LONDON (Reuters) - The U.S. tax authority has accepted that French-resident U.S. citizens can deduct certain previously disallowed income levies paid to France, against their U.S. income tax bills, according to a U.S. Tax Court filing.
The change could save France-based Americans thousands of dollars each year, and lead to back-tax claims against the U.S. of up to $100 million, Stuart Horwich of Horwich Law, who represented two U.S. taxpayers who took a legal case against the Internal Revenue Service (IRS), said on Monday.
The United States is unusual in that it levies income tax on its citizens even if they live overseas. The burden on citizens is mitigated by the fact income taxes paid overseas can be deducted against one’s U.S. tax bill.
However, certain social charges are not deductible for U.S. tax purposes.
Ory and Linda Eshel, dual French-American citizens, contested an IRS decision that France’s CSG and CRDS income levies were social charges rather than deductible income taxes. The two charges typically amount to approximately 10% of a French resident’s income, according to Horwich Law.
The IRS declined immediate comment.