum balances — you need this for FBAR anyway, and it makes the Irish side faster.
• Your full share scheme history — vest dates, quantities, value at vest, sale dates and prices.
• Your RT number and landlord details if you rent.

If you'd rather have the Irish side handled properly and coordinated with your US preparer, that's what our VIP Premium service is for. For a straightforward Irish review of four open years, the Tax Back service covers it — no refund, no fee.

Four years, and one deadline

You can claim back four Irish years. As of 2026 that's 2022, 2023, 2024 and 2025 — and 2022 closes permanently on 31 December 2026.

If you're heading back to the States, do the Irish review before you go, while you still have an Irish bank account and myAccount access. The departure year is usually a large refund for the same reason your arrival year was. See leaving Ireland and the refund you might be owed.

Questions we get asked

I'm paying Irish tax at 40%. Do I really still owe anything to the IRS?

You still have to file, which is separate from whether you owe. For many Americans in Ireland, the foreign tax credit or the exclusion reduces the US liability on salary substantially or to nil. Where problems arise is usually not the salary — it's investments, PFICs, and unfiled information returns.

My Irish colleague says I should just buy an index ETF. Should I?

Not without US advice first. Irish-domiciled UCITS ETFs are PFICs for you, with punitive US treatment and a Form 8621 for each fund every year. It's the single most common expensive mistake Americans make here, and it's made on perfectly sensible-sounding advice from people who don't know you're a US person.

Do I need to file an FBAR if my accounts are small?

Possibly. The test is the aggregate value of all foreign financial accounts exceeding $10,000 at any point in the year — not the year-end balance of any one account. Several modest accounts, or one month with a bonus in it, can cross the line.

Should I use the FEIE or the foreign tax credit?

There's no universal answer, and it interacts with your pension contributions, investment income and family situation. Because Irish effective rates on professional salaries are typically higher than US federal rates, the credit is often the better fit — but confirm it with a US preparer against your actual figures rather than a rule of thumb.

I've been here four years and haven't filed a US return. What now?

You're not the first. The US system has procedures for people who need to catch up, and they generally work better when used voluntarily than when prompted. Speak to a US expatriate preparer — and in the meantime, your Irish returns are entirely separate and still worth filing.

If you arrived part-way through any year since 2022, start with the Irish refund for that year — but tell your US preparer before you claim it, because a refund of Irish tax changes your US foreign tax credit picture for the same year.

Related reading

• Moving to Ireland: how cross-border taxes work
• AVC and pension tax relief
• Crypto tax in Ireland