France and US Taxes: What American Expats Need to Know

France's top marginal income tax rate is 45%, plus social charges that can add another 17.2% on investment and rental income, so US expats in France often find that the Foreign Tax Credit eliminates most or all of their US income tax on wages and investment income. The US-France tax treaty is comprehensive and covers pensions, government pay, students, and teachers, but a saving clause means US citizens cannot rely on most treaty provisions to reduce their US tax. PFICs are a serious concern for US expats in France, since popular French savings products like the Assurance Vie and most French mutual funds qualify as PFICs under US rules. Social security is covered by a totalization agreement, which means most employed US expats pay into the French system and are exempt from US self-employment tax on the same earnings. US expats investing locally should keep their long-term investments in US-domiciled accounts when possible to avoid PFIC classification on French funds.