Is the Dutch 30% ruling allowance taxable in the US?

Yes. The allowance is tax-free only under Dutch law. For US purposes it is compensation paid because of your employment, so the full gross salary, including the untaxed allowance, is reported as foreign wages on Form 1040. The ruling lowers the Dutch tax you pay, which in turn lowers the foreign tax credit available, and that can leave a balance payable to the IRS.

Should an American on the 30% ruling use the FEIE or the foreign tax credit?

For senior employees earning well above the cap, which is USD 132,900 for tax year 2026, the foreign tax credit usually works better. The exclusion pushes remaining wages into higher brackets and forfeits credit for foreign tax on the excluded slice. Because the ruling lowers Dutch tax, we run both methods and project forward through the 27% year before choosing.

Does the 30% ruling still allow partial non-resident status for box 3?

No, not for new users. The Belastingdienst states that from the 2025 tax return the partial foreign tax liability option is no longer available. People who used the expat scheme before 2024 can keep it until their 2026 return. Everyone else is taxed in Dutch box 3 on worldwide savings and investments, including UK and US accounts.

Do I get UK split-year treatment when I move from London to Amsterdam?

Possibly, but it is not automatic. HMRC's statutory residence test guidance, RDR3, sets out specific split-year cases, and the one most employment moves rely on depends on full-time work overseas. If a case applies, the UK tax year is divided into a UK part and an overseas part. On the US side, the UK tax paid must still be allocated to the correct calendar year.

Are my UK ISA and Dutch investment funds a problem on my US return?

Usually, yes. An ISA is tax-free in the UK but ordinary taxable income on a US return, and the funds inside it, like most Dutch and other European funds, are typically passive foreign investment companies. Each holding normally needs Form 8621, and without an election gains are taxed at the highest ordinary rate with an interest charge.

US Tax Returns for Expats on the Dutch 30% Ruling

Q: Which social security system applies on the 30% ruling?

The US-Netherlands totalization agreement decides it, not the ruling. A locally hired employee of a Dutch employer normally pays into the Dutch system only. An employee seconded by a US employer for a limited period can stay in the US system with a certificate of coverage. Dutch contributions covered by the agreement are not claimed as a US foreign tax credit.

US tax return preparation for expats on the Dutch 30% ruling starts from one fact that surprises most new arrivals in Amsterdam: the allowance the Netherlands treats as tax-free is still ordinary taxable wages on your US return. The ruling lowers your Dutch tax bill, and because the foreign tax credit can only offset foreign tax you actually paid, a lower Dutch bill can leave a residual US liability that never existed while you were working in London. For the American banker, executive or engineering lead making that move, the US return has to be rebuilt around three things at once: the final UK tax year, the first Dutch year under the expat scheme, and a US calendar year that cuts across both.

What is the Dutch 30% ruling and what are the current rules?

The 30% ruling, which the Dutch Tax and Customs Administration now calls the expat scheme, is a Dutch payroll concession that lets an employer pay part of an incoming employee's salary as an untaxed allowance for the extra costs of working away from home. The Belastingdienst sets out the conditions at https://www.belastingdienst.nl/wps/wcm/connect/en/individuals/content/coming-to-work-in-the-netherlands-30-percent-facility and the points that matter most for a senior hire from London are these:

Specific expertise is measured by a salary norm. For 2026 the general norm is EUR 48,013 of taxable salary, up from EUR 46,660 in 2025 and EUR 46,107 in 2024. A reduced norm applies to employees under 30 with a qualifying master's degree, which is EUR 36,497 for 2026.
You must have been recruited from outside the Netherlands and must have lived more than 150 kilometres from the Dutch border for more than 16 of the 24 months before your first working day. The Belastingdienst states that living in parts of the UK does not meet this test, so a London address normally qualifies but the distance should be checked rather than assumed.
The employer may pay up to 30% of salary, including the allowance itself, untaxed, and the amount must be agreed in advance. As of 2026 the maximum untaxed allowance is EUR 78,600, which is reached at a salary of EUR 262,000 or more for a full year and is pro-rated for a part year.
A decision lasts up to five years and is shortened by earlier periods of Dutch work or residence, subject to the exceptions the Belastingdienst lists for old or very short stays.
From 2027 the maximum percentage falls to 27%, and a higher salary norm applies from 2027 for people who started on the scheme from 1 January 2025. The Dutch government page at https://www.rijksoverheid.nl/onderwerpen/inkomstenbelasting/belastingvoordeel-buitenlandse-werknemers shows the transitional table: those who started by the end of 2023 keep 30% with the existing norm, those who started in 2024 move to 27% from 2027 on the existing norm, and those who started from 2025 move to 27% and the new norm from 2027.

