Topic · France
Capital gains for Americans in France: the flat tax, the PEA clock, the property abatements — and the US return
France taxes a gain one way and exempts it three ways; the United States taxes it in dollars, at its own rates, and adds 3.8% above the threshold. How the two systems meet on a sale of shares, funds or property.
By Danilson Ramos · Founder, Atamatax
Published June 2026 · Updated September 2026
Part of the France desk — every US tax topic for France in one place.
Check it for your own income
Does the 3.8% reach your investment income?
Four banded answers, no figures typed, no email. The read says which side of the threshold you sit on and — if you paid tax abroad — what that credit can and cannot do.
Free, no account, nothing you answer leaves this page. Open the full NIIT Exposure Check
A banded screen for a US citizen or resident; Form 8960 settles the exact figure. Four answers give bands for net investment income and MAGI, and no read here nets a foreign tax credit against the 3.8% — the Code allows none.
The Christensens sold French shares. Paul Bruyea sold Canadian property. Both paid their country of residence, both paid the United States, and both litigated the 3.8% that survived. A sale is where the two systems meet most sharply for an American in France, because France's answer varies so much by asset and by holding period, and the US answer does not.
What France does
| Asset sold | French treatment |
|---|---|
| Shares, bonds, funds in a CTO | 30% flat tax, or the scale with holding-period abatements on pre-2018 shares |
| PEA holdings after five years | Exempt from income tax; 17.2% social charges on the gain |
| Assurance-vie withdrawal after eight years | Favourable regime with an annual allowance; social charges apply |
| Second home or rental property | 19% income tax plus 17.2% social charges, reduced by holding-period abatements; income-tax exempt after 22 years, social charges after 30 |
| Principal residence | Exempt |
| Crypto-assets | 30% flat tax on disposal for consideration |
What the United States does
Every sale is a US disposition reported on Form 8949 and Schedule D, in dollars: the cost translated at the rate on the acquisition date, the proceeds at the rate on the sale date, so that a euro that moved against the dollar produces a US gain or loss of its own. Long-term gains (held over a year) are taxed at 0%, 15% or 20% by bracket; short-term gains at ordinary rates. The PEA's five-year clock and the property abatements have no US counterpart. A home gets the §121 exclusion — $250,000, or $500,000 on a joint return — and the rest is taxable gain.
A fund or ETF is the exception. If it is a PFIC — and a French, Irish or Luxembourg fund is — the sale is not a capital gain: under the default regime the gain is an excess distribution allocated across the holding period and taxed at the top rate for each prior year with an interest charge; under a mark-to-market election it was taxed year by year as ordinary income. The PFIC in France page goes through it.
Where the two meet: the credit
French income tax and creditable social charges on the gain reduce the regular US tax on the same gain on Form 1116, within §904's limit. For gains France taxes first under Article 13 — French real property above all — the treaty's re-sourcing rule in Article 24(2)(b)(ii) treats the gain as French-source so the limit does not block the credit. In the ordinary case the credit cancels the regular US tax completely, because French rates are higher.
Where France exempts the gain — the PEA after five years, the principal residence — there is no French income tax to credit, and the US tax on the gain (above §121, for a home) lands in full.
And then the 3.8%
The gain is net investment income under §1411(c)(1)(A)(iii). If MAGI — with the foreign earned income exclusion added back — exceeds $200,000 (single) or $250,000 (joint), the 3.8% applies to the smaller of the gain (with the rest of the year's investment income) and the excess. None of the French tax counts against it. That is the Christensen holding, and it is precedential: the France treaty's credit is subject to the Code's limitation, and the Code gives no credit against chapter 2A tax.
What to check before selling
- The US basis in dollars at the acquisition-date rate — often the largest surprise on an old holding.
- Whether the asset is a PFIC, which replaces the capital-gain computation entirely.
- Whether France will tax the gain (CTO, property) or exempt it (PEA after five years, principal residence) — which decides whether there is anything to credit.
- MAGI for the year of sale against the threshold; a sale can be timed across years.
- For a home: §121 eligibility, and whether a euro mortgage repaid at a different rate produces §988 gain.
Will the 3.8% reach your sale?
Four banded answers and a read on the threshold, with the France decision named on the credit line.
Authorities cited
- IRC §1411 — IRC §1411 — Net Investment Income Tax (3.8%)
- IRC §121 — IRC §121 — Exclusion of gain from sale of principal residence ($250,000 / $500,000)
- IRC §988 — IRC §988 — Treatment of certain foreign currency transactions (a repaid foreign-currency mortgage can produce ordinary gain)
- IRC §901 — IRC §901 — Taxes of foreign countries and U.S. possessions
- IRC §904 — IRC §904 — Limitation on the foreign tax credit
- IRS Form 1116 — About Form 1116 — Foreign Tax Credit (Individual, Estate, or Trust)
- IRS Form 8960 — About Form 8960 — Net Investment Income Tax (Individuals, Estates, and Trusts)
- US–France Income Tax Treaty — Convention between the United States and France (signed 1994), as amended by the 2004 and 2009 Protocols
- Christensen v. United States (Fed. Cir. 2026) — Christensen v. United States, No. 24-1284 (Fed. Cir. Aug. 31, 2026) (precedential) — the U.S.–France treaty's Article 24(2)(a) and 24(2)(b) credits are subject to the Code's §§27/901(a) limitation and do not offset the §1411 net investment income tax; reversing 168 Fed. Cl. 263 (2023)
- IRC §1291 — IRC §1291 — Interest on tax deferral (excess-distribution regime)
- IRC §1296 — IRC §1296 — Mark-to-market election for marketable PFIC stock
- IRS Form 8621 — About Form 8621 — Information Return by a Shareholder of a PFIC or QEF
- IRS · yearly average exchange rates — IRS — Yearly average currency exchange rates
Primary sources (Cornell Legal Information Institute for the US Code and CFR; IRS.gov for forms, procedures, and treaty documents). This page is general information, not individualized tax or legal advice.
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