US Expat Taxes for Americans Living in France – What You Need to Know
There are an estimated 102,000 Americans living in France.
Living in France is an incredible experience for a variety of reasons – the history, the culture, the cuisine, wine and cheese, and the wonderful countryside to name but a few. As an American expatriate living in France though, what exactly do you need to know regarding filing US expat (and French) taxes?
All US citizens and green card holders who earn a minimum of $10,000 (or just $400 for self-employed individuals) anywhere in the world are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live or their income is generated.
The good news is if you are already paying income tax in France, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.
US taxes – what you need to know
If you earn more than US$10,000 (or $400 for self-employed individuals), you must file form 1040. While taxes are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended still further online until October 15th.
If you have foreign assets with a value of over US$200,000 (per person), excluding your home if it is owned in your own name, you must also file form 8938 and declare them.
If you had more than US$10,000 in total in one or more foreign bank accounts at any time during the tax year, you are also required to file FinCEN form 114, otherwise known as an FBAR (Foreign Bank Account Report).
“France now has a higher tax burden than any other country in the euro zone apart from Belgium.”
– The Economist Magazine.
If you pay income tax in France, there are several mechanisms that allow you to reduce or avoid being taxed on the same income by the IRS too. The two primary ones are the Foreign Earned Income Exclusion, which lets you exclude the first around US$100,000 of foreign earned income from US tax if you can demonstrate that you are a French resident, and the Foreign Tax Credit, which gives you a dollar tax credit for every dollar of tax you’ve paid in France. The Foreign Tax Credit is normally a better option if you pay more tax in France than you would to the IRS, as you can carry the excess credits forward for future use. Be aware though that even if you don’t owe any tax to the IRS, if your income is over US$10,000 (or $400 for self-employed individuals) you still have to file.
The US and French governments share taxpayer info, while French banks pass on US account holders’ account info to the IRS, so it’s not worth hiding or being ‘economical’ with the truth on your return. The penalties for tax evasion for expats are harsh to say the least.
If you’re a US citizen, green card holder, or US/French dual citizen and you have been living in France but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to get up to date with your filing without facing any penalties. It’s better not to put it off though, as the IRS might find you first.
French taxes – what you need to know
French tax returns are due by mid May. The exact date is confirmed early each year. The French equivalent of the IRS is called the Direction Générale des Finances Publiques, and the French tax return form is called form 2042. Taxes can be paid in monthly instalments, by 15th of each month, starting in February.
Americans are considered French residents if their main home is in France, or if France is where they work or the center of their economic interests.
French income tax rates are relatively high compared to in the US, so for many people it will make sense to claim the Foreign Tax Credit. French income tax rates range from 0% to 45%, however there’s an additional 3% or 4% surcharge on higher earners, and furthermore everyone has to pay an additional 9.2% on employment income or 9.9% on other types of income. In 2019 the IRS announced that expats in France could claim (and back claim) US tax credits against this tax, too.
Alongside income tax, there are taxes on owning property (Taxe Foncière), living in a property, whether you rent or own it (Taxe d’Habitation), and owning a TV or device for watching TV, such as a DVD player or computer (Redevance Audiovisuelle). Lastly, there is an annual wealth tax for anyone with French assets worth over 800,000 Euros.
We strongly recommend that if you have any doubts or questions about your tax filing situation as a US expat living in France that you contact a US expat tax specialist.