Americans who move to Bucharest for a multinational assignment, Cluj-Napoca for the tech sector, or anywhere else in Romania for family or retirement quickly discover that ANAF, the Agentia Nationala de Administrare Fiscala, expects a return just as much as the IRS does. US expat taxes in Romania are not optional, and filing one return does not cancel out the other. Romania taxes its residents on worldwide income, and citizenship, not residency, is what keeps the IRS involved: the United States taxes its citizens and green card holders on worldwide income no matter where they live. An American living in Romania typically owes a filing obligation in both countries every year, and the real work is coordinating the two so the same dollar of income is never taxed twice.
Do US Citizens Living in Romania Have to File Both Romanian and US Tax Returns?
Yes, in nearly every case. Romania treats a person as a tax resident based on where they keep a permanent home, where their center of vital interests sits, or how much of the year they actually spend in the country, and once that threshold is met ANAF taxes everything they earn worldwide. US tax law works off a completely different trigger: citizenship or green card status is what puts a person on the hook for a US return, not where they happen to be living that year.
Those two filing obligations run on independent tracks. Paying tax to ANAF does not excuse an American from filing a US Form 1040, and filing with the IRS does not excuse anyone from their Romanian obligations. The mechanisms that keep the same income from being taxed twice, the Foreign Earned Income Exclusion, the Foreign Tax Credit, and the US-Romania tax treaty, operate entirely on the US side of the equation rather than replacing either country's filing requirement.
How Does Romania Tax Residents on Worldwide Income?
Romania applies its individual income tax on a worldwide basis to anyone who qualifies as a resident, which is the starting point for figuring out a Romanian tax bill before turning to the US return. Residency generally turns on factors like maintaining a domicile in Romania, having a permanent home available, or the location of a person's closest personal and economic ties, rather than a single bright-line test.
Employers in Romania generally withhold income tax and social contributions directly from wages, and self-employed individuals and business owners file their own periodic declarations with ANAF. Romania's tax system is worth approaching without assuming any specific rate or bracket carries over from another country, since the details of what is taxed, at what point in the year, and under what category matter for the credit-versus-exclusion decision below, and change often enough that they should be confirmed for the current year rather than assumed.
Should You Claim the FEIE or the Foreign Tax Credit on Romanian Income?
The right answer for an American in Romania depends on how much Romanian income tax is actually paid on the income in question and on whether a family with children needs the refundable Additional Child Tax Credit. The Foreign Tax Credit on Form 1116 tends to work better when Romanian tax on the income is meaningful, since it is computed by category under IRC Sections 901 and 904, with any unused amount carrying over per Schedule B of Form 1116.
The Foreign Earned Income Exclusion on Form 2555 takes a different approach under IRC Section 911: it excludes foreign earned income entirely, up to an annually indexed ceiling, $130,000 for 2025, before the credit math ever starts. For a salaried employee at a Bucharest multinational or a Cluj-Napoca tech company earning under that ceiling, the exclusion can wipe out US tax on the wages outright. It has real costs, though: it does nothing against self employment tax, it can knock a family with kids out of the refundable Additional Child Tax Credit, and walking away from it is a five-year commitment, since revoking the election locks out re-electing FEIE for five years without IRS consent. Our FEIE versus Foreign Tax Credit comparison walks through the full decision, and the two elections can be combined across different income types within the same tax year.
What Does the US-Romania Tax Treaty Do for Double Taxation?
The United States and Romania have had an income tax treaty in force since 1973, one of the oldest US tax treaties still on the books today. Like nearly every US treaty, it carries a standard saving clause: the United States reserves the right to tax its own citizens and green card holders largely as if the treaty were not there, which is why the Foreign Tax Credit and Foreign Earned Income Exclusion described above end up doing most of the actual work of avoiding double tax on wages and business income.
The one carve-out that matters most in practice is what the 1973 text simply does not cover. Because it predates the bulk of the modern US treaty network by decades, the treaty is thinner on categories like pensions and certain investment income than agreements negotiated more recently, and it lacks provisions that show up as standard in newer treaties. Any position that leans on a specific treaty article beyond the general saving-clause framework should be checked against the actual 1973 language, since assuming a modern-treaty benefit applies here can be a costly mistake.