The other change a London-to-Amsterdam mover needs to know about is the end of partial non-resident status. Under the old rules, an expat scheme user could elect to be treated as a non-resident for Dutch box 2 (substantial shareholdings) and box 3 (savings and investments), which kept a UK or US investment portfolio largely outside Dutch income tax. The Belastingdienst now states that as of the 2025 tax return this election is no longer available, with a transitional rule letting people who used the scheme before 2024 keep the status until their 2026 return. For anyone arriving in 2025 or 2026, worldwide savings and investments fall into Dutch box 3 from the start, and that has consequences on the US return that we come back to below.

Why is the tax-free 30% allowance still taxable on your US return?

The United States taxes its citizens and green card holders on worldwide income regardless of where they live, and US law has no equivalent of the Dutch concession. The allowance is paid by your employer because of your employment, so for US purposes it is compensation, reported as foreign wages in full. The Dutch label of tax-free expense allowance does not travel. When we prepare the return we start from the gross Dutch salary before the allowance is carved out, not the lower taxable wage shown in the Dutch payroll figures, and we reconcile the two so the IRS figure can be traced back to the employer's annual statement.

This is the point that has to be stated plainly to every client: the ruling does not reduce US tax. It reduces Dutch tax. Because US relief for foreign tax is a credit for tax actually paid, any reduction in the Dutch bill reduces the credit available. Where the Dutch effective rate on the full US-measured wage drops below the US effective rate on the same income, the gap becomes payable to the IRS. In London, with UK income tax and no comparable expat allowance, most of our clients at this income level carried excess credits. In Amsterdam, under the ruling, many do not.

What does US tax return preparation for expats on the 30% ruling involve in practice?

A US return for an American on the expat scheme is a Form 1040 with a set of international schedules attached. In the first Dutch year it usually also has to absorb the tail end of the UK employment, because the US year runs January to December while the UK tax year runs 6 April to 5 April. The core components are:

Wages from both employers, converted to US dollars, including the full Dutch allowance and any UK bonus or deferred award paid after departure.
Form 1116 for the foreign tax credit, normally in the general category basket for employment income and the passive basket for investment income, with UK and Dutch taxes tracked separately so they can be matched to the income they relate to.
Form 2555 only if the foreign earned income exclusion is genuinely better, which for this profile is unusual.
Form 8938 for specified foreign financial assets where the thresholds for taxpayers living abroad are exceeded, and the separate FinCEN Report of Foreign Bank and Financial Accounts.
Form 8621 for each passive foreign investment company holding, including UK and Dutch funds.
Form 8833 where a position depends on the US-Netherlands income tax treaty overriding the Internal Revenue Code.

Should you claim the FEIE or the foreign tax credit under the 30% ruling?

The foreign earned income exclusion removes a fixed amount of foreign wages from US income. The IRS page at https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion explains that the exclusion is adjusted annually for inflation and that you qualify through either the bona fide residence test or the physical presence test of 330 full days in a foreign country in any 12-month period. The current amounts are published in the IRS inflation release for tax year 2026 at https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill, which sets the maximum exclusion at USD 132,900 for 2026, up from USD 130,000 for 2025.

For a senior hire earning well above that cap, the exclusion is usually the weaker choice, for three reasons. First, the income above the cap is taxed as if the excluded amount were still there, so the remaining wages land in the higher US brackets. Second, you cannot claim a foreign tax credit for foreign tax allocable to the excluded income, so a slice of your Dutch tax is simply lost. Third, once the exclusion has been claimed and later revoked, there is a statutory waiting period before it can be claimed again without IRS consent, which removes flexibility in exactly the years when the Dutch percentage is changing.

The 30% ruling changes this comparison more than most guides acknowledge. Because Dutch tax is lower, the credit route leaves more residual US tax than it would without the ruling, and the exclusion can look attractive at first sight. The way we test it is mechanical: we prepare the return both ways, carry forward the unused credits each method would produce, and project the next two to three years, including the year the ruling percentage drops to 27% and the year the ruling ends. A move to 27% raises Dutch tax, which strengthens the credit position, and when the ruling ends entirely the Dutch rate on full salary usually exceeds the US rate. An exclusion election made in year one to save a modest amount can leave a client locked out of the better position later.

Can you also use the foreign housing exclusion in Amsterdam?

