US Expat Taxes for Americans Living in France – A Guide

France has long been one of the most popular European destinations for Americans seeking to experience life in Europe. Living in France as a US expat offers a blend of historical charm, world-class cuisine, breathtaking countryside, and vibrant cities like Paris, Lyon, and Marseilles.

Your obligations to the US taxman don’t stop after you move to France, though. As a US citizen or green card holder, you must still file a US tax return if you meet certain income thresholds. Besides, if you qualify as a French resident, you will also have to file a French tax return and pay taxes if your income exceeds around 11,000 Euros..

To help you navigate through these requirements and avoid double taxation, we’ve compiled a US tax guide for Americans living in France. It answers common expat tax questions and providing insights to help you save as much as possible.

Do US expats living in France have double taxation?

A common concern for US expats is double taxation. If you still need to keep filing taxes in the US as well as in France… does it mean you must pay taxes on the same income twice?! Is there any way to mitigate this? We got you.

The good news is, the IRS has several provisions in place to mitigate double taxation:

• Foreign Earned Income Exclusion,
• Foreign Tax Credit,
• US-France Tax Treaty and Totalization Agreement. 

The Foreign Earned Income Exclusion (FEIE) is one of the most common ways for US expats to reduce their US income tax liability. For the 2024 tax year, if you qualify, you can exclude up to $126,500 in foreign earned income from US income tax. Couples who both qualify and file jointly can exclude up to $253,000! To claim the FEIE, taxpayers must meet either the physical presence test or the bona fide residence test to prove that they reside overseas.

The physical presence test, as the name suggests, focuses on where you spend time physically during a certain year. . To qualify, you must spend at least 330 full days outside the US within a 12-month period.

Meanwhile, for the bona fide residence test you will have to demonstrate residency in France. While visits back to the US are allowed, you must show that France is your primary place of residence. This test offers more flexibility regarding time spent in the US, but it can be harder to prove in the case of an IRS audit due to its subjective nature.

By claiming the Foreign Earned Income Exclusion, American expats living in France can significantly reduce their taxable income, making it a valuable way to avoid double taxation while living abroad.

Exclude or deduct housing expenses in France

If your taxable income exceeds the 2024 Foreign Earned Income Exclusion threshold, you may be able to further reduce your US tax liability by claiming the Foreign Housing Exclusion or Deduction. This provision allows you to exclude or deduct qualifying housing expenses, such as rent, utilities, and furnishings while living abroad.

The IRS sets the standard limitation on housing expenses at 30% of the FEIE threshold, which is $37,950 for 2024. However, the allowable limit can vary based on your location in France. Paris for example has a higher limit. The number of qualifying days you lived abroad during the tax year also affect the limit. 

The Foreign Tax Credit

The Foreign Tax Credit is an alternative way for expats to avoid double taxation. Simply put, the IRS allows you to claim a credit in the US up to the value of the taxes you must pay in France. It is essentially as if you were telling the IRS, for instance, ‘’since I have already paid $1,000 income taxes in France, I am taking it as a credit in the US’’. Suppose your US tax bill is $900 for the 2024 tax year. So, taking a $1,000 foreign tax credit would reduce your US liability to nil.

It is worth mentioning that the excess is not refunded but carried over to future years. France has higher tax rates than the US. Therefore, taking a foreign tax credit for French taxes paid generally reduces or eliminates an expat’s US tax bill.

A unique element when it comes to Foreign Tax Credit in France is the ability to claim social contributions as a credit. Historically, the IRS has disallowed this. However, the US-France Tax Treaty was updated in recent years. It now allows US expats residing in France to take ‘’Contribution Sociale Generalisee’’ and the ‘’Contribution pour le Remboursement de la Dette Sociale’’ (i.e., social contributions) as a credit to further reduce their US tax liability.

Is the FEIE or Foreign Tax Credit better for expats in France?

Claiming the Foreign Tax Credit (FTC) rather than the FEIE has some advantages, including:

• no limit on the amount of tax credits you can claim,
• no restrictions on income types (whereas the FEIE applies only to earned income such as salaries),
• the ability to make contributions to US retirement plans and claim refundable US credits such as the Child Tax Credit.

These benefits often make the Foreign Tax Credit a better option than the Foreign Earned Income Exclusion for many Americans living in France.

Whether to take the FTC or the FEIE depends on your specific financial and tax situation. The income type, amounts, and the French tax rates applicable to you can all play a factor. Consulting a tax advisor familiar with both US and French tax laws is essential to developing a tax strategy that minimizes your overall liability and maximizes your benefits in both countries.

Do Americans living in France need to file a French tax return?

Americans living in France may need to file a French tax return depending on their residency status and income sources. The French tax authority, known as Direction Générale des Finances Publiques (DGFiP), oversees the country’s tax system. Generally, French tax residents are taxed on their worldwide income, while non-residents are taxed only on income sourced in France.

