Taxation of pre-tax and post-taxUS US accounts

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Taxation of pre-tax and post-taxUS US accounts


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Old 12th July 2019, 12:01 AM
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Default Taxation of pre-tax and post-taxUS US accounts

I have a question regarding French taxation of US fund distributions.

Let's say I have 3 US accounts:
1. Savings
2. Roth IRA
3. Traditional IRA

I understand what the US taxation treatment is on these (ie. I pay tax only on the Traditional IRA), but what are the French taxation rules when I start to take money out and bring it to France to live on?

I would think they wouldn't care as these are taxed (or not) at source. And then it's just my own after-tax money I'm bringing into France, ie. no tax.

Correct?

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Old 12th July 2019, 06:13 AM
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Right answer - but potentially for the wrong reasons.

The savings account is taxed in France only on the interest earned (and declared) in the current tax year. (There is a special consideration made for the fact that bank interest is taxed in the US - but it's not the same as the "tax credit at French rates" that is done for salary and some other income items.)

The IRAs (as well as US SS) are specifically named in the US-France tax treaty as being taxable only in the US. You declare them on your French declaration as "foreign source pensions" and then again on the form for foreign source income, identifying them as US pensions (I always cite the treaty, Article 18, just to be sure). Those amounts are then included with the income that is subject to tax credit at French rates so that you are credited for the amount of extra tax generated by those items.

For more info on the US-French tax treaties, go here: https://franceintheus.org/spip.php?article703
The French Consulate in the US offers a consolidated version of the treaty so you don't have to wade through the various originals, amendments and "explanations" which is all they offer on the IRS website.

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Old 12th July 2019, 01:30 PM
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Default Roth IRA tax treatment

Thanks - you mention interest in the savings account. What about capital gains in the Roth IRA? The Roth capital gains are not taxable in the US.

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Old 12th July 2019, 03:50 PM
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Quote:
Originally Posted by ferrad View Post
Thanks - you mention interest in the savings account. What about capital gains in the Roth IRA? The Roth capital gains are not taxable in the US.
I've always considered that where the treaty says "IRA" accounts, it means both traditional IRAs and Roths. Basically, the deal with a Roth account is something the US government set up and so they control the taxation - i.e. you put in after-tax funds. So you would just declare the withdrawals as your "pension" income subject to the "tax credit at French rates" just like a traditional IRA.

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Old 12th July 2019, 05:47 PM
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Thanks - forgot to ask about capital gains in a non-retirement accounts such as a brokerage account. These are taxed at short or long term rates by the US. Do they have the same treatment as for IRA accounts in France? ie. effectively not taxable as they were taxed in the US?

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Old 12th July 2019, 06:03 PM
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What about the sell of stocks and dividends in a regular brokerage account?

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Old 12th July 2019, 08:20 PM
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Quote:
Originally Posted by ferrad View Post
Thanks - forgot to ask about capital gains in a non-retirement accounts such as a brokerage account. These are taxed at short or long term rates by the US. Do they have the same treatment as for IRA accounts in France? ie. effectively not taxable as they were taxed in the US?
No, non-retirement accounts are subject to reporting as "foreign source income" in France. The form for Foreign Source Income (form 2047) asks you to detail your interest and dividends by country and then applies an assumed tax rate to those forms of investment income to calculate the French tax due. I'm not certain how the tax is calculated on foreign investment income, but it does make allowance for the foreign (i.e. US) taxes paid.

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Old 13th July 2019, 04:48 AM
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Originally Posted by Bevdeforges View Post
No, non-retirement accounts are subject to reporting as "foreign source income" in France. The form for Foreign Source Income (form 2047) asks you to detail your interest and dividends by country and then applies an assumed tax rate to those forms of investment income to calculate the French tax due. I'm not certain how the tax is calculated on foreign investment income, but it does make allowance for the foreign (i.e. US) taxes paid.
For US citizens, US-source investment income is given a credit equivalent to the French tax that would be owed. This means that you won't have to pay any French taxes on it, regardless of the amount of US taxes paid.

This was discussed more on this thread.

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