France replaced its old solidarity wealth tax (ISF) in 2018 with a new tax called the Impôt sur la Fortune Immobilière (IFI). IFI applies only to real estate holdings. Americans will be liable to pay IFI if the net value of their taxable real estate exceeds €1.3 million on January 1. If you’re a US citizen and a French resident, you owe IFI on your worldwide property, while non‑residents only pay for property located in France. In this article, we’ll dive into the details and provide an overview of everything Americans moving to or living in France need to know.
Who counts as a French tax resident for IFI liability?
France uses four primary tests to determine tax residency:
- Your main home is in France.
- You spend over 183 days there per year.
- Your principal professional or economic interests are in France.
- You earn income sourced from France.
If you meet any one of these tests, French tax authorities consider you a French resident, and IFI is payable on your global real estate. Note however that when you first become a French resident, there is a 5 year exemption on your worldwide real estate outside of France, so many expats delay full residency to avoid the worldwide IFI for longer.
IFI rates and brackets in 2026
While the tax doesn’t kick in unless your qualifying real estate is valued at over €1.3m, once you are liable, the tax is applied to holdings above €800 000. The rates and brackets have remained unchanged since 2018, however they can be changed in theory. They currently are:
- Up to €800 000: 0%
- €800 001–€1 300 000: 0.5%
- €1 300 001–€2 570 000: 0.7%
- €2 570 001–€5 000 000: 1.0%
- €5 000 001–€10 000 000: 1.25%
- Above €10 000 000: 1.5%
So for example, a household with €1.5 million therefore would pay 0.5% on the first €500 000 above €800 000, then 0.7% on the next €200 000, resulting in a €4 900 annual IFI bill.
The ‘Décote’ cliff edge rebate reduction
However, if your net taxable estate falls between €1.3 M and €1.4 M, you quality for a reduction known as the ‘Décote’ designed to reduce the tax for those who only just qualify to pay it. The Décote is calculated as €17,000 – (1.25% x the value of your real estate assets). So, for example, if your qualifying real estate assets are worth €1.38m, the calculation would be:
€800,001 to €1,300,000: 0.50% €500,000 × 0.5% = €2,500
€1,300,001 to €1,380,000: 0.70% €80,000 × 0.7% = €560
IFI due before rebate: €2,500 + €560 = €3,060
Décote calculation: €17,500−(1.25%×€1,380,000) = €17,500−€17,250 = €250
Final IFI due: €3,060 – €250 = €2,810
Other IFI deductions and exemptions for expats
While if your total qualifying real estate value exceeds €1.3m you still have to pay IFI, there are several other factors that can reduce your IFI bill significantly:
- You can deduct the value of mortgages and loans used to buy or renovate your properties.
- Primary residence benefit: you subtract 30% of its market value if you own it directly (rather than through a company or other entity).
- Properties held within a professional activity, such as a Para‑Hotelier rental business, may qualify for full or partial exemption.
- Certain rural assets such as rented farmland, self-farmed land and woodlands qualify for deductions, while nationally listed heritage assets may be exempt.
- Charitable gifts to approved organisations reduce IFI by 75% of the donation amount, capped at €50 000 per annum.
- As mentioned, new French tax residents enjoy a five‑year exemption on non‑French real estate.
Why IFI matters for US expats
American citizens living in France need to be especially mindful of the IFI because of their ongoing obligation to file US tax returns. While IFI is a French tax applied only to real estate assets, it can still affect your US tax picture. The good news is that IFI qualifies as a foreign tax for the purposes of the US Foreign Tax Credit, which can be claimed on Form 1116. That means a properly calculated IFI bill can offset your US income tax liability. This credit can also be retroactively applied, or carried forward. It may also be worth selling US property and reinvesting in other assets if you’re moving to France permanently. Consult a US expat financial advisor with experience working with Americans moving to or living in France to map out the best path forward to optimize your investments and taxes.
How to calculate and file IFI
IFI is calculated on the net value of your real estate as of January 1 each year. The process begins with a fair market valuation of your French and, if you’re a resident, worldwide property. From that number, you subtract any qualifying deductions, such as mortgage balances, property loans, or the 30% discount on a principal residence. The result is your net taxable value.
Americans in France should report IFI on Form 2042-IFI, which is typically filed with your French income tax return. The deadline usually falls in late May or early June. Filing is mandatory even if no tax is due if your real estate holdings exceed the threshold. Late filings incur a penalty plus monthly interest on any payment due. Understatements or missing valuations can trigger audits and more severe consequences.
