Buying a €1.8M Home in France: U.S. Tax Checklist for High‑Net‑Worth Buyers

Buying a €1.8M Home in France: A U.S. Tax Checklist for High‑Net‑Worth Buyers (2026)

Hook: You found the perfect villa in Sète for €1.8M — stunning views, designer finishes, and the lifestyle you want. But before you sign, are you ready for the U.S. and French tax, reporting and estate consequences that follow? For high‑net‑worth U.S. buyers, a luxury foreign purchase can trigger complex filings, unexpected taxes, and state residency risked by the smallest ties. This checklist turns those unknowns into a step‑by‑step plan you can act on now.

Executive summary — what matters most in 2026

U.S. citizens pay taxes on their worldwide income and face reporting obligations for foreign assets. In 2026, near‑term policy dynamics — the post‑2025 federal estate tax sunset risk, tighter IRS international enforcement (late 2025–early 2026), and continued cross‑border information exchange — make proactive compliance and planning essential.

Top practical points:

• Report your foreign accounts: FBAR (FinCEN Form 114) if aggregate foreign accounts exceed $10,000 at any time in the year.
• Report foreign financial assets: Form 8938 (FATCA) thresholds commonly apply for high‑net‑worth filers.
• Claim relief for French income tax on rentals and capital gains via the foreign tax credit (Form 1116), where applicable.
• Address French wealth tax (IFI) and French succession rules that can affect ownership and estate planning.
• Be mindful of U.S. state residency rules — your French property can complicate domicile status and SALT exposure.

Full step‑by‑step tax checklist

Pre‑purchase (60–90+ days before closing)

• Determine ownership vehicle. Decide whether to buy in your name, via a U.S. entity (LLC), a French vehicle (SCI - Société Civile Immobilière), or a trust. Each choice changes U.S. reporting (Form 5471, Form 8865, Form 3520, Form 926) and French tax treatment. Quick rule: simplicity favors direct ownership; asset protection and succession goals often favor a structure — get tax counsel before choosing.
• Get currency and financing advice. Lock or hedge EUR exposure for the purchase price and mortgage. If you plan to use a French mortgage, confirm that the loan documentation supports possible U.S. mortgage interest deductions and that the mortgage will be treated as secured by the home.
• Check French wealth tax (IFI) exposure. France’s IFI (wealth tax on real estate) applies to net real estate assets above the threshold (historically €1.3M). If your worldwide property holdings or the French property exceeds the threshold, budget for an annual IFI calculation and payment. If you expect to exceed the threshold, model the tax under French rules and consider structure alternatives.
• Map estate and succession consequences. French succession law and forced heirship rules can apply to French‑situated real property. Decide whether to prepare a French will or use a succession strategy (e.g., cross‑border trust or company) after coordinating with both U.S. and French estate counsel.
• Project annual costs and tax filing burden. Factor in French property tax (taxe foncière), possible taxe d’habitation (where applicable), notary fees (frais de notaire: typically 2–8% depending on new vs. older property), insurance and maintenance. Determine whether rental will be used and project French income tax on rentals and social charges.

At closing (Day 0)

• Confirm legal title and structure documentation. If using an SCI or other entity, ensure you receive corporate documents, shareholder registers, and clear data to satisfy U.S. reporting rules.
• Record the full purchase price in USD for your U.S. tax basis. Use the exchange rate on the closing date for basis and depreciation calculations (and retain proof of the rate used). For FBAR and Form 8938 reporting later, you’ll use Treasury and IRS exchange rate guidance — keep records.
• Capture closing costs for basis determination. Most French acquisition costs (notary, registration) increase your tax basis for U.S. capital gains; explicitly document these additions.

Within 30–120 days after closing

• File any immediate U.S. informational returns. Examples: Form 3520 for a large gift or inheritance from abroad (threshold for receiving a foreign gift from nonresident alien/foreign estate historically $100,000 aggregate), or Form 926 for transfers to a foreign corporation. If you formed or acquired an interest in a foreign corporation (e.g., an SCI treated as a corporation), Form 5471 or Form 8865 may be required. These forms carry stiff penalties for nondisclosure.
• Notify your bank and coordinate cross‑border accounts. Ensure you have wire facilities and documentation to comply with U.S. banks’ FATCA certifications when transferring funds. Keep a paper trail for all transfers into and out of France.

