US taxes while living in France: FBAR, FEIE and tax credits

Moving to France does not end your US tax life. The United States taxes its citizens on worldwide income wherever they live, so an American in Paris, Lyon or a village in the Dordogne still files a US return each year if their income meets the filing threshold. On top of that, France will usually tax you as a resident. The job is to report correctly to both countries and use the tools that stop the same income being taxed twice.

Vaughn lived and worked in France in the 2010s. This guide does not tell his story; it sets out what the IRS publishes today on the main pieces: the FBAR, Form 8938, the foreign earned income exclusion, the foreign tax credit and the US France income tax treaty. It is general information, not tax advice, and a cross-border tax professional is worth paying for in your first year.

The short version

• FBAR: if the combined value of your foreign financial accounts exceeded $10,000 at any time in the year, you file FinCEN Form 114. It is due April 15, with an automatic extension to October 15.
• Form 8938 (FATCA): if you live abroad and file single, you file it when specified foreign financial assets exceed $200,000 at year end or $300,000 at any time. Joint filers double those amounts.
• Foreign earned income exclusion (FEIE): lets you exclude a capped amount of foreign earned income if you meet the bona fide residence test or the 330 full days physical presence test. You claim it on Form 2555.
• Foreign tax credit: lets you credit income tax paid to France against US tax on the same income, claimed on Form 1116.
• Treaty: the US and France have an income tax treaty (1994) with protocols from 2004 and 2009.

The FBAR: reporting French bank accounts

The IRS explains that a US person must file a Report of Foreign Bank and Financial Accounts if they have a financial interest in, or signature authority over, at least one financial account outside the United States, and the aggregate value of those accounts exceeded $10,000 at any time during the calendar year.

Note the word aggregate. If you hold a French current account (compte courant), a savings account such as a Livret A, and a small account elsewhere, you add their highest values together. If the total ever crossed $10,000, every account goes on the report.

The FBAR is filed electronically with FinCEN, not with your tax return. The IRS states it is due April 15 following the calendar year, with an automatic extension to October 15. You do not need to request that extension. The FBAR reports accounts; it does not create tax.

Practical habit: each January, note the highest balance of every French account during the prior year, in euros, and keep the bank statements. You convert to dollars using the Treasury year-end rate when you file.

Form 8938: FATCA reporting

Form 8938 is separate from the FBAR, and many people file both. It is attached to your income tax return. The IRS FATCA summary sets higher thresholds for people who live abroad. A single filer living abroad files Form 8938 if specified foreign financial assets exceed $200,000 on the last day of the year or $300,000 at any time during the year. If you file jointly, the thresholds double.

The IRS considers you to live abroad for this purpose if you are a US citizen whose tax home is in a foreign country and you have been present in a foreign country or countries for at least 330 days out of a consecutive 12-month period, or if you meet the bona fide residence rules.

French banks report US account holders under FATCA, which is why some French banks ask Americans for a US tax identification number when opening an account. Keep your Social Security number to hand.

The foreign earned income exclusion

If you earn a salary or self-employment income in France, the FEIE may let you exclude part of it from US income tax. The IRS sets three ways to qualify. You need a tax home in a foreign country and one of the following:

1. As a US citizen, be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.
2. As a US resident alien from a treaty country, meet the same bona fide residence test.
3. Be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

You claim the exclusion on Form 2555. It applies only to earned income such as wages and self-employment income. Pensions, Social Security, interest, dividends and capital gains are not earned income for this purpose. The exclusion amount is adjusted for inflation each year; check the current figure on the IRS FEIE page for the year you are filing.

The foreign tax credit

France has relatively high income tax and social charges, so many Americans in France find the foreign tax credit more useful than the exclusion. The IRS explains that individuals file Form 1116 to claim the credit for foreign income taxes paid or accrued to a foreign country.

The credit works dollar for dollar against US tax on the same foreign source income, within limits calculated by category. Unused credit can generally be carried back one year and forward ten years. You generally cannot claim both the exclusion and the credit on the same income.

An important France-specific point on the IRS foreign tax credit page concerns the French social levies CSG and CRDS. The IRS gives instructions for individuals filing amended returns to claim a foreign tax credit for CSG and CRDS: write "French CSG/CRDS Taxes" in red at the top of Form 1040-X and file it with accompanying Forms 1116. If you have paid these levies on French income, ask your preparer how this applies to your years.

The US France tax treaty

The IRS publishes the US France income tax treaty of 1994, its technical explanation, and protocols signed in 2004 and 2009, each with a technical explanation. The treaty allocates taxing rights between the two countries for items like wages, pensions, dividends and interest, and contains tie-breaker rules if both countries consider you resident.

Two things to know about treaties for US citizens. First, most US treaties include a saving clause that lets the US tax its citizens as if the treaty did not exist, with listed exceptions. Second, if you take a treaty position that changes your US tax, you may need to disclose it on Form 8833. Read the relevant articles in the treaty text rather than relying on secondhand summaries.

For when France itself considers you a tax resident, see our guide on French tax residency rules in this series.

Dates to put in your calendar

• April 15: normal US return due date and FBAR due date.
• June 15: automatic two-month extension to file and pay for US citizens living abroad on the regular due date, under IRS rules in Publication 54. Interest still runs on unpaid tax from April 15.
• October 15: extended due date for the FBAR and, if you filed an extension, the US return.
• Spring: the French income tax declaration season, with dates published each year by the French tax administration.

Records to keep

• Year-end and highest balances for every French account.
• French tax notices (avis d'impôt) showing tax paid, needed for the foreign tax credit.
• Pay slips and employer statements.
• Copies of every FBAR confirmation and US return.

Common mistakes

• Forgetting small accounts when totalling for the FBAR.
• Assuming the FEIE covers pensions or investment income.
• Claiming the exclusion and the credit on the same euros.
• Missing the 330-day count by a few days because of US visits.
• Not keeping French tax notices that prove tax paid.

Common questions

Do I have to file a US tax return if I live in France? US citizens are taxed on worldwide income wherever they live, so you file if your income meets the filing threshold for your filing status. Living in France does not remove that obligation, though exclusions and credits often reduce the US tax owed.

Is a French Livret A account reported on the FBAR? The IRS FBAR rule covers financial accounts outside the United States in which you have a financial interest. If your foreign accounts together exceeded $10,000 at any time in the year, each account, including savings accounts, goes on the report.

Should I use the foreign earned income exclusion or the foreign tax credit in France? It depends on your income and French tax paid. Because French income tax and social charges are often high, many residents find the foreign tax credit on Form 1116 covers more of their US tax. You generally cannot use both on the same income, so compare both before filing.

Can I claim a credit for French CSG and CRDS? The IRS foreign tax credit page gives instructions for individuals filing amended returns to claim a credit for CSG and CRDS, using Form 1040-X marked French CSG/CRDS Taxes with Forms 1116. Ask a preparer how it applies to your years.