The people of Sweden are kind and generous, the government offers excellent services, and the corporate culture encourages people to have a good work-life balance. The many benefits Sweden offers are the main reason why many Americans decide to move there. But, when moving from one country to another- isn’t it only fair that you also compare their tax systems?
In Sweden, income tax usually ranges from 28.98% to 35.15%. On the other hand, the US has a lower range with their tax only ranging from 10% to 37%. But, there are certain taxes that Sweden doesn’t impose, unlike the US. These tax types include gift tax, estate tax, or inheritance tax.
Before moving to Sweden, it is essential to know everything about their taxing system since there is a vast difference compared to the taxing system of your home country- the US. This guide will ensure you have everything you need to know about taxes in Sweden vs the US, so finish it ‘till the last sentence!
Also read our article about living as an American in Sweden, so you know what to expect when moving here.
Tax rates in the US vs Sweden: full comparison
Moving to Sweden means you’ll deal with the Swedish Tax Agency every day. Not only does it collect taxes, but it also manages private individuals’ civil registrations.
Around 8 million Swedish citizens are taxable, and the majority of them file their tax returns electronically. Over 6.7 million people did so in 2022.
Income taxes: Sweden vs the US
The Internal Revenue Service (IRS) collects and manages income taxes in the US. Tax rates vary by state, but they typically range from 10% to 37%.
As of January 1, 2023, here are the income tax rates for every bracket in the US:
US tax rates for single filers:
|Tax rate||Taxable income bracket||Tax owed|
|10%||$0 to $10,275.||10% of taxable income.|
|12%||$10,276 to $41,775.||$1,027.50 plus 12% of the amount over $10,275.|
|22%||$41,776 to $89,075.||$4,807.50 plus 22% of the amount over $41,775.|
|24%||$89,076 to $170,050.||$15,213.50 plus 24% of the amount over $89,075.|
|32%||$170,051 to $215,950.||$34,647.50 plus 32% of the amount over $170,050.|
|35%||$215,951 to $539,900.||$49,335.50 plus 35% of the amount over $215,950.|
|37%||$539,901 or more.||$162,718 plus 37% of the amount over $539,900.|
US tax rates for married and filing jointly:
|Tax rate||Taxable income bracket||Taxes owed|
|10%||$0 to $20,550.||10% of taxable income.|
|12%||$20,551 to $83,550.||$2,055 plus 12% of the amount over $20,550.|
|22%||$83,551 to $178,150.||$9,615 plus 22% of the amount over $83,550.|
|24%||$178,151 to $340,100.||$30,427 plus 24% of the amount over $178,150.|
|32%||$340,101 to $431,900.||$69,295 plus 32% of the amount over $340,100.|
|35%||$431,901 to $647,850.||$98,671 plus 35% of the amount over $431,900.|
|37%||$647,851 or more.||$174,253.50 plus 37% of the amount over $647,850.|
US tax rates for the head of household:
|Tax rate||Taxable income bracket||Tax owed|
|10%||$0 to $14,650.||10% of taxable income.|
|12%||$14,651 to $55,900.||$1,465 plus 12% of the amount over $14,650.|
|22%||$55,901 to $89,050.||$6,415 plus 22% of the amount over $55,900.|
|24%||$89,051 to $170,050.||$13,708 plus 24% of the amount over $89,050.|
|32%||$170,051 to $215,950.||$33,148 plus 32% of the amount over $170,050.|
|35%||$215,951 to $539,900.||$47,836 plus 35% of the amount over $215,950.|
|37%||$539,901 or more.||$161,218.50 plus 37% of the amount over $539,900.|
You may notice that there are many different tax rates in the United States, and that’s because the country has a progressive tax system. That means that the taxi you’re paying for in the country will depend on how much you earn and how many dependents you have.
There are two levels of income tax in Sweden: local and national. The local tax rates differ between municipalities, whereas the national tax rates are more consistent. Below is information showing rates for Swedish residents, along with an estimated average local tax.
Resident income tax rates in Sweden:
- There is no national tax rate for income under SEK 20,200, and no local tax rate for income under SEK 20,200 or USD 1,900.
- Incomes between SEK 20,200 and SEK 537,200 (USD 1,900 to USD 50,541) are taxed at 0% at the national level, and at 32% at the local level
- National and local tax rates for income above SEK 537,200 (USD 50,541) are 20% and 52%, respectively
Americans who have become Swedish residents must report their worldwide income, but tax treaties between the United States and Sweden help US expats living in Sweden avoid double taxation.