Annual compliance (every tax year)

• FBAR — FinCEN Form 114. File if the aggregate value of all your foreign financial accounts exceeds $10,000 at any point during the year. Deadline: April 15 with automatic extension to October 15. Penalties for non‑filing can be severe.
• FATCA — Form 8938 (Statement of Specified Foreign Financial Assets). Attach to your Form 1040 when your specified foreign financial assets exceed the applicable threshold. High‑net‑worth buyers of luxury foreign property often meet these thresholds. Check current thresholds for filers living in the U.S. vs. abroad (commonly lower for U.S. residents).
• Report foreign rental income properly. If you rent the property 12 weeks per year, report gross rental income on Schedule E and claim deductions (French property taxes, insurance, repairs). Use Form 1116 to claim a foreign tax credit for French income taxes to avoid double taxation when possible.
• Depreciate the property for U.S. tax purposes. If you hold the property as a rental, convert your EUR purchase allocation to USD and depreciate the building (residential property generally over 27.5 years under MACRS). Maintain a clear land/building allocation.
• French filings. File French property tax returns, IFI returns if required, and income tax returns for rental income or capital gains when you sell. Work with a French accountant (expertise: non‑resident tax rules) to minimize duplication and claim available treaty benefits.

Key reporting forms and red flags (practical details)

• FBAR (FinCEN Form 114) — triggered at $10,000 aggregate foreign accounts at any time. Applies to U.S. citizens and residents. File electronically with FinCEN.
• Form 8938 (FATCA) — attach to your Form 1040. High‑net‑worth buyers usually exceed thresholds. Confirm the proper threshold for your filing status and residency.
• Form 1116 — claim the foreign tax credit for French income taxes paid (rental income, sometimes capital gains) to reduce U.S. tax on the same income. Keep detailed records of French tax paid and the tax base.
• Form 5471 / Form 8865 / Form 3520 / Form 926 — may be required if you buy via a foreign corporation, partnership or receive large foreign gifts or transfers. Penalties are high for non‑filing. If you formed an SCI or other vehicle, determine U.S. classification (partnership vs. corporation) immediately.
• Form 1040 and Schedule E — report worldwide income including rental profits and capital gains on sale.

"A luxury purchase abroad creates tax entries in at least two jurisdictions. The smartest buyers map information flows in advance."

French tax traps and planning opportunities

Wealth tax (IFI)

France’s IFI targets real estate net wealth above the statutory threshold (historically around €1.3M). If your French property or combined real estate portfolio meets that threshold, you must file and pay IFI on the applicable taxable base. For non‑residents, IFI usually applies to the French‑located real estate only. Consider structuring (and valuation timing) to minimize unexpected IFI exposure.

Capital gains on sale

France taxes capital gains on French real estate. Non‑residents may owe French capital gains tax and social contributions; however, U.S. taxpayers generally can claim a foreign tax credit on the U.S. return for French taxes paid, subject to the foreign tax credit rules (Form 1116).

Rental income and social charges

Rental income is taxed under French rules and will also be taxed in the U.S. You can usually claim the French tax as a foreign tax credit. Be mindful of prélèvements sociaux (social contributions) that may apply to rental income and gains.

U.S. state and SALT implications — what many buyers miss

Buying a French property can affect your state tax position and SALT exposure in two ways:

• State residency audits. States like California, New York and New Jersey aggressively assess domicile and residency. Owning a luxury property in France does not itself change your U.S. domicile. But spending significant time abroad, or changing ties (banking, driver’s license, voting) can trigger state audits or a challenge to an intended move.
• SALT considerations. The federal SALT deduction cap ($10,000 historically) restricts deductions for state and local taxes. Foreign property taxes are different: whether French property taxes are creditable or deductible on the U.S. return depends on the tax’s nature and current IRS guidance. High‑net‑worth filers should model SALT outcomes with their CPA and consider timing of deductible taxes versus credits.

