An increasing number of Americans are choosing to leave the United States, often due to family reasons, political tensions, or the pursuit of better work-life balance. As a result, Sweden has seen a rising influx of American expats looking to settle here. However, moving to Sweden can be challenging and costly, especially from a tax perspective. This guide covers the basic tax considerations for an American moving from the U.S. to Sweden.
When Is an American Liable for Tax in Sweden?
Under Swedish tax law, an American can become a tax resident in Sweden under three different bases:
Permanent Resident in Sweden
As a general rule, an American is considered a permanent resident of Sweden if they live there for at least one year. If they reside in both Sweden and the U.S., a more detailed analysis will determine whether they have stronger ties to Sweden or the U.S.
Habitual Stay in Sweden
This is the most common way a newly-arrived individual becomes a tax resident. In general, staying in Sweden for six consecutive months fulfills this condition. Time spent outside of Sweden, such as in the U.S., may still count toward the residency requirement if the time abroad is shorter than the preceding or following stay in Sweden.
Tax residency can sometimes be established with significantly less time spent in Sweden—80 days may be enough in some cases. Given the uncertainty and reliance on Swedish case law, it’s wise to consult a tax lawyer to determine if and when you qualify as a tax resident in Sweden. This is crucial, as under Swedish law, tax residency can apply at any point during the tax year. Discussions are ongoing in Sweden about clarifying tax residency rules, though it remains to be seen if changes will be made.
Essential Ties to Sweden
An individual who previously resided in Sweden and has left but retains a “significant connection” to Sweden may still be considered a Swedish tax resident. This basis is only relevant for Americans who leave Sweden after having lived there permanently. The factors defining a “significant connection” are laid out in Swedish case law and represent a complex area of Swedish tax law. Certain connections, such as Swedish citizenship, tend to weigh lightly, while others, like family members remaining in Sweden, carry significant weight.
What Income Is Subject to Swedish Tax?
Sweden taxes the worldwide income of its tax residents, meaning both Swedish and American income is subject to Swedish tax. Earnings from work in the U.S., dividends from American companies, 401(k) payouts, and other American income are all part of Sweden’s tax claim, which may lead to potential double taxation. See more on this below.
What Are the Swedish Tax Rates?
Sweden applies different tax rates depending on the type of income.
Employment Income
Sweden has a general allowance of between USD 1,500 and USD 3,500, depending on age and income. For the tax year 2025:
Employment income up to SEK 643,100 (approximately USD 59,000) is taxed at a municipal rate of 29–34%, depending on your municipality.
Employment income above SEK 643,100 (USD 59,000) incurs an additional 20% national tax, for an effective tax rate of 49–54%, depending on your municipality.
Capital Income
As a rule, capital income, such as interest, dividends, and capital gains from the sale of shares, is taxed at 30%. Dividends from unlisted companies are taxed at 25%. Capital gains from property sales are typically taxed at 22%.
A special tax framework applies to shareholders in closely-held companies (3:12 rules). In these cases, dividends are often taxed as employment income (29–55%), though a 20% rate applies up to a certain limit. Proper planning is essential to understand the impact of the 3:12 rules on one’s holdings.
Other Taxes
In addition to income and capital taxes, there are smaller taxes, such as a burial fee and a public service fee, amounting to a few thousand Swedish kronor per person per year.
American owners to LLCs, taxed as S-corps would usually also be liable to Swedish tax (30 - 55 %) on their share of the LLC's income. See more here.
Social Security Contributions
Sweden’s social security contributions are among the highest in the world, at 31.42% of gross salary, typically covered entirely by the employer. For sole proprietors, social security contributions are generally 28.97% and are deductible.
Do Americans in Sweden Have to File a Swedish Tax Return?
Yes, if you become a tax resident in Sweden, you are required to submit a Swedish income tax return from the year your tax residency begins. The tax return must be filed in Swedish, so professional assistance is highly recommended. Tax returns can be filed digitally or on paper, with the deadline for the 2024 tax year being May 2, 2025. Nomadtax clients receive an extension on this deadline. See our more detailed article about Swedish Tax Return for Americans.