Strategies for Americans to reduce their IFI bill
There are several strategies that American expats can use to manage or reduce their exposure to IFI. One of the most effective is to delay becoming a French tax resident. New residents get a five-year exemption on real estate held outside France, so limiting the amount of time you spend in France each year for example can help reduce your tax bill.
If you’re already a resident, structuring how you hold your property makes a difference. Owning your primary residence in your own name qualifies you for the 30% discount. Taking out a mortgage on valuable property also helps reduce your net taxable value, especially useful if the loan is interest-only or tied to renovations.
You might consider moving some properties into a Société Civile Immobilière (SCI), or checking whether properties used for professional activity qualify for exemption. Dividing ownership with a spouse or heirs can influence how much tax you owe.
Planning is critical when looking to optimize your finances. Don’t wait until April or May to start reviewing your assets. Seek advice from a US expat specialist financial advisors and a French tax accountant or attorney who has experience working with Americans in France as soon as possible to minimize your IFI liability.
Will IFI be reformed or repealed?
Although IFI has remained the same since its 2018 introduction, French lawmakers continue to debate changes. There’s political pressure from the left to either broaden the base of IFI or to reintroduce a full wealth tax that includes financial assets rather than just real estate. While no legislation has passed, the proposals are serious enough that high-net-worth expats should stay alert.
Some proposals suggest lowering the €1.3 million exemption threshold or increasing rates for property portfolios above €10 million. Others call for expanding IFI to cover shares in real estate companies or adding a surtax for second homes in high-demand areas like Paris or the Côte d’Azur. While none of these ideas are law as of 2026, seek advice and keep in touch with a French tax advisor to keep ahead of potential changes.
Steps American expats should take now
Managing IFI isn’t just about knowing the rules, it’s about planning ahead. Here are the steps every American expat with French property should take:
- Determine your real estate net value as of January 1
Take the time to value your property using conservative, documented estimates. Include only what qualifies under French IFI rules. - Check whether your net value exceeds the €1.3 million threshold
Don’t assume you’re exempt – calculate your net value after deducting allowable debts like mortgages or home improvement loans. - Confirm your French tax residency status
Review how many days you spent in France and where your family and assets are based. - Apply all eligible deductions and exemptions Use the 30% primary home discount, deduct mortgage debt, and explore whether your property qualifies as professional or exempt.
- Prepare and file Form 2042-IFI on time
Even if you don’t owe IFI, a filing may still be required. Filing late or skipping it entirely can lead to costly penalties. - Work with a US-France tax advisor to align both systems
A qualified tax professional will help you optimise deductions, avoid mistakes, and coordinate foreign tax credits on your US return. - Monitor French political developments that could affect IFI rules
Keep an eye on reform discussions, especially if your assets approach the upper IFI brackets or span multiple property types.
When to consult an expert
IFI often intersects with inheritance, investing, and retirement planning. An expat specialist financial planning expert can help you make an investment and optimized cross-border plan for your finances, including taking into account IFI and other local and US taxes, along with estate planning considerations.
French Wealth Tax for Americans Q&A
Do Americans living in France have to pay the French wealth tax on global assets?
Yes, if you’re a French tax resident, you must declare and potentially pay IFI on real estate assets worldwide. Non-residents only owe IFI on real estate located in France. Other types of assets like stocks or cash are not subject to IFI under current rules.
What happens if I jointly own French property with my spouse or partner?
French tax law treats married couples (and PACSed partners) as a single tax unit for IFI purposes. That means the €1.3 million threshold applies to your combined net real estate holdings. If you’re unmarried and not in a PACS, each person is assessed separately.
Can I use my French wealth tax payments as a credit on my US tax return?
Yes, IFI is generally eligible for the foreign tax credit on Form 1116. It offsets US tax on foreign-sourced income, reducing the risk of double taxation. Always confirm with a cross-border tax specialist to ensure proper classification and documentation.
What kinds of real estate are subject to IFI?
IFI applies to residential and rental property, land, second homes, and shares in real estate companies. Commercial or professional property may be excluded if used for business purposes. You can also deduct debts tied to taxable properties, which helps reduce your liability.
Do I have to file IFI if my real estate is worth just under €1.3 million?
If your net taxable real estate is below the €1.3 million threshold, you don’t owe IFI and aren’t required to file Form 2042-IFI. However, it’s smart to keep documentation proving your valuation in case of a future audit. A small market shift could push you above the line next year.
If you have any questions about your situation or require assistance managing your investments as an American living abroad, get in touch.
This article is for informational purposes only; it is not intended to offer advice or guidance on legal, tax, or investment matters. Such advice can be given only with full understanding of a person’s specific situation.
