U.S. taxes for Americans in Austria: what to file, and how to catch up.
Vienna draws Americans working in research, culture and international business, and all of them still file a U.S. return every year. Austrian tax rates usually cover the U.S. bill on wages. The details to get right are the severance fund, pension savings and Austrian funds. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.
Sound familiar?
- You moved to Vienna for work or study and stayed.
- Your payslip shows a 13th and 14th salary taxed at a lower rate.
- Your employer pays into a severance fund (Abfertigung neu) for you.
- Your Austrian bank asked you to confirm your U.S. citizenship.
How does the IRS treat Austrian pensions and savings?
Every one of these goes on your FBAR. What differs is how the IRS taxes them.
| Account | U.S. treatment | |
|---|---|---|
| Austrian state pension | Under the treaty, only Austria can tax it, even for U.S. citizens. | Usually fine |
| Severance fund (Abfertigung neu) | Your employer pays 1.53% of your pay into a Mitarbeitervorsorgekasse. It could be taxable for the U.S. as it’s paid in or only when you take it out, and the rules don’t settle which. | Check first |
| Pension savings (Zukunftsvorsorge, Pensionskasse) | Tax-favored in Austria only. Growth may be taxable for the U.S., and some plans hold PFICs. | Check first |
| Bausparvertrag | Interest is taxable for the U.S., and the state bonus could be too. | Taxable |
| Austrian funds | Usually PFICs (Form 8621), with complex reporting and tax rules. | Watch out |
| Savings accounts | Interest is taxable for the U.S., and the accounts count toward your FBAR total. | Taxable |
Which Austrian investments are PFICs?
Austrian investment funds, the European ETFs Austrian banks and brokers sell, and the funds inside many pension savings products. For U.S. tax they’re passive foreign investment companies, or PFICs.
- Each fund needs its own Form 8621 in most years, and gains can be taxed at the top U.S. rate plus an interest charge, unless an election was made in time.
- Austria taxes funds on deemed income each year, using figures the fund reports, which rarely match what the U.S. PFIC rules tax.
- Not PFICs: shares of individual companies on the Vienna exchange, Austrian government bonds, and savings accounts.
What does the U.S.–Austria tax treaty actually say?
The treaty was signed in 1996 and took effect in 1998. For Americans living in Austria, these parts matter most:
- The saving clause. The U.S. can tax its citizens as if the treaty didn’t exist, except for the provisions the treaty lists.
- Social security. The Austrian state pension is taxed only by Austria, even for U.S. citizens, and U.S. Social Security only by the U.S.
- Relief from double tax. The U.S. gives a credit for Austrian income tax on the same income, including the lightly taxed 13th and 14th salaries.
- Severance and pension savings aren’t given a treaty deferral for U.S. citizens living in Austria, which is why they need checking.
Social security contributions are covered by a separate U.S.–Austria agreement, which generally means you pay into one system, not both. Read the U.S.–Austria tax treaty on IRS.gov.
When are Austrian and U.S. taxes due?
Both tax years run January to December, so each Austrian year lines up with one U.S. return. Your Lohnzettel (L16) and Einkommensteuerbescheid give most of what the U.S. return needs.
| Austria | United States | |
|---|---|---|
| Tax year | January to December | January to December |
| Annual return | June 30 online, or April 30 on paper, if you have to file. Employees often file a voluntary assessment for a refund, up to five years later. | April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension |
| Paying the tax | Withheld from your salary, with any balance after the assessment | April 15, even if you file later |
| Foreign accounts | Foreign investment income goes on the Austrian return | The FBAR, due October 15, filed online |
Foreign tax credit or exclusion: which wins in Austria?
Usually the foreign tax credit. Austrian income tax reaches 50% on higher salaries, so Austrian tax on your pay is normally more than the U.S. tax on it, even with the lightly taxed 13th and 14th salaries. The unused credit carries forward for up to 10 years.
- The exclusion, up to $130,000 for 2025, is rarely better in Austria, and it gives up the refundable child tax credit.
- Families with children can get the refundable part of the U.S. child tax credit, up to $1,700 per child for 2025, by using the credit.
- Investment income is taxed in Austria at a flat 27.5%, which usually covers the U.S. tax on dividends and interest, but not on fund gains taxed under the PFIC rules.
We run your returns both ways before choosing. How we compare the exclusion and the credit.
A worked example: a researcher in Vienna
Kevin moved to Vienna in 2018 for a research institute. He earns €65,000 a year, paid in 14 installments, his employer pays into a severance fund, and he has a Bausparvertrag and an Austrian equity fund. He hasn’t filed a U.S. return since moving.
| Item | How it’s handled |
|---|---|
| Salary, all 14 installments | Ordinary wages for the U.S. Austrian tax on his pay is higher than the U.S. tax on it, so with the foreign tax credit his U.S. tax on it is $0. |
| Severance fund | On the FBAR. Whether the contributions are taxable now or later is unsettled, so we explain the options before filing. |
| Bausparvertrag | The interest, and possibly the state bonus, go on his U.S. return. |
| Austrian fund | A PFIC: a Form 8621 in each year filed. |
| Catching up | Three years of returns and six FBARs under the Streamlined procedures, with no penalty if he qualifies. |
Catching up from Austria
Most Americans in Austria who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.
Common questions
Do I pay U.S. Social Security tax in Austria?
Generally not if you pay into the Austrian system. The U.S.-Austria totalization agreement prevents paying into both systems for the same work in most cases.
Will the U.S. tax my U.S. Social Security in Austria?
The U.S. taxes it as usual. Under the treaty, Austria can’t.
My 13th and 14th salaries are taxed lightly in Austria. What about the U.S.?
They’re ordinary wages for the U.S. Austria’s tax on the rest of your pay usually leaves enough foreign tax credit to cover them.
Is my severance fund taxable in the U.S.?
Possibly. It could be taxable as your employer pays in, or only when you take it out, and the rules don’t settle which. We explain both and report it consistently.
Is my Austrian state pension taxed by the U.S.?
No. Under the treaty, only Austria can tax it, even for U.S. citizens.
Should I sell my Austrian funds?
Maybe, but not before getting advice. Selling has tax consequences in both countries. We’ll show you the U.S. cost of keeping versus selling.
American in Austria? Let's get you caught up.
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