# HSA account tax treatment in France?



## Tucsonsteve (Mar 26, 2013)

Does anyone know how a U.S. health savings account is treated under French tax law and the U.S. - France tax treaty? I am specifically interested in the case of U.S. citizens residing in France as retirees with all other sources of income from pensions and retirement accounts. The HSA account is linked to a brokerage account with the money invested in ETFs.

It looks to me like any sales would be subject to capital gains tax in France. 


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## Bevdeforges (Nov 16, 2007)

I suspect the simple answer to this is that since the French tax system doesn't recognize the HSA accounts as having any tax significance, they are considered just like any other investment account. Report the annual income as investment income and that way when you withdraw funds, there is no tax due.

But as far as I know, there is no mention of these funds in the US-France tax treaties, so no special treatment.

As retirees in France with US pensions (i.e. US social security), you're covered after 3 months of residence by the national health care plan, and if you add a good mutuelle (top up insurance) you won't really have need of the HSA - at least not for medical expenses.


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## Tucsonsteve (Mar 26, 2013)

Bevdeforges said:


> I suspect the simple answer to this is that since the French tax system doesn't recognize the HSA accounts as having any tax significance, they are considered just like any other investment account. Report the annual income as investment income and that way when you withdraw funds, there is no tax due.
> 
> But as far as I know, there is no mention of these funds in the US-France tax treaties, so no special treatment.
> 
> As retirees in France with US pensions (i.e. US social security), you're covered after 3 months of residence by the national health care plan, and if you add a good mutuelle (top up insurance) you won't really have need of the HSA - at least not for medical expenses.



Thank you, Bev. We do plan to obtain mutuelles. The HSAs in the US have become such a significant part of retirement planning for some, including us. I don’t expect to draw from it till one of us reaches 65 and I was hoping to keep all the tax benefits. Oh, well.


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## 255 (Sep 8, 2018)

Tucsonsteve -- Alternatively, you could continue utilizing the HSA, before or after 65, to pay medical bills (perhaps in place of a mutuelle,) as it was designed. This way there would be no income tax on withdrawals. After 65, you'll also gain the benefit of paying health (mutuelle) and long term care premiums (with age based limitations,) without owing any income tax (in the US anyway.) After age 65, you can take withdrawals, just like a regular IRA (use the money for whatever you want) and only pay tax on the withdrawals. If, as Bev said, France also taxes you on the withdrawals -- you could utilize the foreign tax credit to mitigate any double taxation. Cheers, 255


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## Bevdeforges (Nov 16, 2007)

255 said:


> Tucsonsteve -- Alternatively, you could continue utilizing the HSA, before or after 65, to pay medical bills (perhaps in place of a mutuelle,) as it was designed. This way there would be no income tax on withdrawals. After 65, you'll also gain the benefit of paying health (mutuelle) and long term care premiums (with age based limitations,) without owing any income tax (in the US anyway.) After age 65, you can take withdrawals, just like a regular IRA (use the money for whatever you want) and only pay tax on the withdrawals. If, as Bev said, France also taxes you on the withdrawals -- you could utilize the foreign tax credit to mitigate any double taxation. Cheers, 255


OK, using the HSA to pay medical bills in France might allow you to avoid US taxation. (I'm really not at all familiar with how those funds work in the US.) But as for French taxes, it would be considered like any other investment account - so most likely you'd pay French income tax on the annual earnings (and CSG/CRDS at something like 17%).

I'd really urge some caution on that plan for after age 65. An IRA is specifically mentioned in the tax treaty as being taxable only in the US. There is no mention of HSAs in this regard. France doesn't offer a "foreign tax credit" like that in the US. In France, you declare your IRA withdrawals as foreign source income, then you are granted a tax credit at French tax rates on certain types of foreign sourced income (yes on the various named pension plans, no on foreign investment accounts).


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## 255 (Sep 8, 2018)

Tucsonsteve -- I defer to Bevdeforges on the tax treatment, in France. That means you'll have two separate tax treatments in the U.S. & France. Regular income in the U.S. and capital gains in France. After 65, you may want to build a withdrawal ladder, so your U.S. standard deduction will eliminate or keep your income taxes low on the HSA withdrawals. Maybe Bev (she is/or was a CPA) can help on how to deduct the French taxes paid annually on the gains from your withdrawals, so you don't get taxed three times (capital gains in France, HSA withdrawals in France and HSA withdrawals in the U.S.) Cheers, 255


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## Tucsonsteve (Mar 26, 2013)

255 said:


> Tucsonsteve -- I defer to Bevdeforges on the tax treatment, in France. That means you'll have two separate tax treatments in the U.S. & France. Regular income in the U.S. and capital gains in France. After 65, you may want to build a withdrawal ladder, so your U.S. standard deduction will eliminate or keep your income taxes low on the HSA withdrawals. Maybe Bev (she is/or was a CPA) can help on how to deduct the French taxes paid annually on the gains from your withdrawals, so you don't get taxed three times (capital gains in France, HSA withdrawals in France and HSA withdrawals in the U.S.) Cheers, 255



Thanks for your thoughts, 255. I had hoped to avoid dealing with something like French taxation on capital gains and dividends since I otherwise have everything in retirement accounts, but it looks like I have more googling to do to decide what the best course (in terms of simplicity and cost) for us is.


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## Bevdeforges (Nov 16, 2007)

Cashing out of the HSA may or may not involve capital gains at all. If you report the income from the gains and losses on the fund each year (treating it basically like a mutual fund or other managed fund) then there are no capital gains on withdrawals. 

I would suggest perhaps considering a membership in AARO or a discussion with a tax person in France, as I have no idea under what circumstances you would treat an HSA like you would discrete investments handled through a broker (i.e. capital gains vs. regular income).


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## Tucsonsteve (Mar 26, 2013)

Bevdeforges said:


> Cashing out of the HSA may or may not involve capital gains at all. If you report the income from the gains and losses on the fund each year (treating it basically like a mutual fund or other managed fund) then there are no capital gains on withdrawals.
> 
> I would suggest perhaps considering a membership in AARO or a discussion with a tax person in France, as I have no idea under what circumstances you would treat an HSA like you would discrete investments handled through a broker (i.e. capital gains vs. regular income).



Thanks, Bev. I’ll probably see a tax person some time after making the move. 


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