An American retiree moving to France is not simply changing countries; he is simultaneously entering two tax systems, without being subject to double taxation. The United States continues to tax him as an American citizen, and France taxes him as a resident. The Franco-American tax treaty assigns the right to tax each type of pension and governs tax credits. However, it is essential to know which rule applies to each pension. This study examines all scenarios: American social security, public pensions, company pensions, 401(k) plans, traditional IRAs, and Roth IRAs. It then addresses health insurance and social security contributions in France, and finally, the mechanism of tax credits.
1- TWO TAX SYSTEMS FOR A SINGLE RETIREE
In France, everything depends on tax residency. French tax residents are people who have their home or principal residence, their main professional activity, or the centre of their economic interests in France (Article 4 B of the French General Tax Code). Retirees who sell their house in the United States and live year-round in France easily meet the first criterion. They are then taxed in France on their worldwide income, subject to the applicable tax treaty.
In the United States, everything depends on citizenship. The United States is one of the very few countries that taxes its citizens wherever they live. American living in France therefore remains US taxpayer as long as they retain their citizenship.
- The tax treaty takes this into account through a « safeguard clause. » In principle, this clause allows the United States to continue taxing its citizens according to its own laws, as if the treaty did not exist. It should be noted that this clause is included in almost all tax treaties concluded by the United States.
- This rule has exceptions that protect retirees. On certain issues, the United States commits to respecting the treaty even with regard to its own citizens. Two of these exceptions directly concern retirees:
- Pension sharing. Each pension is taxed only in one country: the country from which it originates. For example, an American who worked for ten years in France and receives an Agirc-Arrco pension is taxed on that pension only in France.
- Tax credits. When income is taxed in France, for example, rental income from an apartment located in France, the United States must take into account the tax already paid in France. The retiree therefore does not pay twice.
In summary, the United States retains the right to tax its citizens but respects the pension sharing and tax credits stipulated in the tax treaty.
Reporting obligations are cumulative. In France, retirees file their 2042 income tax return annually, supplemented by form 2047 for foreign-source income. They also declare their foreign bank accounts on form 3916-bis, under penalty of a €1,500 fine per account. In the United States, they continue to file form 1040, as well as forms FBAR and 8938 (FATCA) for their French accounts.
2- THE TREATMENT OF EACH PENSION IN FRANCE
The principle: American pensions are taxable only in the United States. The convention stipulates that social security benefits and retirement pensions originating in one state and paid to a resident of the other state are taxable only in the state of origin. This rule applies to both periodic payments and lump-sum payments. A pension « originates » in the United States when it is paid from a retirement plan established in the United States.
France does not tax the pension, but it takes it into account. Thus, this income is included in the French tax base and then offset by a tax credit equal to the corresponding French tax. In practical terms, the American pension is not subject to any net tax in France. However, it raises the tax rate applied to other taxable income in France for the household: this is the « effective tax rate » rule.
In practice, these pensions are declared on form 2047, then transferred to form 2042. Omitting them on the grounds that they are « American » is a common mistake.
Below is a table summarizing the taxation method for the main categories of pensions.
Type of pension | Where is it taxable? | Treatment in France |
Social Security | United States only (Art. 18, § 1) | Declared; tax credit equal to the French tax: effective rate |
Public pension (federal, state, military) | United States only (art. 18 et 19) | Declared; tax credit equal to the French tax: effective rate |
Defined benefit company pension | United States only (Art. 18, § 1) | Declared; tax credit equal to the French tax: effective rate |
401(k), 403(b), 457, traditional IRA, SEP, SIMPLE (rent or capital) | United States only (art. 18, § 1) | Declared; tax credit equal to the French tax: effective rate |
Roth IRA, Roth 401(k) | The convention does not mention Roth | Uncertain: the exemption is defensible but not confirmed by the administration |
French pension (partial career in France) | France only (art. 18, § 1) | progressive scale |
NOTES:
The Roth plan remains an open question. The word « Roth » does not appear in any text of the convention. Only the 2004 American technical explanation classifies it among individual retirement plans, and only for contributions. No French policy addresses withdrawals from a Roth plan, nor conversions of IRAs to Roth plans carried out from France. These transactions must be reviewed before being executed.
The case of an American still working in France: Article 18, § 2, allows, under certain conditions, the deduction in France of contributions paid into an American plan. Specifically, the contributions must have begun before arrival in France, and the competent French authority must give its approval.
3- HEALTH COVERAGE AND SOCIAL SECURITY CONTRIBUTIONS
Medicare does not cover retirees in France. This institution generally does not reimburse medical care received abroad. The Franco-American social security agreement coordinates retirement benefits, but it does not cover health insurance for retirees.
Medicare is the U.S. federal health insurance program is primarily intended for people aged 65 and over, as well as some younger people with disabilities.
The only option for social security coverage is PUMa. Anyone residing in France legally and permanently can benefit from universal health coverage. Without employment, you must wait three months of residency before becoming eligible, and then live in France for at least six months a year. Applications are made to the local CPAM (Health Insurance Fund). Each spouse is insured individually. Private insurance is essential for the first three months; it is also required to obtain a long-stay visa.
In practice, there is no CSG (French social security contributions) on American pensions. According to the instructions for form 2047, the French tax offset by the credit includes income tax and social security contributions. Therefore, an American pension declared on these lines is not, in practice, subject to CSG or CRDS, as American pensions are taxed only in the United States. However, taxable investment income in France (French rental income, dividends, and interest) remains subject to social security contributions.
The supplementary health insurance contribution (CSM) does not apply to retired pensioners. This 6.5% contribution is levied on the capital income of those affiliated with the PUMa (Universal Health Coverage) who have low earned income. It is not payable by those who received a retirement pension during the year. The profile described is that of a pre-retiree who lives off their investments before drawing their pensions.
A new contribution has been announced. The 2026 Social Security Financing Law includes a financial contribution for beneficiaries of Universal Health Coverage (PUMa) who reside in France, are not employed, and do not pay CSG or CRDS social security contributions under an international agreement. This profile precisely matches that of an American retiree. The decree setting the amount is pending; this point is worth monitoring.
Supplemental health insurance remains essential. National health insurance only reimburses a portion of healthcare costs. Supplemental health insurance covers the rest, including dental care, vision care, and excess charges.
4- TAXATION IN THE UNITED STATES AND THE TAX CREDIT
There is no US tax credit on US pensions. Since France does not tax these pensions on a net basis, there is no French tax to be credited.
The US tax credit applies to other income. It is possible to credit the French tax paid on income that France actually taxes: French pensions, rental income from a property located in France, and income from French investments. Since 2019, the IRS no longer challenges the crediting of the CSG (General Social Contribution) and CRDS, following an agreement with France regarding their nature.
KEY TAKEAWAYS
- All US pensions are taxable only in the United States: Social Security, public and corporate pensions, 401(k) and IRAs, whether paid as an annuity or a lump sum (Article 18, § 1).
- France does not tax them but requires them to be declared: they are included on tax forms 2047 and 2042 and increase the tax rate on other French income.
- Roth pensions are a grey area: the tax treaty does not address them, and conversions to Roth pensions from France must be carefully considered beforehand.
- Healthcare coverage is provided by PUMa after three months of residency, supplemented by private health insurance. CSM does not currently apply to retired pensioners.
- On the US side, the tax credit does not apply to US pensions, but to French income tax paid on French-source income.
- The best decisions are made before departure with an advisor; one of our chartered accountants can study your situation to help you make the best choices.