Does Sweden and the U.S. Have a Tax Treaty?
Since 1994, Sweden and the U.S. have been parties to a tax treaty aimed at preventing double taxation. Due to the U.S.’s “citizen-based taxation,” it is especially important for Americans to utilize tax treaty provisions to avoid high risks of double taxation. Before moving to Sweden, a careful analysis of the tax treaty’s effects and implications is essential, particularly regarding residency status under the treaty.
In simplified terms, if one is considered a U.S. resident, Sweden is generally barred from taxing most income, except for Swedish-source income. If one is a Swedish resident, both Sweden and the U.S. can tax income. A special provision, unique to the Sweden-U.S. tax treaty, then applies. Often, planning can secure residency in the most tax-efficient country, which, for Americans, is often the U.S.
At nomadtax, we analyze treaty residency for clients moving from the U.S. to Sweden and offer advice on steps to take to establish residency in the most optimal country. Learn more here.
How Does the Swedish-American Tax Treaty Affect Me?
As noted, the tax treaty can prevent double taxation by both the U.S. and Sweden. It can also be beneficial for tax planning, as sometimes even if the treaty allows taxation by one country, that country may choose not to exercise its taxing rights, resulting in tax-free income in certain cases.
What Deductions Are Available for Americans Living in Sweden?
Beyond standard deductions, such as housing and travel costs for work trips, certain deductions are frequently utilized by American expats in Sweden. For instance, expenses for a U.S. residence, such as rent, utilities, and internet, may be deductible. Travel expenses to a home within the EU may also qualify for deductions.
Americans covered by Sweden’s expert tax may receive tax-free reimbursements from their employers for moving to and from Sweden, two annual trips to the U.S. for themselves and family, and their children’s school fees.
Are There Any Tax Incentive Rules Available for Americans Coming to Sweden?
For years, Sweden has offered a special regime for foreign experts. In short, individuals who have not lived in Sweden in the past five years can receive 25% of their income tax-free. Given Sweden’s high tax rates on earned income, the so-called expert tax is an attractive option to reduce tax liability for Americans in Sweden.
An application for expert tax must be submitted within three months of arriving in Sweden. Missing the deadline eliminates eligibility. We often assist clients with their Swedish expert tax applications.
Sweden also has a special regime for investment accounts, under which capital gains and dividends in a Swedish brokerage account are not taxed. Instead, a flat annual tax of around 1% in 2024 is levied on the account’s market value. Starting in 2025, the first SEK 150,000 in the account will be tax-free. Care should be taken to ensure that the U.S. does not simultaneously tax capital gains and dividends from such accounts.
Sweden is also, believe it or not, a country that is considered as beneficial for persons with considerable wealth, by reason of the non-existence of gift, inheritance and wealth taxes.
How Does Sweden Tax American-Sourced Income?
Sweden seeks to tax American income for individuals who are tax residents in Sweden. However, foreign income from sources such as the U.S. must be classified under Swedish tax law. Swedish case law offers guidance, for instance, indicating significant tax risks for those considering a rollover from a 401(k) to an IRA.
Before relocating to Sweden, an American should consult a Swedish tax lawyer to assess the Swedish tax treatment of their American income and assets.
Are Americans Eligible for Swedish Social Security Benefits?
Under Swedish law, there is a distinction between residency-based and work-based benefits. Eligibility for residency-based benefits requires that the individual is considered resident in Sweden. In some cases, this may be uncertain, especially if they spend substantial time in both Sweden and the U.S.
To qualify for free healthcare in Sweden, individuals typically need to be registered in Sweden and possess a Swedish personal identification number. Certain cases also allow eligibility for Swedish healthcare due to EU regulations, such as Regulation 883/2004 on social security coordination within the EU.
Are you an American individual that plan to move to Sweden? We offer tax assistance for US expats. Contact us to learn more.