# US taxation of French pensions



## Marnée (Oct 2, 2021)

We've recently retired to France, living on a French pension. We no longer have any US income (still too young for US Social Security) and I am trying to figure out what my US tax liability will be moving forward (with no payroll deductions, I'd need to make estimated tax payments in each quarter).

I believe that I've read on the forum that foreign government pensions (in our case, from l'Education National) that are taxed by that government are partially exempt from US taxes. Does anyone know up to what amount is exempt? Where can I find the text/treaty that states this?

Thank you for your help.


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## Bevdeforges (Nov 16, 2007)

Have moved you to a thread of your own, since the "sticky" thread is actually for more general matters.

OK - for US tax purposes, there are two commonly used approaches for foreign pensions. Technically speaking, the tax treaty says that you should only be taxed by the source country - so French national pensions (i.e. the mandatory pension plans) are only taxable by France. The mechanism for doing this is a bit odd, though. Officially, you're supposed to declare your foreign pensions in full on your US returns - and then claim back the taxes paid to France on the pensions using form 1116 (Foreign Tax Credit). If this is your primary source of income, chances are you won't owe any US taxes.

The FTC forms can, however, be a real hassle to fill out, as you have to partition your income by "type" and then apply only like to like for the tax credit. Roughly it works out to, if your foreign income is one-half your total worldwide income, then you can only deduct half the French taxes paid against any US tax obligation. Though if you're really living off your pensions, you should be able to deduct everything you pay in France. The downside to all that is that there is a reasonable chance that you'll pay far less tax in France on your pensions than you run up in the US on the pensions.

What many expats do is simply not to declare their French pensions at all and leave it at that. The French government certainly doesn't report anything back to the IRS about how much it is paying you in pensions, and given the sorry state of the IRS right now, it's highly unlikely that anyone will bother you. Traditionally, the IRS has little or no enforcement power outside the US unless you hit their radar as very high income individuals (like Boris Johnson). 

If you have a copy of the tax treaty handy, check Article 18, which is the one that deals with pensions.


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## Marnée (Oct 2, 2021)

Thanks, Bev.
I forwarded your response (and the copy of the tax treaty that you had posted) to the American accountant that I've been using for years. If you're interested, I'll let you know how it goes.


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## Bevdeforges (Nov 16, 2007)

Any tax accountant that hopes to retain their registration with the IRS will not do anything other than explicitly "by the book" - meaning the FTC (form 1116) and all that. They have to cover their own asses, after all and preserve their livelihoods. But Article 18 is the first stop, followed by the later Articles that describe how one offsets taxes paid to France by those assessed by the US.


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