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us expat tax guide – france

How do Americans report French pensions on their US tax return?

It depends on the type of pension. For a regular government pension, the contribution is reported on the US tax return and taxed. The cost basis is created from the taxed contribution. The net amount (distribution minus cost basis) is taxed when distributions are made. 

If the pension is self-managed, it may be treated as a trust, requiring additional forms such as Form 3520 and Form 3520A.

Will Americans in France pay US tax on their pensions upon withdrawal?

Yes and no. Taxability depends on the availability of foreign tax credits (FTCs) and applicable tax treaties. If FTCs can be utilized, they may offset US tax liability. However, in some situations, distributions may be taxed in the US without FTCs.

How can Americans in France plan for tax-efficient pension withdrawals?

It’s recommended that you seek advice from a tax professional, as they can provide good strategies based on your individual situation. 

Good tax planning advice includes filing US tax returns using the FTC method for at least ten years before retirement. This allows you to accumulate and carry forward FTCs, which can be used to offset US tax liability when withdrawing from the pension.

Is it beneficial for Americans in France to have a self-funded or self-managed pension plan?

It depends on individual circumstances. Self-managed pensions offer control over investment vehicles, which can simplify tax reporting if you are knowledgeable about your investments. 

However, they come with additional costs for filing foreign trust forms on US tax returns. A self-managed plan may be beneficial if you are an avid investor who can outperform general pension funds and cover these costs. Otherwise, the additional costs outweigh the benefits.

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