Moving to Iceland from the US with an Icelandic spouse: the 2026 means-of-support rule, what counts, and how Iceland taxes a US annuity
Written by Hans Goldstein, licensed insurance agent · CA 4273294Short answer: To move to Iceland from the US as the spouse of an Icelander, you apply for a residence permit for a spouse, and in 2026 the means of support is ISK 259,951 a month for one person and ISK 415,922 for a married couple (about $2,127 and $3,403 at ISK 122.23 per dollar), plus ISK 129,976 for each extra adult, before tax. Spouses of Icelandic citizens are not exempt, but Iceland is unusually flexible: for a married couple either spouse can show the funds for both, and a bank balance covering the permit period counts. So an annuity is not needed to qualify; it is one way to show steady income for life at each renewal. Iceland has no wealth tax.
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“Move to Iceland” is a common search, and for most Americans the honest answer is short: Iceland has no retirement visa. The realistic route for a retiree is family: an Icelandic spouse. If that is you, the news is better than in Norway or the Netherlands. Iceland tests the household’s means, not only the citizen spouse’s, and it accepts savings. Here is what the Directorate of Immigration (Útlendingastofnun, whose pages are now on island.is) and the Foreign Nationals Act No. 80/2016 say for 2026.
Routes for an American moving to Iceland
- Spouse or cohabiting partner of an Icelander (Act 80/2016, art. 70). The main route for a retiree. Married, or cohabiting for at least one year, both 18 or older when the relationship began.
- Parent aged 67 or older of an Icelander or resident. A separate family route for older parents (art. 69).
- Long-term visa for remote work. Up to 180 days, for people working for employers abroad. It is not a way to live in Iceland long term.
- No retirement visa. Island.is lists no permit for living on a pension or savings alone.
The 2026 means-of-support requirement
Under art. 56 of the Act, an applicant over 18 must show secure means of support, and state or municipal social assistance does not count. The Directorate sets the amount at the basic financial assistance of the City of Reykjavik, measured before tax:
| Who | ISK a month (2026) | About USD a month |
|---|---|---|
| Individual | ISK 259,951 | $2,127 |
| Married couple | ISK 415,922 | $3,403 |
| Each additional family member 18 or older | ISK 129,976 | $1,063 |
USD at ISK 122.23 per dollar (Central Bank of Iceland official rate, 2 October 2026). The figures were last updated by the Directorate on 18 May 2026; check island.is the month you apply.
Whose income counts: sponsor, applicant, or both
This is where Iceland differs from the sponsor countries. The Directorate says a married spouse “does not need to demonstrate independent funds” and that “it is enough that one party in a marriage demonstrates sufficient funds for both.” If the applicant is supported by the other spouse, that spouse’s employment contract can be submitted. So for a married couple, the money can be in the Icelandic spouse’s name, the American’s name, or both.
- Cohabiting, not married: the partner “must therefore demonstrate independent funds,” so the American needs the individual figure in his or her own name.
- Spouses of Icelandic citizens are not exempt. The test applies to them like everyone else.
- No sponsor benefits-history rule of the Danish kind: what matters is that the applicant is not relying on social assistance.
Why I write about this. My mom is Norwegian, my dad is American, and they’re planning the move from the US to Norway. My mom is the sponsor (the host, or “reference person” in UDI’s words), so Norway’s income test falls on her income, not my dad’s. UDI told us in writing that money in an account does not count as income, and only lifelong income does. Their savings were not the problem; the paperwork wanted a monthly number in the host’s name. The rules in Iceland are different, but the problem is the same one many retirees hit: the income test, not the net worth. I’m writing this to help others in the same boat as my parents. Read how we worked through the Norway income requirement.
In the same boat? Let’s run your numbers
See roughly what a lifetime annuity would cost to close your income gap, then get my personal read by email. I can help while you still live in the US.
Estimates use the September 9, 2026 ImmediateAnnuities.com payout survey (life only) and a 15% cushion. Illustrative, not a quote.
What counts: income, pensions, and savings
| Source | Counts? | Notes (island.is, 2026) |
|---|---|---|
| Wages | Yes | Employment contract, last 3 payslips and a tax overview |
| Secure and regular payments | Yes | Examples given: Social Insurance Administration payments, rent, grants; “not a complete list” |
| Bank balance | Yes | In an internationally recognized currency, in Iceland or abroad, withdrawable during the stay, on an original bank-certified statement. You must cover the permit period: one year of means for a one-year permit |
| Combination | Yes | “Means can also be combined, for example income and/or bank balance” |
| Cash, real estate, uncertain dividends or interest, third-party support | No |
US Social Security, US pensions and a US annuity are not named on the Directorate’s page. They look like “secure and regular payments”, but that is my reading; ask the Directorate before relying on them, and bring award letters.
