U.S. EXPAT TAX GUIDE – FRANCE
What are the tax implications for selling your home in France?
When selling your primary residence in France, you can exclude up to $250,000 of the gain from your income if you are single or married filing separately, and up to $500,000 if you are married filing jointly, provided you lived in the home for at least two out of the five years before the sale.
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Example: Selling your home with a net gain of $300,000 allows you to exclude $250,000, leaving $50,000 subject to capital gains tax.
Can property investments be deducted from capital gains?
Yes, expenses related to purchasing, improving, and selling your property can be deducted. This includes renovation costs, legal fees, and real estate commissions. These costs are added to your property’s cost basis, thereby reducing the overall capital gain from the sale.
How does renting out your property affect taxes when selling?
Renting out your property complicates the tax situation. The IRS requires calculating the number of days the property was rented versus when it was your primary residence. You can still qualify for the $250,000 or $500,000 exclusion if you meet the primary residence criteria within the required period. If it was strictly an investment property, this exclusion does not apply.
How do French taxes on rental income impact your US tax obligations?
You can claim a foreign tax credit on your US tax return for taxes paid on rental income in France. This prevents double taxation by reducing the amount owed to the IRS by the amount paid to French tax authorities.
What is the role of depreciation in capital gains tax?
Depreciation claimed on a rental property must be “recaptured” when you sell. This means adding the amount of depreciation back into your income, which increases the taxable capital gains. This can affect the total tax liability after the property is sold.
What happens if the property was always rented out?
If the property in France was rented out for the entire duration of ownership and never served as your primary residence, you cannot claim the $250,000 or $500,000 exclusion. All profits from the sale are subject to capital gains tax. However, improvements made to the property can still be deducted from the total gain, reducing the taxable amount.
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.
