U.S. taxes for Americans in Denmark: what to file, and how to catch up.
Americans in Denmark still file a U.S. return every year, but Danish tax rates usually mean little or no U.S. tax on wages once credits apply. The traps are Danish pension schemes and investment accounts, and Danish funds, which the IRS sees very differently. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.
Sound familiar?
- You moved to Copenhagen for work or love and stayed.
- Your employer pays into a labor market pension for you.
- You opened an aktiesparekonto because it’s taxed lightly in Denmark.
- Your Danish bank asked about your U.S. citizenship.
How does the IRS treat Danish pensions and savings?
Every one of these goes on your FBAR. What differs is how the IRS taxes them.
| Account | U.S. treatment | |
|---|---|---|
| Folkepension (state pension) | Under the treaty, only Denmark can tax it, even for U.S. citizens. | Usually fine |
| Labor market pension (arbejdsmarkedspension) | Could be taxable for the U.S. as it builds up, depending on the scheme; the rules aren’t settled. | Check first |
| Aktiesparekonto | Taxed lightly in Denmark only. For the U.S., dividends and gains are taxable, and funds inside are usually PFICs. | Watch out |
| Danish funds | Usually PFICs (Form 8621), with complex reporting and tax rules. | Watch out |
| Bank accounts | Interest is taxable for the U.S., and the accounts count toward your FBAR total. | Taxable |
| Your home and mortgage | The U.S. excludes up to $250,000 of gain on a main home ($500,000 for couples). Paying off a krone mortgage when the krone has fallen can create a taxable currency gain. | Plan ahead |
Which Danish investments are PFICs?
Danish investment funds (investeringsforeninger), the funds on Nordnet and Saxo, and European ETFs. For U.S. tax they’re passive foreign investment companies, or PFICs, and that doesn’t change inside an aktiesparekonto or a pension.
- 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.
- Denmark taxes some funds yearly on their gains, which can line up better with a U.S. mark-to-market election than with the default PFIC rules. We look at which applies.
- Not PFICs: shares of individual companies on the Copenhagen exchange, Danish government and mortgage bonds, and bank deposits.
What does the U.S.–Denmark tax treaty actually say?
The treaty was signed in 1999 and updated by a protocol in 2006. For Americans living in Denmark, 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 folkepension is taxed only by Denmark, 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 Danish income tax on the same income.
- Labor market pensions don’t get a clear treaty deferral for U.S. citizens living in Denmark, which is why they need checking.
Social security contributions are covered by a separate U.S.–Denmark agreement, which generally means you pay into one system, not both. Read the U.S.–Denmark tax treaty on IRS.gov.
When are Danish and U.S. taxes due?
Both tax years run January to December, so each Danish year lines up with one U.S. return. Your årsopgørelse from Skattestyrelsen gives most of what the U.S. return needs.
| Denmark | United States | |
|---|---|---|
| Tax year | January to December | January to December |
| Annual return | A pre-filled årsopgørelse in March; corrections by May 1, or July 1 if you have foreign or self-employment income | April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension |
| Paying the tax | Withheld from your salary through your tax card, with any balance collected the following year | April 15, even if you file later |
| Foreign accounts | Foreign income goes on the Danish return | The FBAR, due October 15, filed online |
Foreign tax credit or exclusion: which wins in Denmark?
Usually the foreign tax credit. Danish tax on a salary, municipal and state, is among the highest anywhere and normally more than the U.S. tax on it. The unused credit carries forward for up to 10 years.
- The exclusion, up to $130,000 for 2025, is rarely better in Denmark, 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 accounts are the gap. Spare credit from your salary can’t cover dividends and fund gains, so a lightly taxed aktiesparekonto can leave a U.S. bill.
We run your returns both ways before choosing. How we compare the exclusion and the credit.
A worked example: a researcher in Copenhagen
Lisa moved to Copenhagen in 2017 for a research job and stayed for her Danish partner. She earns DKK 600,000, her employer pays into a labor market pension, and she holds two ETFs in an aktiesparekonto. She hasn’t filed a U.S. return since moving.
| Item | How it’s handled |
|---|---|
| Salary | Danish tax is higher than the U.S. tax on it, so with the foreign tax credit her U.S. tax on it is $0. |
| Labor market pension | On the FBAR. Contributions and growth could be taxable for the U.S., depending on the scheme, so we check it. |
| Aktiesparekonto ETFs | PFICs: a Form 8621 for each, in each year filed. |
| Filing status | Married filing separately, so her partner’s income stays off the U.S. return. |
| Catching up | Three years of returns and six FBARs under the Streamlined procedures, with no penalty if she qualifies. |
Catching up from Denmark
Most Americans in Denmark 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 Denmark?
Generally not if you pay into the Danish system. The U.S.-Denmark 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 Denmark?
The U.S. taxes it as usual. Under the treaty, Denmark can’t.
How do you handle krone amounts?
We convert using the correct IRS exchange rates for each year and account. It’s routine for us.
Is my folkepension taxed by the U.S.?
No. Under the treaty, only Denmark can tax it, even for U.S. citizens.
Should I keep my aktiesparekonto?
It depends on what’s inside. Funds and ETFs mean Form 8621 every year; individual shares are far simpler. We’ll show you the U.S. cost of keeping it.
My partner is Danish. How do we file?
Usually as married filing separately, so your spouse’s income stays off the U.S. return. If you’re not married, only you file. Married to a non-American.
American in Denmark? Let's get you caught up.
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