Here's an informative guest post about US Taxes for expats in France
Americans love living in France and several factors influence that decision. A great climate, beautiful countryside, exciting culture, and its rich culture are only a few of the positives. An interesting cuisine, economical cost of living, and affordable healthcare also draw in US expats. Interestingly, students also opt to study in French schools and universities. Even as you’re planning your move, one of the first things to find out in detail is about filing taxes as a US expat in France.
US Expats Must File Returns with the IRS Back Home
Even though you’re a permanent Resident of France and earning an income in the country, you’ll continue to pay taxes back home. As long as you remain a US citizen or hold a Green Card, the IRS expects you to declare income from all international sources in the tax return. That includes any assets you hold in foreign bank accounts.
You’ll complete and submit the FinCEN Form 114, which is also called the Foreign Bank Account Report. Of course, as a resident of France, you’ll also comply with the tax obligations that your host country has for you.
You’ll Qualify as a Resident of France Based in 3 Criteria
Any individual must fulfill any one of the three main criteria if they wish to qualify as French residents for taxation purposes.
● Your primary residence is on French soil or your family has a permanent home in the country. If you spend more than 183 days out of a calendar year in France or spend more days here than in any other country, you’re considered a French resident.
● If your primary employment, self-employment, or other business, is in France, then you’re a resident. Conducting most of your professional activities out of France is a valid qualifier.
● If all of your economic activity is conducted in France, that makes you a resident.
You Won’t Have to Pay Dual Taxation
If you’re concerned about paying double taxes on the same income in two different countries, rest assured. The IRS has provisions so US expats pay tax only once. This gets complex, but you don’t have to be on US soil to benefit from a knowledgeable tax service. Online options are available. Residents of France will learn that they can take advantage of different kinds of exclusions. For instance:
● Foreign Earned Income Exclusion, where you can exclude up to $107,600 from your total US taxes from all international sources. You’ll pay taxes only on the balance income left over.
● Foreign tax Credit where you can claim credit for the taxes you pay to the French government in your IRS return.
● Foreign Housing Exclusion where you can exclude any household expenses incurred during your stay in France from the US tax return.
Do keep in mind that even if you think you don’t owe the IRS any taxes, you’ll file returns as usual and declare all earned income.
Understanding Income Tax Rates Applicable in France
The French government levies progressive tax rates according to your income level. These rates can change year to year, which is why you must consult an expert tax attorney who can guide you. For instance, all income earned in the year 2020 will be taxed in the year 2021 at these rates:
● Income of €9,964 and below - 0%
● Income of €9,964 to €25,405 - 11%
● Income of €25,405 to €72,643 - 30%
● Income of €72,643 to €156,244 - 41%
● Above €156,244 - 45%
In addition to understanding tax rates, you’ll also want to keep in mind that the fiscal year in the US and France are similar - from January 1st to December 31st. Remember to check for the applicable due dates and file your tax returns in time.
France is a lovely country to explore. Stay compliant with your tax obligations and enjoy a fantastic life.