Estate tax and succession planning — urgency in 2026

Two urgent realities for wealthy U.S. buyers:

1. Federal estate tax exposure: U.S. citizens are taxed on worldwide assets at death. The federal estate tax exemption levels that governed 2018–2025 are scheduled to change in 2026 unless Congress acts. That sunset could materially reduce exemptions and increase estate tax liability for many high‑net‑worth households. If you are thinking of buying or already bought a €1.8M home, re‑assess your estate plan now.
2. French succession law and inheritance tax: France can tax and apply forced heirship rules to French real property. A U.S. will alone may not achieve the succession outcome you expect. Consider a French will or entity ownership to harmonize U.S. estate planning goals and French mandatory rules.

Practical moves: review and update your U.S. estate tax calculations, consider lifetime gifts, life insurance planning, and structure the French asset to respect both U.S. federal estate tax and French succession law.

Entity strategies — pros and cons

• Direct ownership: Simpler U.S. reporting but full U.S. estate exposure and potential French forced heirship complications.
• U.S. LLC that owns a French property: U.S. tax consolidation and clear U.S. reporting. France will still tax the property; some French taxes and transfer rules may treat the underlying real estate directly.
• French SCI: Common in France for managing family real estate. In the U.S. the SCI may be treated as a corporation or partnership depending on elections. It can help with French succession but creates additional U.S. informational filings and possible CFC issues.
• Trusts: A properly drafted trust can help with succession. But U.S. grantor trust rules, reporting and potential income inclusion require careful planning.

Practical example: The €1.8M Sète villa — compliance snapshot

Assume purchase price €1.8M (~$2.0M depending on exchange rate). You plan to use it as a second home and rent it 12 weeks per year.

• FBAR: If you hold a French bank account or mortgage account and your aggregate foreign financial accounts exceed $10,000, FBAR is required.
• Form 8938: Likely required — specified foreign assets (value of the real estate if held through a foreign legal entity or associated foreign financial accounts) will likely exceed filing thresholds for high‑net‑worth filers.
• Form 1116: Claim foreign tax credit for French income taxes paid on rental income and any capital gains at sale (subject to the FTC rules).
• IFI: If net real estate holdings exceed the IFI threshold, plan for an annual IFI filing.
• Estate planning: Update wills and consider a French will or structure to address forced heirship rules.

2026 trends and future predictions — what to anticipate

• Stronger IRS international enforcement: Following increased information exchange programs in late 2025, enforcement activity on undisclosed foreign accounts and assets remains elevated in 2026. Voluntary disclosure windows have narrowed; the emphasis is on accurate ongoing compliance.
• Increased cross‑border cooperation: France and the U.S. continue automated information exchange under FATCA and OECD CRS (for other jurisdictions). Expect faster matching of foreign property income and account data.
• Estate tax policy volatility: The potential reversion of the federal estate tax exemption in 2026 raises urgency: wealthy buyers must revisit gifting and trust strategies immediately.
• State tax scrutiny of remote presence: States will refine residency factors around frequent travelers and second‑home owners. Documentation of physical presence and intent will be decisive in audits.

Actionable takeaways

1. Do not close without a cross‑border tax plan. Engage a U.S. international tax attorney and a French notaire/accountant before signing.
2. Choose the ownership vehicle after tax modeling. Run scenarios for estate tax, IFI and U.S. reporting burdens for at least three ownership structures.
3. Document everything at closing. Exchange rates used, closing statements, financing agreements — all saved for basis and future reporting.
4. Track days and ties to preserve state domicile positions. Keep clear logs of travel and domestic ties if you intend to change state residency.
5. Prepare for annual reporting first year in advance. Anticipate FBAR, Form 8938 and potential Form 3520/Form 5471 filings and budget for compliance costs.

How taxattorneys.us can help

Cross‑border luxury purchases demand integrated legal, tax and estate advice. Our team helps U.S. high‑net‑worth buyers structure acquisitions, prepare mandatory U.S. filings, coordinate with French notaires and accountants, and update estate plans to reflect 2026 realities.

Next step: If you’re closing on or considering a €1.8M (or higher) French property, book a cross‑border intake with our specialists before exchange of contract. Early planning can save taxes, filings and years of headaches.

Contact (call to action)

Schedule a consultation with our U.S.–France tax team. We provide a tailored checklist, filing calendar, and structure analysis within 7 business days. Protect your purchase and your legacy — start now.

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