FEIE vs. Foreign Tax Credit under the Beckham Law: the numbers US citizens should run before moving

You’ve run the Spanish numbers: under the impatriate regime — the “Beckham Law” — your employment income is taxed at a flat 24% up to €600,000 (47% on the excess). But if you’re a US citizen or green-card holder, that’s only half the equation. The IRS doesn’t care that you moved. The other half lives on your US return, and it comes down to choosing between two tools: the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC).

Moving doesn’t pause the IRS

The United States taxes by citizenship, not residence. Wherever you live, you keep filing Form 1040 every year on your worldwide income. Meanwhile Spain, under Beckham, taxes your employment income at 24% and you file Modelo 151 annually. Two returns, two systems — and the FEIE-vs-FTC decision happens entirely on the American one. (If your “foreign employer” is your own LLC or S-corp, the Spanish side gets more delicate — read this first.)

Tool 1: the Foreign Earned Income Exclusion (Form 2555)

The FEIE lets you exclude $132,900 of foreign earned income from US tax (the 2026 figure — it adjusts annually for inflation). To qualify you need a tax home in a foreign country plus either the bona fide residence test or the physical presence test (330 full days abroad in a 12-month window).

Three things people miss:

• It covers earned income only — salary and wages, not dividends, interest or capital gains.
• The first year is awkward: a mid-year move often means qualifying through physical presence over a window that straddles two tax years.
• Income above the cap is taxed by the US normally. On a $300,000 package, the FEIE shelters less than half.

Tool 2: the Foreign Tax Credit (Form 1116)

The FTC gives you a dollar-for-dollar credit for foreign income tax paid, applied against the US tax on that same income. The Spanish 24% you pay under Beckham is generally a creditable income tax.

Here’s why this matters at Beckham income levels: a flat 24% from the first euro is often higher than your US effective federal rate on the same salary. When it is, the credit tends to cover most or all of the US federal tax on that income — and excess credits can carry over to other years rather than evaporating. The credit is capped at the US tax attributable to your foreign-source income, so days worked physically in the US, among other details, can shrink it.

The rule that decides most cases: no double-dipping

Income excluded under the FEIE cannot also take the FTC. You can’t exclude your salary and credit the Spanish tax you paid on it. And under Beckham you pay Spanish tax from the first euro — so every dollar you exclude “wastes” the Spanish 24% already paid on it as a potential credit.

That’s why, for many high-income Beckham profiles, the FTC alone does more work than the FEIE. But not always: US workdays, state exposure, family credits and the shape of your income can flip the result. One more asymmetry to price in: the FEIE is a sticky election — revoking it generally locks you out of re-electing it for five years without IRS consent, while the FTC carries no such penalty.

	FEIE (Form 2555)	FTC (Form 1116)
What it does	Excludes income from US tax	Credits Spanish tax against US tax
Covers	Earned income up to ~$133k (2026)	No dollar cap; limited to US tax on foreign income
Unused benefit	Lost	Excess credits carry over
Fit with Beckham’s flat 24%	Wastes the Spanish tax paid on excluded income	Spanish 24% often absorbs most or all US federal tax on that income

What the choice does not change: Spain

Whichever box you tick in April, Spain’s side is identical: 24% on your full employment income, Modelo 151, no deductions to speak of. The FEIE does not reduce Spanish tax by a cent. The optimization axis is exclusively American.

The treaty blind spot: your US passive income

Under Beckham you’re taxed in Spain as a non-resident, and in practice you usually cannot obtain a Spanish treaty residence certificate. For US-source passive income — dividends, interest, fund distributions — that can mean the US–Spain treaty’s protections are not available to you, with a double-taxation risk that neither the FEIE nor the FTC neatly solves. If your wealth is in a US brokerage account, this belongs in the model before you move. (Equity compensation has its own chapter.)

State tax, FBAR and FATCA don’t read Spanish law

Briefly, because each deserves its own article:

• Sticky states. California and a few others may keep treating you as a resident — and taxing you — until you demonstrably cut ties. Moving to Spain is not automatically moving out of your state.
• FBAR and FATCA continue. FinCEN Form 114 and Form 8938 apply regardless of Beckham. The regime removes the Spanish foreign-asset report (Modelo 720) — it does nothing for the American ones.

Run both returns before you book flights

There is no universal answer. The right choice depends on your income level and mix, your US workdays, your state, your family situation — and on whether Beckham itself even beats Spain’s general regime for your profile, which at moderate incomes or with family deductions it sometimes doesn’t. We’re US expats ourselves — we hold the regime and are paid through our own US structure — and modelling both returns side by side is exactly what we do in the strategy consultation. If you’re earlier in the process, start with the eligibility check. And if your employer is a company you own, the nomad-visa route with your own company is the piece to read next.