The foreign housing exclusion lets an employee who claims the earned income exclusion also exclude certain reasonable housing costs above a base amount, subject to a limit. The IRS foreign earned income exclusion page notes that you can exclude or deduct certain foreign housing amounts, and Publication 54 refers readers to the annual inflation adjustment for the base and limit figures. The base and limit are set by reference to the maximum exclusion, and the IRS publishes higher limits for designated high-cost locations each year. We check the current year's notice for the Dutch location before relying on any figure.

In practice the housing exclusion only exists inside a Form 2555 election, so it carries all of the drawbacks above. It can tip the balance for an employee whose employer pays rent directly and whose salary sits only modestly above the cap, but for a director-level package it rarely outweighs the lost credits. The ruling allowance is not a housing payment for US purposes and does not create any US housing figure.

How does the UK exit year interact with your US return?

Leaving London creates a UK tax year in which you are likely to be UK resident under the statutory residence test but may qualify for split-year treatment, which divides the year into a UK part and an overseas part. HMRC's guidance on the test is RDR3, reached from https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt and read alongside Schedule 45 to the Finance Act 2013. The split-year cases are specific and conditional, and the one that most employment moves turn on depends on full-time work overseas, so we confirm the facts against the guidance rather than assuming split-year treatment applies because you moved mid-year.

On the US side, the UK exit year produces three recurring issues. The first is timing: UK tax for 6 April to the departure date is paid under the UK year but must be allocated to the right US calendar year, and a later UK repayment or balancing payment can require a foreign tax redetermination on an earlier US return. The second is deferred compensation: a UK bonus or share award paid after you have moved to Amsterdam may be taxed in the UK because it relates to London work and in the Netherlands as a resident, and the US return must source each part correctly so the credit is not double-counted. The third is UK savings wrappers: an ISA that is tax-free in the UK is an ordinary taxable account on the US return and, if it holds funds, is usually a PFIC problem, and under the post-2025 Dutch rules it also sits inside box 3.

One point works in the client's favour. Because both the UK and the Netherlands are foreign countries for US purposes, an American moving from London to Amsterdam usually remains abroad for the whole US year. The physical presence test counts days in any foreign country, so the move itself does not break eligibility for the earned income exclusion, and residence status for US purposes is not reset. The decision between exclusion and credit is therefore about economics, not eligibility.

How does the US-Netherlands tax treaty help, and where does it stop?

The US-Netherlands income tax treaty allocates taxing rights between the two countries and contains a saving clause, common to US treaties, that preserves the right of the United States to tax its own citizens as if the treaty did not exist, subject to listed exceptions. For a US citizen employee in Amsterdam, the treaty does not exempt Dutch wages from US tax. Its value lies in the relief provisions, sourcing rules that can matter for income such as UK deferred awards, and the treatment of certain pensions and investment income. Where a return relies on a treaty provision to override the Code, we disclose it on Form 8833.

Is Dutch box 3 tax creditable against US tax?

Box 3 is the Dutch tax on savings and investments. For years, it was charged on a deemed return calculated from asset values rather than on the income actually received, and it has been the subject of Dutch court rulings and ongoing reform. For an American who now falls fully into box 3 because partial non-resident status is no longer available, two US questions follow. The first is whether the tax qualifies as a creditable foreign income tax at all, given that it has been levied on a notional rather than realised return; the second is which US basket and which income it relates to.

We treat box 3 creditability conservatively and on a year-by-year basis, because the answer depends on how the Dutch charge is calculated for the year in question and on the IRS rules on what counts as an income tax, which have themselves been the subject of recent guidance. Where the charge looks to actual returns, the case for a credit is stronger. Where it is purely notional, the conservative position may be to deduct rather than credit, or to credit only after careful analysis. Whatever the position, it is documented in the workpapers.

What FBAR and Form 8938 filings do Dutch accounts create?

Every Dutch current account, savings account, brokerage account and employer share plan account that you own or have signature authority over counts toward FBAR reporting. IRS Publication 54 at https://www.irs.gov/publications/p54 confirms you do not need to file FinCEN Form 114 only if the combined value of the accounts was USD 10,000 or less throughout the entire year. For a family arriving in Amsterdam with a salary account, a joint account, a savings account and retained UK accounts, that threshold is crossed almost immediately. The FBAR is filed electronically with FinCEN, separately from the tax return, and each account is reported at its maximum value during the year converted to US dollars.

Form 8938 covers broadly similar assets but is filed with the tax return and has higher thresholds for taxpayers living abroad, which Publication 54 notes depend on residence and filing status. It also captures assets the FBAR does not, such as directly held foreign securities outside an account. The two filings overlap rather than replace each other, and missing either one carries its own penalty regime. Late FBARs are filed through FinCEN's BSA E-Filing System with a reason for the late filing, or inside the Streamlined Filing Compliance Procedures where returns are also outstanding.