Are Romanian Investment Funds Taxed as PFICs?
Usually, yes, and this catches many Americans off guard the first time they open a fonduri deschise de investitii, a Romanian open-end mutual fund, or fund the voluntary Pillar III account through a Romanian asset manager rather than a US brokerage. Under IRC Section 1297, a foreign-domiciled pooled investment vehicle, whether it is a Romanian mutual fund, a Pillar III-linked fund, or an ETF tracking the Bucharest Stock Exchange, almost always meets the definition of a passive foreign investment company, and Sections 1291 and 1298 govern the US tax treatment regardless of how ANAF taxes the same fund domestically.
Once a holding is a PFIC, the default outcome is harsh: absent a timely election, gains and certain distributions get spread across the entire holding period, taxed at the highest rate in effect for each of those years, and hit with an interest charge on top, and each individual fund requires its own Form 8621 filing even in a year when no US tax ends up being owed. This is a major reason Americans in Romania are usually steered toward US-domiciled brokerage accounts for new investing rather than opening a fund through a Romanian bank.
What Foreign Accounts and Assets Must You Report?
Beyond the income tax return itself, Romanian financial accounts trigger their own separate reporting obligations regardless of whether any US tax is owed, and the penalties for skipping them typically dwarf whatever tax was actually due. Americans in Romania often run a mix of leu-denominated checking accounts at banks like BCR or BT alongside a USD account for savings or a former US employer's payroll, plus a Pillar II or Pillar III pension account, and it is the combined balance across all of them that matters: the FBAR, FinCEN Form 114, is required once those Romanian accounts together exceed $10,000 at any point during the year, even if no single account gets close on its own.
FATCA adds a second layer on top of that. Form 8938 under IRC Section 6038D kicks in at its own threshold, one set higher than the FBAR's and tied to filing status and where a person lives, and when it applies the same Romanian accounts often have to be listed a second time, directly on the federal return itself. Neither form substitutes for the other, they answer to different agencies with different rules, and both sit on top of, not in place of, the core Form 1040 filing.
How Are Romanian Pensions and Retirement Accounts Taxed by the US?
A common assumption trips up Americans here: because Pillar II is mandatory and Pillar III gets favorable tax treatment under Romanian law, it feels like a 401(k) equivalent that should just carry that deferral over to a US return. It does not work that way automatically. Romania's retirement system runs on three pillars, the state pay-as-you-go Pillar I, the privately managed mandatory Pillar II accounts, and the voluntary Pillar III accounts, and none of them become tax-deferred for US purposes simply because ANAF treats them favorably.
The general US rule, under IRC Sections 401(a) and 402(b), is that income growing inside a foreign retirement plan is taxed to a US person as it accrues unless a specific treaty provision says otherwise. Because the 1973 treaty predates most of the pension-specific language found in newer US treaties, whether a Pillar II or Pillar III account actually qualifies for deferral has to be checked against that older text rather than assumed the way it might be under a more current agreement. Our foreign pension US tax treatment guide walks through the four questions that apply to any foreign plan: whether growth is taxed as it accrues, whether a treaty defers it, what has to be reported, and how distributions are eventually taxed.
Bottom Line
The single biggest trap for Americans in Romania is treating the 1973 treaty like a modern one: it is nearly the oldest treaty the US has on the books, and leaning on it for a benefit that only shows up in newer agreements is how double-tax relief quietly falls apart. ANAF and the IRS operate on entirely separate tracks, and the Foreign Tax Credit and Foreign Earned Income Exclusion have to be applied deliberately against that older treaty text rather than assumed to work the way they would under a country with a current agreement. There is no US-Romania totalization agreement, so a self-employed American in Romania owes US self employment tax with zero coordination against the Romanian social contribution system, and Romanian investment funds, pension pillars, and foreign accounts each carry their own separate reporting rules on top of the income tax return itself, which means getting any single one wrong tends to cost far more in penalties than the underlying tax ever would have.
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