The savings route in numbers: a one-year permit implies one year of the couple figure, ISK 4,991,064 (about $40,800), by my arithmetic rather than a published figure. First permits usually run one year, at most two, so you show it again at each renewal.
Single or married: how much income you need
| Household | 2026 requirement | Who must show it |
|---|---|---|
| Single American, no Icelandic partner | No retiree permit exists | Not applicable |
| Married couple (Icelandic sponsor plus American spouse) | ISK 415,922 a month, about $3,403 | Either spouse, or both combined |
| Cohabiting partner (not married) | ISK 259,951 a month, about $2,127 | The American partner, independently |
| Each additional adult | +ISK 129,976, about $1,063 | The household |
Do you need an annuity for Iceland? Honestly, usually not
Because savings count and either spouse can show the means, the common “sponsor is not the breadwinner” trap does not apply in Iceland. A couple with US savings in the American spouse’s name can show a certified bank balance. That is cheaper than buying income.
A life-only annuity still has a role for some couples: it shows the same monthly figure at every renewal without re-proving a year of savings, and it keeps paying for life. If you go that way, the annuitant can be either spouse. I would not buy one only to get the first permit.
Example: a 62-year-old American moving to Iceland
Target: the married-couple figure, ISK 415,922, about $3,403, plus 15% headroom for the yearly update and the exchange rate, so about $3,913 a month. Payout at 62 (ImmediateAnnuities.com survey of September 9, 2026, life-only, per $100,000 a month): man $603 average ($660 best), woman $582 ($637 best). Illustrative, not a quote.
| Annuitant, 62 | Monthly gap | Premium at average rate | Premium at best rate |
|---|---|---|---|
| Man, no other income | $3,913 | about $649,000 | about $593,000 |
| Woman, no other income | $3,913 | about $672,000 | about $614,000 |
| Couple with $2,000 a month of Social Security (if accepted), man annuitant | $1,913 | about $317,000 | about $290,000 |
| Savings route instead (one-year permit) | About $40,800 on a certified statement, renewed each permit period | ||
Premium equals the monthly gap divided by the payout per $100,000, times $100,000. A joint and survivor annuity covering both of you pays less per dollar than single life, so get a quote. The comparison makes the point: in Iceland, savings are the efficient way to qualify.
Which annuity counts
If you use one, the cleanest fit is a life-only SPIA or joint and survivor SPIA, or an existing deferred annuity or MYGA converted to lifetime payments, paying monthly into an account you can document. An annuity still accumulating is simply savings, which Iceland accepts anyway on a certified statement if it can be withdrawn during your stay.
Does Iceland have a wealth tax?
No. Iceland’s general net wealth tax was repealed by Act 129/2004, and the later wealth tax (auðleggðarskattur) was temporary, levied only in the assessments of 2010 to 2014 under transitional provisions of the Income Tax Act. There is no net wealth tax in 2026.
How the annuity is taxed: Iceland and the US
US side. As a US citizen you stay taxable on worldwide income wherever you live. A US single premium immediate annuity bought with after-tax savings is taxed under IRC 72: an exclusion ratio makes part of each payment a non-taxable return of your premium until the premium is recovered. If you bought it with IRA money, every payment is taxable. The foreign earned income exclusion does not cover annuities (IRC 911(b)(1)(B)(i)). Foreign tax on the payments can be credited on Form 1116, through the treaty’s relief article. Since January 1, 2026, a US citizen with a foreign residence address cannot opt out of federal withholding, even if payments go to a US account (IRC 3405(e)(13), Treas. Reg. 31.3405(e)-1). Withholding is a prepayment, not extra tax. An annuity from a US insurer is not reported on FBAR or Form 8938, and it is not a PFIC.
Treaty. The current US-Iceland income tax treaty was signed on 23 October 2007. Under Article 17(3), an annuity paid to a resident of Iceland is taxable only in Iceland. The saving clause (Article 1(4)) lets the US keep taxing its citizens, and Article 17(3) is not among its exceptions. Article 22(4) then sorts out the overlap for a US citizen living in Iceland: Iceland taxes first, and the US gives a credit for the Icelandic tax, treating the income as arising in Iceland so the credit works. US Social Security is taxable only in the US (Article 17(2)), which also holds for US citizens.
