You live in the United States and are selling a property in France? The tax treaty signed on 31 August 1994 between France and the United States sets out precisely who taxes, how, and what mechanism eliminates double taxation. This article breaks down the rules applicable to your capital gain, with worked examples and practical notes.
The principle: French taxation takes priority on property located in France
Article 13 of the France-US treaty follows the OECD model: gains from the alienation of immovable property are taxable in the State where that property is situated. France therefore taxes the capital gain on French real estate first, at source, at the time of notarial signing. This taxation is not optional and does not depend on your nationality or your status with the IRS.
The French side: 19% income tax + 17.2% social levies
US residents do not benefit from the reduced 7.5% solidarity levy rate reserved for EEA/Swiss affiliates. They therefore pay the full rate of 36.2% before length-of-ownership allowances. On top of this rate, a progressive surcharge on capital gains exceeding 50,000 euros may apply, which can bring the total rate up to 42.2%.
The US side: the capital gain re-declared on Schedule D
The gain on a foreign property is included in the worldwide income of the US resident and declared on Schedule D of Form 1040. It is treated under US rules: long-term capital gain taxed at 0%, 15% or 20% depending on the income bracket, plus a possible Net Investment Income Tax (NIIT) surcharge of 3.8% above certain thresholds.
Eliminating double taxation: Foreign Tax Credit, Form 1116
The treaty provides that the United States grants a foreign tax credit for French tax already paid, via Form 1116. The credit is calculated separately by category of income (passive category for real estate capital gains). It is capped at the US tax due on the same gain.
In practice: if the French tax exceeds the US tax due on this gain, the excess can be carried forward for ten years (carryforward) or back for one year (carryback). If the French tax is lower, the credit absorbs the US tax due and there is no additional US taxation.
Case study: Paris apartment sold from San Francisco
A California resident sells in 2026 a Paris apartment purchased for 380,000 euros in 2014, sold for 620,000 euros.
- Gross gain: 620,000 – (380,000 + 28,500 + 57,000) = 154,500 euros.
- 12-year ownership, income tax allowance 7 x 6% = 42%. Taxable gain for IT: 89,610 euros, IT at 19% = 17,026 euros.
- Social levies allowance 7 x 1.65% = 11.55%. Taxable gain for SL: 136,656 euros, SL at 17.2% = 23,505 euros.
- Total French tax: 40,531 euros.
- US side (California resident, 24% federal marginal rate, NIIT 3.8%): the gain is converted to USD and treated as a long-term capital gain. At LTCG 15% + NIIT 3.8% = 18.8%. On approximately $165,000 taxable, US tax due is approximately $31,000.
- The Form 1116 foreign tax credit caps the usable credit at approximately $31,000. The French tax of 40,531 euros (approximately $44,000) generates a usable credit of $31,000 and a carryforward of approximately $13,000.
- California additionally taxes the gain at the state rate (up to 13.3%), with its own more restrictive foreign tax credit.
Three pitfalls to avoid
- Confusing the French capital gain with the American capital gain: the two tax bases differ (deductible costs and works, length of ownership, rates). Do not extrapolate one from the other.
- Forgetting the carryforward of unused credit: a French excess can be carried forward ten years if you generate passive foreign income again in the future.
- Poorly documenting the tax credit: Form 1116 must be supported by the French 2048-IMM certificate and the EUR/USD conversion at the IRS rate (average annual exchange rate or spot rate depending on context).
How ACCREDITAX coordinates your file
Our role for a France-USA file goes beyond putting accredited tax representatives in competition. We identify representatives familiar with Form 1116, we ensure that the French certificate provided is usable on the US side, and we can refer you to bilingual CPAs if needed for the carryforward.
FAQ – France-US tax treaty
Does the treaty also cover the NIIT (Net Investment Income Tax)?
The US Treasury’s position is that the NIIT is not an income tax within the meaning of the treaty, so the foreign tax credit does not apply to the NIIT. Several court decisions (notably Christensen 2023) have nuanced this point – your tax advisor will be able to guide you on the strategy to adopt.
Is an accredited tax representative required even for a sale at a loss?
Yes. The obligation to designate a tax representative is assessed on the sale price (at least 150,000 euros) or the length of ownership, regardless of whether a gain or loss is made. Filing a capital loss return is still mandatory.
Does the France-US treaty apply to green card holders?
Yes, provided they are US tax residents. The treaty applies to residents in the tax sense, not strictly to citizens.