US capital gains and CGT

As well as understanding French CGT, Americans moving to France also need to be aware of:

• Taxation of US capital gains

• US capital gains tax on US or French capital gains

CGT on sale of a property in the US

If, as a French resident, you sell property in the US, you should be aware that both countries may assess this for CGT.

The property is located in the US, so the US has the first right to assess and tax the gain.

You calculate the gain as sale price minus what you paid for it (plus adjustments for improvements etc) and if you owned the property for more than a year you will usually qualify for long-term CGT rates (0%, 15% or 20% depending on the person’s overall income level). 

If the property was your principal residence for at least two out of the five years before you sold, you should qualify for a US ‘principal residence exclusion’ of up to $250,000 for a single person or double for a couple. 

However, France will also assess the property for French CGT, and not only with regard to value that has accrued since moving to France and the onus is on you to declare this on a specific form. 

If you sell a former main home soon after moving to France (one year maximum) and have not rented it out to anyone in the meantime, France will generally still allow it to benefit from the ‘principal residence’ exemption.

Beyond that, the French will be liable to assess it and tax it for CSG based on the usual rules, but with a tax credit for any US CGT actually paid on the sale (if any).

Note, however, other rules can come into play, depending on circumstances. For example, if you rent out your former US residence to someone after moving to France, and you, yourself, rent in France and then you sell the US property after four years so as to buy a main home in France, the sale of the US property will be exempt from French CGT.

• For sales of US stocks and shares by a US citizen living in France, in most cases capital gains are reportable to both countries, but France applies a tax credit equal to the theoretical French tax, thus annulling it. 

Double tax treaty considerations on sale of property in France

If, as a French resident, you sell property in France, France has the first right to assess this for CGT. The US also has the right to assess it but you can claim a ‘foreign tax credit’ for any French tax paid. 

However, note the US exemption for the sale of principal residence, mentioned above, which may last for up to three years in France. 

However, if the gain exceeds this allowance, US tax may still be payable. 

If you own second homes or investment properties, both countries are eligible to tax the gains, but again with the award of a US tax credit for French tax paid. 

You must still report property capital gains on IRS forms even if little or no tax is due after credits.