Iceland side. For 2026 the combined state and municipal rates on ordinary income are 31.49% up to ISK 498,122 a month, 37.99% up to ISK 1,398,450, and 46.29% above, less a personal tax credit of ISK 72,492 a month. Capital income is taxed at 22%. How Iceland classifies a privately purchased US annuity is not settled in anything I could find: the Income Tax Act taxes pensions (eftirlaun og lífeyrir) as ordinary income, but it also says the return on individuals’ annuity insurance with life insurers is income when paid, which points to taxing only the gain as capital income. Get an Icelandic tax adviser’s written view, or a binding ruling from Skatturinn, before you model it.
Net result. Iceland’s tax is likely the binding one, and the US credit absorbs most or all of the US tax. If Iceland taxes the whole payment as a pension, the annuity is tax-costly there compared with drawing down savings; if only the gain is taxed at 22%, it is closer to neutral. Social Security stays US-taxed only.
Practical steps
- Decide whether savings or income will carry the application. For most married couples, a certified bank balance is enough.
- Collect the marriage certificate, passports and an original bank-certified statement; get US award letters for any pension or annuity.
- Arrange private health insurance valid in Iceland for at least the first three months, minimum cover ISK 2,000,000; national health insurance follows.
- Apply. Americans are visa-exempt and may generally stay in Iceland while the application is processed if they applied during a legal stay. The Directorate quotes up to 8 to 10 months; its September 2026 queue for family members was working on applications from September 2025.
- If you buy an annuity, buy while you still have a US address and start payments before applying.
The trade-offs of an annuity, stated once: the premium cannot be taken back, payments are level unless you add a cost-of-living rider, they arrive in dollars against a krona requirement, and payouts are lower at younger ages.
Married? Make the income outlive either of you. In Iceland spouses may add their incomes together, so two smaller annuities, one on each spouse, can work as well as one larger one. If a single-life annuity is on one spouse and that spouse dies first, the payments stop, and the surviving spouse may have to show income of their own at the next renewal. A joint and survivor annuity, which keeps paying until the second death, or a separate annuity on each spouse closes that gap. Joint and survivor pays less per dollar than single life, so ask for both quotes and compare.
Frequently asked questions
Free annuity gap analysis for Iceland. Tell me your ages, your Social Security or pension, and whether you are single or a couple. I will show how far your income is from the Iceland requirement and what a lifetime annuity would cost to fill the gap, in the sponsor’s or main applicant’s name where that matters.
Related reading
- Moving abroad on a fixed income: hub
- Spouse visa income requirements when your spouse is the sponsor
- Norway family immigration with a US spouse
- Denmark family reunification requirements
- Finland family income requirement
- Sweden income requirement 2026
- How European countries tax a US annuity
Sources
- Island.is (Directorate of Immigration): residence permit for spouse
- Foreign Nationals Act No. 80/2016 (lög um útlendinga), arts. 55, 56, 69, 70
- Regulation 540/2017 on foreign nationals
- Directorate of Immigration: processing times
- Island.is: immigrating to Iceland, permit categories
- Central Bank of Iceland: official USD rate, 2 October 2026
- Skatturinn: withholding brackets 2026
- Skatturinn: personal tax credit 2026
- Income Tax Act No. 90/2003, arts. 7, 8, 66 and transitional provisions
- US-Iceland income tax treaty, signed 23 October 2007 (US Treasury)
- 26 U.S.C. 3405 (withholding on pensions and annuities)
- ImmediateAnnuities.com: annuity rates by age (survey September 9, 2026)
Goldstein & Co. LLC dba Goldstein Insurance Services · Hans Goldstein, licensed insurance agent, CA lic. #4273294 · NPN 20602398 · 213-414-2808 · hans@hansgoldstein.com
Education, not tax, legal or immigration advice. Rules, thresholds and exchange rates change; confirm with the consulate or immigration authority and a local tax adviser before you act, and get answers in writing. Hans Goldstein is a licensed insurance agent (CA 4273294) and can only offer annuities to residents of states where he is licensed. Annuity payments are guaranteed by the issuing insurer’s claims-paying ability, not by any government. Payout figures are illustrations from a published survey, not quotes. Immediate annuities are generally irrevocable.