“The American dream”—have you heard this phrase too? Well, many of you have taken the plunge and come to conquer the American market. The United States is one of the favorite destinations when you decide to boost your career, start a business, and so on.
If you decide to settle in the Sunshine State (Florida), you will need to familiarize yourself with the country’s rules and laws, but also—and above all—with its tax system.
Although Florida offers a much more flexible tax system than France, it is nevertheless very specific compared with that of the other forty-nine (49) states of the United States.
In the United States, the tax system is somewhat complex. Individuals must pay different taxes at the federal level and at the state level. But that is not all: taxes also exist at the city and county levels… there is no end to the taxes in the United States.
What tax treaties exist between France and the United States?
There are two (2) tax treaties between France and the United States. The first dates from 1978 and the second from 1994. A tax treaty (double taxation treaty or DTT) is an agreement concluded between two (2) states intended to prevent the double taxation of individuals and businesses. One important point is determining tax residence, that is, the place of taxation. The aim is to ensure that the individual or business is not taxed once in each country on the same income. There are, of course, conditions, which can be found in Article 4 of the 1994 French-American treaty to determine the country of your tax residence (in hierarchical order):- The country where you have your permanent home
- The country where you have your center of vital interests
- The country where you usually stay
- The country of your nationality
- Be a U.S. citizen;
- Hold a Green Card;
- Be present in the United States for at least 183 days;
- Be present in the United States for 183 days according to the following calculation:
- Number of days spent during year N: + 1/3 of the number of days spent in N-1 + 1/6 of the number of days in year N-2.
Taxes in the USA
What about wealth tax in the United States?
The good news is that there is no wealth tax. Unlike France, the United States avoids any mechanism that could drive away the wealthiest individuals.Federal tax
Federal tax in the United States is also called national tax. As in France, the rate varies according to family situation and income. It is a progressive income tax ranging from 10% to 35%. There are ways to reduce this tax through deductions for professional expenses. If you are the manager of a company with revenue of less than $50,000, the tax rate will be 15%. The advantage is that this tax allows professional expenses to be deducted, within certain limits.Income tax
Income tax is withheld at source, meaning that the employer collects the tax and remits it to the state. Deductions and allowances are applied before the tax is withheld.What tax rates apply in the United States?
- For individuals: Rates range from 10% if you earn less than $8,925 to 35% if you have income above $398,350, or even 39.6% for income above $400,000. This may also change depending on your family situation.
- For companies: Rates range from 15% if taxable income is less than or equal to $50,000 to 38% if your company has more than $15 million in taxable income.
State tax
- Individuals: State tax is more commonly known as “state tax.” In the state of Florida, its constitution states that there is no personal income tax. In reality, such a tax did exist but was abolished in 2007. At the time, it was called the tax on “intangible personal property” (intangible personal property).
- Companies: Companies in the state of Florida are subject to a 5.5% tax on their net profit.
Other taxes: local taxes
These taxes are calculated based on declared gross income. Residents and non-residents are subject to these taxes. In short, some of these taxes include:- Property Tax: this is the property tax. The basis for this tax is all real estate owned by individuals and businesses.
- There is also the “Sales and Use Tax,” which is similar to local VAT and is added to the purchase price of all types of consumer goods. This tax is seven percent in Miami County… We are a long way from the 20 percent applied in France.
- Tax on rental income: under Article 6-1 of the Convention, rental income from real estate located in the USA is taxable. This income is exempt from tax in France, but if you are a French tax resident, France reserves the right to take this income into account when calculating its tax rate.