Non-resident income tax rates in Sweden:
For non-residents, the Swedish tax rate on employment income is a flat 25%.
For self-employed people, a notice notifying expats living in Sweden of their tax obligations will be sent to them by skatteverket (the Swedish equivalent of the IRS).
Capital gains tax
A capital gains tax is imposed when an investor sells an investment and makes a profit. A tax is due for the tax year the asset is sold.
According to the IRS, most individuals pay no more than 15% in taxes on their net capital gains. If your net capital gain is less than or equal to $40,400 for singles or $80,800 for married filing jointly or qualifying widows and widowers, some or all of the profit may be taxed at 0%.
Moreover, the capital gain tax rate of 15% applies to the following:
- Singles with taxable income of more than $40,400 but less than $445,850
- Singles with taxable income of more than $80,800 but less than $501,600
- Head of household with taxable income greater than $54,100 but less than or equal to $473,750
- Married filing separately with taxable income greater than $40,400 but less than or equal to $250,800.
In addition to the 15% capital gain tax rate, a net capital gain tax rate of 20% applies if your taxable income exceeds the threshold.
Capital gains may also be taxed more than 20% in the following cases:
- The small business stock sold under section 1202 is taxed at a maximum of 28%.
- The maximum tax rate on net capital gains from selling collectibles (such as coins or art) is 28%.
- There is a maximum 25% tax rate on unrecaptured section 1250 gains from selling section 1250 real property.
Capital gains are taxed at a flat rate of 30% in Sweden. The Swedish tax authorities define a capital gain as income that cannot be attributed to a business operation or service — for example, rents from private assets, dividends, profits from asset sales, and interest payments.
On the other hand, the corporate net income tax rate is flat at 22%.
The property owner pays property taxes, or real estate taxes, to the county or local taxing authority. Property taxes are based on the assessed value of your home and vary depending on your country’s property tax rate.
In the United States, property taxes may be assessed at the actual value of your home, but that won’t always be the case. You may have to pay more taxes because of that gap.
Depending on your state and county, as well as the value of your home, you’ll pay different property taxes. The land itself, as well as the structures on it, are included. Therefore, vacant land will likely have lower real estate taxes due to its lower assessed value.
Assessments are based on mills, which are one-thousandth of a dollar. The annual property tax liability is calculated by multiplying three values:
- Rates of state taxes,
- A property’s assessment ratio (the amount subject to tax),
- and the property value.
On the other hand, in Sweden, you must pay property tax if you own undeveloped land, rented premises with rooms, or industrial buildings.
Also, if you own freehold or rental homes or apartments that are taxed as properties where construction is underway, you need to pay property tax.
In addition, property tax must be paid on land built with only freehold flats or residential rental flats with a different owner and on land built with only freehold flats or residential rental flats without building value.
The person who owns the property on January 1 of the income year is responsible for paying the property tax throughout the year, regardless of who owns the property.
Property tax is calculated based on the assessed value of your share of the real estate in the “Inkomstdeklaration 1” form. Generally, it ranges from 0.75% to 3% of the home’s assessed value.
As far as social contributions go, there are two types of taxes in the US; Medicare and Social Security.
1.45% of all wages are paid as Medicare insurance taxes by the employee and the employer. Medicare taxes are paid by anyone earning more than $200,000.
In the case of self-employed individuals, Medicare requires 2.9% of their net income to be paid.
Employers and employees are subject to social security taxes at a rate of 6.20% or 12.4% on their first $147,000 of wages.
Social security contributions from employers and employees support Sweden’s comprehensive system. American workers in Sweden are obligated to contribute to US Social Security or Swedish Social Security under the US-Sweden totalization agreement.
- An expat who works for a US company in Sweden for less than five years typically pays into US Social Security
- An expat working for a US company in Sweden for more than five years is likely to contribute to Swedish social security
- An expat working for a non-US employer in Sweden will pay into Swedish social security
Swedish social security contributions are taxed at the following rates:
- 31.42% for employers
- 7% for employees
- 28.97% for the self-employed
Do you need to pay taxes in the US while living in Sweden?
In the United States – Sweden Tax Treaty, double taxation is prevented when it comes to income taxes, corporation taxes, and capital gains taxes.
However, Article 1, section 4 contains a clause known as the savings clause that allows the United States to tax its citizens in the same manner as if the Convention had not been ratified. This means that US expats are still expected to pay US taxes on their global incomes.
However, US expats can claim US tax credits when they file their US tax returns to avoid double taxation on their income earned in Sweden.
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