Why are Dutch and UK investment funds a PFIC risk?

A passive foreign investment company is a non-US corporation that meets an income or asset test for passive investment, and most non-US mutual funds and exchange-traded funds, including the Dutch and UK funds offered by local platforms and pension-style savings products sold to retail investors, fall into that definition. Without an election, gains and certain distributions are taxed under the excess distribution rules at the highest ordinary rate with an interest charge, and each holding normally requires its own Form 8621. A qualified electing fund election needs an annual information statement from the fund, which most European funds do not provide; a mark-to-market election is available for marketable funds but taxes unrealised gains each year as ordinary income.

Do you pay Dutch or US social security under the totalization agreement?

The United States and the Netherlands have a social security totalization agreement, in force since 1990, designed to stop the same work being charged to both systems. A locally hired employee of a Dutch employer normally pays into the Dutch system only. An employee seconded by a US employer for a limited period can remain in the US system if a certificate of coverage is obtained, which then exempts the work from Dutch contributions. Contributions to either system are separate from income tax, and the ruling allowance does not change which country's system applies.

Worked illustration: a London executive moves to Amsterdam on the ruling

The figures below are an illustration only, using assumed numbers and assumed exchange rates of 1 EUR = 1.10 USD and 1 GBP = 1.30 USD. They are not a computation of Dutch or UK tax, which would depend on the full facts. Our client, a US citizen and married filing jointly, is a managing director who leaves a London role at the end of February 2026 and starts with a Dutch employer on 1 March 2026 under the expat scheme. UK salary for January and February is GBP 40,000, with UK tax withheld assumed at GBP 15,000. Dutch gross salary for March to December is EUR 250,000.

Because she uses the ruling for ten months of 2026, the EUR 78,600 maximum is pro-rated to EUR 65,500. Thirty percent of her Dutch salary would be EUR 75,000, so the cap bites and the untaxed allowance is EUR 65,500. Her Dutch taxable wage is EUR 184,500, and we assume Dutch wage tax of EUR 80,000 for this illustration. On her US return, by contrast, all EUR 250,000 is wages, or USD 275,000, plus USD 52,000 of UK salary, giving total wages of USD 327,000. Her foreign taxes in dollars are USD 88,000 Dutch and USD 19,500 UK, or USD 107,500 in total, an average foreign rate of roughly 33% on US-measured wages.

In London, her UK tax on a full year's salary at this level had always produced more credit than her US tax, so she paid no US income tax and accumulated excess general-category credits. In 2026, whether she owes the IRS depends on the US tax computed on USD 327,000 of wages plus her investment income, against USD 107,500 of credit plus any carryover. If the US tax exceeds the available credit, the difference is payable, and the reason is the ruling. Using the exclusion would remove USD 132,900 of wages but also forfeit the Dutch and UK tax allocable to that slice, and in 2027, when her percentage drops to 27% under the post-2025 rules, her Dutch tax rises and the credit route becomes stronger again. We prepared her 2026 return on the credit method and applied excess credits carried from her London years against the shortfall.

What should be on your first-year compliance checklist?

Obtain the Dutch employer's annual statement and a payroll breakdown showing gross salary, the ruling allowance and the taxable wage, so the full gross figure can be reported as US wages.
Confirm the start date and percentage on the expat scheme decision, and note which transitional category applies for 2027.
Collect the final UK payslip, the P45 and any post-departure bonus or share award statements, and confirm whether split-year treatment applies under RDR3.
Map UK tax paid between 6 April and departure to the correct US calendar year, and diarise any expected UK repayment that will require a foreign tax redetermination.
Run the foreign tax credit and the earned income exclusion side by side, with a two-to-three year projection through the 27% year and the end of the ruling.
List every Dutch, UK and US account for the FBAR and Form 8938, with year-end and maximum values.
Identify every non-US fund, including ISA and Dutch platform holdings, and decide the Form 8621 treatment for each.
Record the box 3 assessment and the position taken on its creditability, with the reasoning kept in the workpapers.
Confirm social security coverage and, for a secondment, whether a certificate of coverage is in place.

How we prepare these returns

The 30% ruling is a valuable Dutch concession, and nothing in US law takes it away. What US law does is measure your income without it, which is why the first Dutch year is the one most likely to produce an unexpected US balance. We prepare the US return from the full gross salary, reconcile it to the Dutch payroll, allocate UK and Dutch tax to the correct years and baskets, and file the FBAR, Form 8938 and PFIC reporting alongside it, so that the return stands up on its own when the IRS reviews it.