# Self Employed



## pgcat (Oct 26, 2014)

Hi everybody, 

I've been trying to figure out the IRS forms but the instructions are not very clear for expats  so I have a few questions: 

1) I'm self-employed (profession libérale) with a home office : can I deduct home office expenses on form 8829 / Schedule C and at the same time claim the foreign house deduction?

2) I was hoping to deduct French health insurance contributions (RSI + mutuelle) on form 1040 line 29 - is there a limit?

3) I was also hoping to deduct French retirement plan contributions (CIPAV) on form 1040 line 28. According to article 18 of the US France treaty amended in 2004 it looks to me like French retirement plans are accepted as equivalent to US plans and are deductible within US plan limits. But what US retirement plan could possibly be equivalent to the CIPAV?

4) I read on the US embassy site that CSG and CRDS contributions are not deductible or creditable, but what about the CAF (part of the self employed URSSAF contributions)? 

5) Am I right to assume that French "prevoyance" insurances are not deductible (death & disability, "indemnites journalieres"...)?

6) I have a cleaning lady and I pay French social taxes (URSSAF - CESU). Do I need to fill out Schedule H and pay household employment taxes in the US? That would be soooo unfair!

Thanks!


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## Bevdeforges (Nov 16, 2007)

pgcat said:


> Hi everybody,
> 
> I've been trying to figure out the IRS forms but the instructions are not very clear for expats  so I have a few questions:
> 
> 1) I'm self-employed (profession libérale) with a home office : can I deduct home office expenses on form 8829 / Schedule C and at the same time claim the foreign house deduction?


If you're taking the foreign housing allowance, I seriously doubt you can take any deduction for a home office, since that most definitely would be "double dipping." 



> 2) I was hoping to deduct French health insurance contributions (RSI + mutuelle) on form 1040 line 29 - is there a limit?


Not if you are taking the FEIE (foreign earned income exclusion) and only to the extent that the health care portion of your cotisations and mutuelle exceed 10% of your AGI (line 38). If you are taking the standard deduction, then you can't deduct anything for health insurance.



> 3) I was also hoping to deduct French retirement plan contributions (CIPAV) on form 1040 line 28. According to article 18 of the US France treaty amended in 2004 it looks to me like French retirement plans are accepted as equivalent to US plans and are deductible within US plan limits. But what US retirement plan could possibly be equivalent to the CIPAV?


I don't think so. The US plans are generally tax deferred plans - where you deduct your contributions when made and then pay full US income tax on withdrawals after retirement. The French plans don't work that way, as far as I know. But again, if you're taking the FEIE, you don't get to deduct any of that anyhow.



> 4) I read on the US embassy site that CSG and CRDS contributions are not deductible or creditable, but what about the CAF (part of the self employed URSSAF contributions)?


No, family allocation is not deductible for US tax purposes, but again, if you're taking the FEIE absolutely not.



> 5) Am I right to assume that French "prevoyance" insurances are not deductible (death & disability, "indemnites journalieres"...)?


Exactly. None of those insurances are deductible in the US tax system anyhow.



> 6) I have a cleaning lady and I pay French social taxes (URSSAF - CESU). Do I need to fill out Schedule H and pay household employment taxes in the US? That would be soooo unfair!


What you pay your cleaning lady in France has no bearing on your US tax returns. You do need to file the appropriate forms in France to report her earnings and pay the employer's portion of her cotisations, however.
Cheers,
Bev


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## pgcat (Oct 26, 2014)

*Still a bit confused...*

Thanks for your quick replies!

Not sure I quite understand the part on FEIE though... I thought that if you took FEIE you could still claim deductions against the non-excluded amounts.

What I understood from 2555 form instructions was that:

1) line 43 you enter your FEIE

2) line 44 you enter the total of all deductions (from 1040 and Schedule C) multiplied by the FEIE divided by the total income

3) line 45 = line 43 - line 44 = your adjusted FEIE 

So it seems that you claim deductions only against the non excluded amounts the same way you calculate your adjusted foreign tax credit.

Or am I missing something???


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## Bevdeforges (Nov 16, 2007)

Basically, if you take the FEIE and want to itemize your deductions, you need to apportion your deductions between what you excluded via the FEIE and what's left over.

To take a vastly simplified example, if you exclude the max $97K (or whatever it is this year) against earned income of $194K (twice the max FEIE), then you only can deduct one-half of your itemized deductions against the "leftover" bit.

Actually, the US Consulate in Paris usually has quite a bit of useful information on their tax page: Internal Revenue Service | Embassy of the United States Paris, France with links to some of the most relevant information on the IRS web pages.
Cheers,
Bev


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## pgcat (Oct 26, 2014)

OK thanks I'll have a look !


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## BBCWatcher (Dec 28, 2012)

What Bev describes is why it might be more favorable to take the Foreign Tax Credit exclusively and skip the FEIE/FHE. I have no idea -- it depends on your situation -- but I'd run the calculation both ways to see which works better keeping in mind that you cannot flip back and forth between FTC-only and FEIE/FHE arbitrarily. (There are some IRS restrictions about that, so read up on that, too.)


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## Bevdeforges (Nov 16, 2007)

Given that you're in France, you might want to try contacting the Paris IRS office directly. By all reports, the folks in the Paris office are extremely helpful in all kinds of situations, much more so than the typical IRS types you run into back in the US. (And before anyone jumps down my throat for that statement - staffing an IRS office overseas is a very different job from that of a domestic IRS agent.)
Cheers,
Bev


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## pgcat (Oct 26, 2014)

I ran some simulations: in my situation I'm much better off with the FIEE and FHE than without.


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## pgcat (Oct 26, 2014)

I was wondering who would give the best advice on how the US-France tax treaty impacts deductions on self-employed health insurance and retirement contributions: the Paris IRS office or a Paris-based tax preparer? 

Of course advice from the Paris IRS office is free...


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## Bevdeforges (Nov 16, 2007)

pgcat said:


> I was wondering who would give the best advice on how the US-France tax treaty impacts deductions on self-employed health insurance and retirement contributions: the Paris IRS office or a Paris-based tax preparer?
> 
> Of course advice from the Paris IRS office is free...


How much do you want to pay for your advice? (Though to be honest, I don't think you're going to find an answer much different by paying for it.)

For "cheap" advice prepared by the "high price tax advisers in Paris" you might want to consider joining AARO. They have a number of publications and other information available to their members, including an annual tax "seminar" conducted by their tax attorney members with the participation of folks from the Paris IRS office. AARO - Association of Americans Resident Overseas - AARO - Association of Americans Resident Overseas for more information 
Cheers,
Bev


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## pgcat (Oct 26, 2014)

Thank, I'll look into that.


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