US Citizens living in France
The tax position of US citizens living in France is particularly complex since you are required to report BOTH in France and the US.
Cabinet Gregory works in association with MG Partners Paris - a small firm of US tax specialists based in Paris - and together we would be glad to assist.
This page outlines
- Tax position of US Citizens Overseas
- Foreign Earned Income Exclusion
- Foreign Housing Exclusion
- Foreign Tax Credits
- Specified Foreign Financial Assets
- Instructions for New Streamlined Filing Compliance Procedures
Tax Position Of US Citizens Overseas
The US taxes its citizens on the basis of their nationality and not on the basis of their residence. US citizens and resident aliens who are outside the United States (and its possessions) have the same requirements to file tax returns as anyone living in the United States. Income from worldwide sources must be considered when determining if a federal tax return must be filed. In general, foreign earned income is income received for services performed in a foreign country.
US expatriates who meet the Physical Presence or the Bona Fide Resident Test may be able to take advantage of the Foreign Earned Income Exclusion and or the Foreign Housing Exclusion.
You are considered physically present in a foreign country (or countries) if you reside in that country (or countries) for at least 330 full days in a 12-month period. You can live and work in any number of foreign countries, but you must be physically present in those countries for at least 330 full days. The qualifying period can be any consecutive 12-month period of time. A "full day" is 24 hours; days of arrival and departure are generally not counted in the physical presence test.
A person is considered a "bona fide resident" of a foreign country if they reside in that country for "an uninterrupted period that includes an entire tax year." A tax year is January 1 through December 31. Brief trips or vacations outside the foreign country will not jeopardize status as a bona fide resident. If the foreign government concerned has determined that a person is not subject to their tax laws as a resident, the Exclusions will not be available.
Foreign Earned Income Exclusion.
If a person's tax home is in a foreign country and they meet either the bona fide residence test or the physical presence test, they can choose to exclude from gross income a limited amount of their foreign earned income. The income must be for services performed in a foreign country during a period of foreign residence or presence, whichever applies.
Foreign Housing Exclusion
In addition to the foreign earned income exclusion, qualifying individuals may also choose to exclude or deduct from their foreign earned income a foreign housing amount. To claim the housing exclusion, a person must meet the Physical Presence Test or the Bona Fide Resident Test.
The following expenses qualify for the foreign housing exclusion:
Rent, or the fair rental value of housing;
- Utilities other than telephone;
- Real property and personal property insurance;
- Occupancy taxes;
- Nonrefundable security deposits or lease payments;
- Furniture rental;
- Residential parking fees;
Foreign Tax Credits
Foreign taxes paid by a US taxpayer can often be credited against US tax liability or deducted in figuring taxable income on a US income tax return. It is often better to claim a credit rather than a deduction for foreign taxes. Whereas a credit reduces US tax liability, with any excess able to be carried back and carried forward to other years, a deduction reduces taxable income and may be taken only in the current year. All foreign income taxes must be given the same treatment; it isn't permitted to deduct some foreign income taxes and take a credit for others. Credits cannot be claimed in respect of foreign taxes paid on income that is excluded from a US tax return.
Specified Foreign Financial Assets
Since 2011 there is a reporting requirement for individuals who have "Specified Foreign Financial Assets" in excess of certain levels.
Taxpayers must report specified foreign financial assets on form 8938. Be aware that this requirement is in addition to the foreign bank account (FBAR) reporting requirement
FATCA (Foreign Account Compliance Tax Act) - Final FATCA regulations issued by US tax authorities
The Final Regulations are a voluminous set of rules comprised of hundreds of pages of details regarding the implementation of all aspects of FATCA. The Final Regulations are relevant to private investment funds of all types, fund managers and investors, banks, custodians, insurance companies, retirement funds, foreign governments and the investment entities they directly or indirectly control, service providers who will assist in facilitating FATCA compliance and many other members of the global financial services community
We strongly recommend obtaining advice from qualified professionals in France
- and we would be glad to assist.
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