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Connect on LinkedInA mark-to-market election is a U.S. tax election that lets a PFIC shareholder report eligible marketable PFIC stock each year based on its fair market value. When the election applies, annual gains are taxed as ordinary income, and losses are deductible only to the extent of prior mark-to-market gains.
Why it matters for U.S. expats
U.S. expats often encounter PFICs through foreign mutual funds, ETFs, investment platforms, pensions, and some non-U.S. savings products. A mark-to-market election can reduce the harshness of the default PFIC tax regime, but it also creates annual reporting on Form 8621 and can produce taxable income even when the investment has not been sold.
Common questions
1. When can a U.S. expat make a mark-to-market election?
A U.S. expat can make the election for PFIC stock that qualifies as marketable stock. This usually means the stock is regularly traded on a qualifying U.S. or foreign exchange.
2. How is PFIC income taxed under a mark-to-market election?
The taxpayer compares the PFIC’s fair market value at year-end with their adjusted basis. Any gain is included as ordinary income.
3. Can mark-to-market losses reduce taxable income?
Yes, but only up to the amount of prior unreversed mark-to-market gains. Losses beyond that limit are not currently deductible under the election.
4. Does a mark-to-market election avoid the default PFIC rules?
Yes, for years the election applies. It can prevent future PFIC gains from being taxed under the default excess distribution regime.
5. Can a mark-to-market election be made for any PFIC?
No. The election is available only for PFIC stock that meets the marketable stock rules.
6. Is Form 8621 required for a mark-to-market election?
Yes. The election and annual mark-to-market reporting are handled on Form 8621.
7. Can a mark-to-market election be made late?
Late elections are technical and can create tax consequences for prior PFIC years. A late or missed election should be reviewed before filing.
8. Is a mark-to-market election better than a QEF election?
It depends on the investment and the available records. A QEF election can be better when the PFIC provides the required annual information statement, while a mark-to-market election may be more practical for publicly traded PFICs.
Related forms
When to get help
Professional guidance is important when:
- You own foreign mutual funds, ETFs, or other investments that may be PFICs.
- You want to make a mark-to-market election on Form 8621.
- You missed Form 8621 filings in prior years.
- You are deciding between the mark-to-market election, QEF election, and default PFIC treatment.
- You sold a PFIC after years of unreported ownership.
- You hold PFICs through a foreign pension, brokerage account, or investment wrapper.
Bright!Tax can identify PFIC exposure, prepare Form 8621, and help determine whether a mark-to-market election is appropriate. Get started with Bright!Tax.
Related Bright!Tax guides
- IRS Form 8621: Reporting PFICs and foreign investments as a U.S. expat
- PFIC form requirements for U.S. expats
- PFIC rules for foreign investments
Official sources
Reviewed by
Katelynn Minott, CPA & CEO
Last reviewed
June 2026