Few countries capture the imagination quite like France. From sipping coffee at a Parisian café to cycling through Bordeaux’s vineyards to retiring under the Provençal sun, France offers a rare blend of culture, history, cuisine, and quality of life. Combine that with universal healthcare, efficient public transportation, and a more deliberate pace of living, and it’s no wonder so many Americans envision building a life there.

Relocating, however, involves more than a one-way ticket and a charming apartment. France has one of the world’s most sophisticated tax and legal systems. At the same time, the United States continues to tax its citizens on worldwide income regardless of residence, which means U.S. expats considering the move to France must navigate obligations on both sides of the Atlantic. The silver lining is that the U.S.–France income tax treaty and estate and gift tax treaty include important provisions designed to reduce or even eliminate double taxation.

Determining tax residency and domicile

France uses several tests to determine whether you qualify as a tax resident. You may be treated as a resident if your main household or family base is in France, if you spend more than 183 days in the country during a calendar year, or if your principal economic interests are located there. Meeting just one of these conditions is enough for France to tax you on worldwide income. France’s progressive income tax rates range from 0% to 45%, with an additional 3% to 4% surcharge on higher incomes.

For U.S. citizens, this creates a dual-residency issue, since the United States continues to treat its citizens as tax residents no matter where they live. The U.S.–France income tax treaty resolves these conflicts through “tiebreaker” rules. In practice, most Americans who move to France on a full-time basis are treated as French residents under the treaty, which shifts taxing rights on many types of income to France, with the U.S. providing credits to avoid double taxation.

Domicile introduces another layer of complexity. France generally treats an income tax resident as domiciled for estate and gift tax purposes, taxing worldwide assets if the decedent was a resident or if assets have a French situs. French nationality by itself does not create tax exposure. The United States, by contrast, casts a much wider net: It imposes tax based on nationality, residence, domicile, or the presence of U.S.-situs assets. Understanding the interplay of residency and domicile in both countries is essential for effective cross-border tax and estate planning.

Key advantages of the U.S.–France income tax treaty

The U.S.–France income tax treaty offers unusually favorable provisions for Americans living or retiring in France. For example, U.S. Social Security benefits are taxable only in the United States and not in France, making the country particularly attractive for Americans receiving retirement income. Specific provisions that relate to U.S. expats are:

  1. Retirement accounts (Article 18). Distributions from U.S. pensions, IRAs, and Roth IRAs to a French resident are taxable only in the United States. This is a rare benefit, as many other tax treaties allow the country of residence to tax these distributions as well. It preserves the tax-free nature of qualified Roth IRA withdrawals in France, which is particularly valuable for retirees.
  2. U.S. investment income (Article 24). U.S. citizens in France receive a French tax credit equal to the French tax that would otherwise apply to certain U.S. investment income, including dividends, interest, and capital gains. In effect, this can exclude such income from French taxation, leaving only U.S. tax due.

Case study: The retired couple with Roth IRAs and a U.S. portfolio

Paul and Linda, both 68, retire in Marseille with $1.2 million in combined Roth IRAs, $2 million in a U.S. brokerage account, and annual Social Security benefits of $42,000. Under the treaty, their Roth withdrawals remain untaxed in France, and their U.S. investment dividends and capital gains are excluded from French tax via Article 24’s credit mechanism. Their Social Security benefits are taxable only in the United States and fully exempt from French tax.

Investing as a French resident

Once you are a European Union resident, your investment options change. It is often difficult to open an investment account with French institutions as a U.S. taxpayer. The EU’s MiFID II rules also prevent EU-based institutions from offering U.S.-domiciled ETFs and mutual funds to EU residents. At the same time, holding non-U.S. funds can trigger punitive U.S. passive foreign investment company (PFIC) rules. The solution for many U.S. expats is to maintain investment accounts with U.S. custodians who can hold U.S.-domiciled securities for nonresidents. French investment products like the assurance vie are often tax-efficient for French citizens but usually disadvantageous for U.S. taxpayers due to PFIC treatment.

Property wealth tax in France

Since 2018, France’s wealth tax applies only to real estate. French residents are taxed on worldwide real property holdings, while nonresidents are taxed only on property located in France. The tax applies if the net value of taxable property exceeds €1.3 million on January 1 of each year. The tax base includes direct real estate ownership, usufruct interests (valued at the full property value), real estate rights, and even equity in companies to the extent it reflects French real estate. As soon as the limit of €1.3 million has been exceeded, the calculation of the tax begins at €800,000. For example, for real estate assets valued at €1.3 million, the tax is calculated on the brackets between €800,000 and €1.3 million—i.e., €500,000 is taxed at 0.5%. Rates then rise progressively to 1.5% for estates over €10 million. Another important tax benefit for Americans is that those who relocate to France are given a five-year wealth tax exemption on all non-French real property.

