Overseas homes, exchange rates and the five-year exemption
Rising property values may impact wealth tax for UK and US expats
House prices in the UK remain close to historic highs in early 2026, following sustained growth over recent years despite periods of slower activity.
In the US, average property prices also remain elevated by long-term standards, with national averages still above $400,000. While this may be welcome news for homeowners, it can have fiscal implications for those who retain overseas property after becoming resident in France.
For France’s IFI wealth tax, property must be valued at its market value and converted into euros using the exchange rate applicable on January 1 of the tax year. Exchange rates can therefore materially affect whether a taxpayer approaches or exceeds the €1.3million threshold.
The US dollar has weakened against the euro compared with the peaks seen in 2022, when parity was briefly reached. In early 2026 the euro is stronger than the dollar, meaning US property converts into fewer euros than it would have during the period of dollar strength. However, exchange rates remain volatile, and what matters for IFI is the rate in force on January 1, 2026, not movements later in the year.
Sterling remains below its pre-Brexit highs but stronger than its immediate post-referendum lows. As with dollar assets, the relevant figure is the euro exchange rate on the valuation date.
There is, however, an important exemption for new arrivals. Foreign real estate owned by individuals who move to France is excluded from IFI until the end of the fifth calendar year following the year in which they become French tax resident.
This exemption does not apply to French property held indirectly through a foreign structure. French real estate remains within the scope of IFI even if owned via a foreign company or other vehicle.
You are therefore liable to IFI on worldwide real estate assets in 2026 only if you became French tax resident in 2020 or earlier (provided you meet the non-residence condition below), as IFI is assessed on assets held on January 1 each year.
To qualify for the five-year exemption, the individual must not have been fiscally resident in France at any time during the five calendar years preceding the year in which French residence began.