Americans are considered French tax residents if they spend 183 days or more in France during a calendar year. Even if you spend less time in France, residency may be determined based on factors such as having your primary residence (foyer fiscal) in France, working there, or having economic ties to the country. For example, owning property, having dependents in France, or significant time spent there can contribute to residency status.

French income tax rates range from 11% to 45%, with additional social contributions that can increase the overall tax burden. If you meet the French residency criteria or earn taxable income in France, you’ll need to file and pay taxes to the DGFiP. 

The main tax form in France is Form 2042, which is essentially the equivalent of Form 1040 in the US. You will generally have to attach and complete other forms, depending on your sources of income, as you submit Form 2042 to the French tax authorities.

Consulting a French tax advisor is important to ensure compliance with local tax laws and to navigate the complexities of dual US-French filing obligations.

Filing taxes in France and the US – Where to file first?

Typically, a US taxpayer living in France would file their French tax return first. Because to claim the Foreign Tax Credit on your US tax return you need information about foreign taxes paid. However, this can create a timing challenge since the tax deadlines differ.

In France, the tax year aligns with the calendar year. However, filing deadlines vary depending on where you live and whether you file online or on paper. Generally, paper returns are due in May, while online submissions may have deadlines extending into June. To avoid online congestion, the deadlines to file a French tax return online vary between France’s départements (101 regions in total). Each department has its own deadline for online submissions.

The US also follows the calendar year, with US tax returns due by April 15 of the following year. Americans living abroad automatically receive a two-month extension to June 15. Note that an extension to file, is not an extension to pay, unfortunately. If you expect to owe taxes as an expat, you must still pay these by April 15 to avoid penalties and interest accruing. This can be particularly challenging, especially if you can’t finalize your French tax return before the US deadline.

To coordinate your tax filings efficiently and ensure compliance with both French and US regulations, it is advisable to work with tax advisors experienced in both systems. This approach can help minimize your overall tax liability and avoid costly errors.

US – France Totalization Agreement and Income Tax Treaty

The United States and France have a tax treaty designed to prevent double taxation. This treaty addresses various issues such as pension income, dividend taxes, corporate income, and other cross-border income matters. This ensures that individuals don’t pay tax twice on the same income. It can help reduce your French tax liability on these types of income. Notably, the tax treaty allows both countries to respect the tax benefits of their respective retirement savings plans.

Additionally, the US and France have a Totalization Agreement in place, This prevents double social security taxation for those working in both countries. The agreement ensures that US citizens do not have to contribute to both the US Social Security system and the French social security system simultaneously.

Also, you will be able to count credits in either system to qualify for benefits in the country where you eventually retire.

Foreign bank accounts and assets reporting – FBAR and Form 8938

If you are a US citizen or resident living in France, you must report your foreign financial accounts to the US government if their aggregate value exceeds $10,000 at any point during the year. Financial accounts include bank accounts, joint accounts, pension accounts, and any other accounts over which you have signatory authority, such as a business bank account.

You must report these accounts by filing FinCEN Form 114, also known as the FBAR (Foreign Bank Account Report). The FBAR is filed separately from your tax return, directly with the US Treasury.

Additionally, US expats living in France may have to file Form 8938 (Statement of Specified Foreign Financial Assets) with their US tax return. This form is required if the total value of their foreign financial assets exceeds certain thresholds. For single filers, the threshold is $200,000 at the end of the year or $300,000 at any point during the year. If you are married and filing jointly, your threshold gets extended to double the amount.

If you acquire a property in France or in any foreign country, you will not need to report this on an FBAR or Form 8938. But reporting assets such as stocks, bonds, bank balances, and foreign business interests must be reported.

Other US reporting requirements for Americans living in France

Americans living in France may also have to report any US-registered corporations they own or control more than 10% of. This includes LLCs and other types of corporations.

Additionally, you may need to report certain types of French investments, such as mutual funds and other financial products, to the IRS. These reporting requirements can be complex. Therefore, it’s important to seek advice from a US tax professional experienced in tax matters of Americans living in France.

Expats should be wary of investing in French or other non-US registered ETFs and Mutual Funds. The IRS classifies these as PFICS (Passive Foreign Investment Companies) and triggers burdensome reporting and additional tax liabilities.

Note that French banks and financial institutions, as well as the French tax authority, share information about US citizens living in France with the US government under various international agreements and US tax laws.

Filing US expat taxes while living in France

While living in France is an exciting adventure, it may complicate your tax situation. You will need to deal with both US and French taxes. However, with the right strategies in place you can minimize double taxation and optimize your tax position in both countries.

What if you’ve been living in France without filing US taxes because you were unaware of the requirement? Fortunately, you may be able to catch up with your US tax filings without facing IRS penalties under the IRS Streamlined Offshore Filing Procedures.

Many US tax professionals may not be familiar with the nuances of US expat tax provisions. It’s essential to work with a tax advisor who has experience in both the US and French tax systems. Consulting with an expat tax expert can help you navigate these complexities, ensuring compliance in both the US and France while minimizing your tax burden.