French inheritance and gift tax

French inheritance and gift tax is based on the relationship between the donor or decedent and the recipient. Children can inherit €100,000 tax-free from each parent every 10 years. Spouses and those in civil partnerships are now exempt from paying inheritance tax in France. Tax rates for children range from 5% to 45%, while unrelated heirs can face a flat 60% tax. Early planning is essential for U.S. expats, as there is no multimillion-dollar lifetime exemption.

Forced heirship and the EU succession regulation

By default, French law requires that children inherit a reserved portion of the estate, up to three-quarters if there are three or more children. The remainder can be left to anyone. Under EU Regulation 650/2012, Americans in France can elect U.S. state law to govern their estate, potentially avoiding forced heirship. This election must be made clearly in a will, and French inheritance tax still applies. However, France’s 2021 domestic law casts doubt on the full application of the EU succession regulation. This complexity makes it important to work with a qualified cross-border estate planner to put the right plan in place.

Case study: Avoiding forced heirship

Susan, a widow with two adult children, moves to Lyon. She wants to leave most of her estate to one child who has been her primary caregiver. Under French forced heirship, each child would be entitled to one-third of her estate, prohibiting Susan from making a distinction between her heirs. By electing California law in her French will, Susan bypasses forced heirship. The inheritance tax still applies, but her wishes are respected.

The U.S.–France estate and gift tax treaty

The estate and gift tax treaty coordinates how the two countries tax estates, gifts, generation-skipping transfers, and inheritances. To qualify for treaty benefits, the donor or decedent must be domiciled in either the U.S. or France. U.S. citizenship may also be relevant if the person was domiciled in France at the time of the gift or death. The treaty provides special benefits for married couples: Community property rules may reduce the value of the taxable estate, and a treaty-based marital deduction may apply when the surviving spouse is not a U.S. citizen.

Generally, the country of domicile has the primary taxing rights, while the other country retains taxing rights within its borders, such as real estate or business property. The treaty stipulates that financial assets, such as stocks and bonds, are usually taxed only by the country of domicile. To prevent double taxation, the country of domicile grants credits for taxes paid in the other country.

Trusts in France

Trusts are not native to French law and face strict reporting and potential annual levies. Transfers into or from trusts are often treated as direct gifts or inheritances. For U.S. expats, a simple revocable living trust to avoid U.S. probate may still work, but even then create reporting requirements. More complex arrangements need careful cross-border structuring.

Usufructs and bare ownership properties

Under French law, property can be divided into two types: usufruct and bare ownership. The usufructuary has the right to live in the property or collect income from it during their lifetime, while the bare owner holds the future right to full ownership once the usufruct ends. The usufruct is valued at a discount that depends on the age of the surviving spouse—the older the usufructuary, the lower the taxable value. This structure enables a surviving spouse to remain financially secure while ensuring children eventually inherit the property.

Case study: Using usufruct to reduce tax on a Paris apartment

David and Anne, married U.S. citizens living in Paris, jointly own a €1.5 million apartment. When David dies, his will leaves Anne the usufruct and their two children the bare ownership. Because Anne is 72, the French tax code values her usufruct at 30% of the property (€450,000) and the children’s bare ownership at 70% (€1,050,000). Inheritance tax is assessed only on the bare ownership value transferred to the children, significantly lowering the tax due compared to taxing the entire apartment.

Anne keeps the right to live in the apartment or rent it out for income during her lifetime. When Anne passes away, the usufruct is extinguished by law and the children automatically receive full ownership. No additional French inheritance tax is triggered on Anne’s death with respect to the apartment, since the transfer of bare ownership was already taxed at David’s death.

Important financial preparation before moving to France

The best time to plan is before you become a French tax resident. Early preparation allows you to align your investments, estate documents, and reporting structures with both U.S. and French rules. Key steps include reviewing your investment portfolio to avoid punitive treatment for PFICs, structuring retirement distributions to maximize treaty advantages, and drafting wills that clearly elect U.S. law if you wish to avoid French forced heirship. Couples may also explore usufruct and bare ownership strategies to balance spousal security with efficient inheritance tax outcomes. Finally, any trusts should be carefully reviewed to ensure they meet French reporting and compliance requirements.

France’s tax and legal systems reward those who prepare carefully. By understanding how U.S. and French rules interact—and by leveraging treaty benefits, estate planning tools, and cross-border investment strategies—you can reduce tax exposure and protect your family’s wealth. With a solid plan in place, you can focus less on navigating bureaucracy and more on enjoying the lifestyle that drew you to France in the first place. To learn more, reach out to your Cerity Partners advisor or request an introduction today.

Please read important disclosures here.