Donald Trump’s Tax Proposal: What It Could Mean for U.S. Expats Living in France

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U.S. Taxation Abroad: A Unique Burden

Unlike most developed countries, the United States continues to tax its citizens on worldwide income — even if they live permanently overseas. For the approximately 4.4 million Americans living abroad, including many in France, this system creates a tax filing burden that most other nations do not impose on their expats.

A new proposal could change that. A shift toward a residency-based taxation system — as practiced by countries like France — would mean Americans living abroad are only taxed by the country where they reside and earn their income.

U.S. Tax Relief Measures Already Exist

Fortunately, current U.S. law provides significant tax relief to Americans living abroad, especially in countries with established income tax systems like France. Two key mechanisms help reduce or eliminate U.S. tax liability:

1. Foreign Earned Income Exclusion (FEIE)

This allows eligible Americans to exclude up to $130,000 in foreign earned income (2025 limit) from their U.S. taxable income.

Example: An American teacher in Lyon earning $110,000 annually could exclude the entire amount, potentially owing no U.S. tax.

2. Foreign Tax Credit (FTC)

This offers a dollar-for-dollar credit against U.S. taxes for income taxes paid to the French government.

Example: A consultant in Paris pays €25,000 in French income tax. This amount may fully offset any U.S. tax liability on the same income.

Most U.S. citizens living in France benefit from the Foreign Tax Credit, since French tax rates are typically higher than those in the U.S., especially on middle and upper incomes.

Why a Residency-Based System Could Matter

If enacted, the shift to a residency-based taxation model would significantly reduce paperwork and compliance burdens for Americans abroad. This could eliminate the need to:

  • File annual U.S. tax returns while living overseas

  • Submit FBAR reports for foreign bank accounts

  • Perform complex FEIE or FTC calculations

  • Worry about penalties for missed or late filings

While most expats already pay little to no U.S. tax under current rules, the compliance process remains time-consuming and stressful. A new system could remove that obligation entirely.

Legislative Momentum and Requirements

The idea of ending double taxation has gained bipartisan attention in the U.S. legislature. Proposals under review would align U.S. rules with those of other advanced economies by taxing citizens based on residence, not nationality.

However, any change is likely to come with conditions, such as:

  • Verifiable foreign residence status

  • Proof of compliance with current tax laws

  • Measures to prevent abuse by high-income individuals

  • Continued reporting for certain financial accounts

How U.S. Expats in France Can Prepare

While tax reforms are being debated, expats should continue to meet their U.S. obligations using the tools currently available. Staying compliant now will be essential if any future reforms require a clean filing record.

Here’s what you can do:

  • File your current U.S. tax return, using the FEIE or FTC

  • Catch up on past filings, if needed, through streamlined programs

  • Track updates on proposed tax law changes

  • Consult a tax advisor who specializes in expat taxation

In Summary

Although the U.S. system for taxing citizens abroad is burdensome, Americans in France are generally well-protected by existing exclusions and credits. Still, many face stress not from the amount owed — but from the complexity of filing. A potential shift toward residency-based taxation could bring relief, but until then, staying informed and compliant is the best strategy.