“I am a European moving to the US. What should I do with my existing ETFs and investment funds?”
The rules do not require you to sell every European investment. The manageable part is to identify your U.S. tax starting date and classify every fund before that date, because timely planning preserves more choices.
Your route depends first on when you enter the U.S. tax system and then on whether each fund is a foreign corporation that meets the PFIC tests.
Do not treat the move as a new tax starting point: resident aliens are taxed on worldwide income in the same manner as U.S. citizens. Classify the holdings now and use one of the applicable retention routes below (IRS Publication 519 (2025), p. 77).
If you are not a U.S. citizen and are still in the nonresident part of your arrival year, disposing of a foreign-fund position before your prevents you from continuing to hold that position during the resident period. Publication 519 says the period before that date is the nonresident portion of a first dual-status year (IRS Publication 519 (2025), p. 9).
A holding is outside the definition if it is not stock of a foreign corporation meeting either the 75% passive-income test or the 50% passive-asset test. A U.S.-domiciled fund therefore is not a PFIC, although a foreign brokerage account can still trigger FBAR or Form 8938 reporting (Form 8621 Instructions, p. 2; IRS FBAR guidance).
Elect treatment separately for each PFIC by the return due date, including extensions, for the first year the election applies. You need the issuer’s PFIC Annual Information Statement and must include your share of ordinary earnings and net capital gain annually (Form 8621 Instructions, pp. 2, 6–7).
If the shares are -eligible marketable stock—generally regularly traded on a qualifying U.S. or regulated foreign exchange—make Election C by the due date, including extensions, of that year’s return. Each year you generally recognize the excess of year-end fair market value over adjusted basis; loss deductions are limited, and basis is adjusted (Form 8621 Instructions, pp. 2, 8).
Without a valid QEF or mark-to-market election, the PFIC is generally a . A sale’s entire gain is treated as an excess distribution; amounts allocated to earlier PFIC years can face the highest applicable rate plus an interest charge (Form 8621 Instructions, pp. 2, 14–15).
A pre-residency sale can still create tax in your European country, so it is not automatically a tax-free sale.
These steps identify the tax starting point first, preserve your choices, and then cover the required fund and account reporting.
Before changing investments
Calculate your U.S. residency starting date
The substantial-presence test generally requires at least 31 days in the current year and a weighted 183 days across the current and previous two years—counting all current-year days, one-third of the first prior year, and one-sixth of the second prior year. Its starting date is generally your first U.S. day that year; if only the green-card test applies, it is your first day present as a lawful permanent resident. Qualifying excluded-day users file Form 8843 by the Form 1040-NR due date; the closer-connection route requires fewer than 183 current-year days, a foreign tax home and closer connection, and timely Form 8840 (IRS Publication 519 (2025), pp. 5–9).
Requirements
Before selling or transferring
Create one record for every fund and account
Preserve the original transaction statements rather than recording only the value on arrival: Publication 551 says purchased property’s basis is usually its cost and basis determines gain or loss. Also retain the foreign institution’s name and address, account number, account type, and maximum annual value; the IRS FBAR page requires those account records to be kept for five years from the FBAR due date.
Requirements
Fund by fund
Classify each legal issuer
Treat a holding as a only when it is stock of a foreign corporation that satisfies either test: at least 75% passive gross income or at least 50% passive-income-producing or passive-income-held assets. Do not classify by trading currency, exchange, ticker, or broker location alone (Form 8621 Instructions, p. 2).
Requirements
Before the first applicable return is due
Choose the route for every PFIC candidate
Choose among a pre-residency disposition, QEF Election A, mark-to-market Election C, or the default section 1291 treatment. For QEF treatment, check box A in Part II, complete applicable Part III lines, include the PFIC Annual Information Statement, and attach Form 8621 to a timely return. QEF and mark-to-market elections are generally due with the applicable return, including extensions (Form 8621 Instructions, pp. 6–8).
Requirements
By the income-tax return deadline
File one Form 8621 for each applicable PFIC
Attach each Form 8621 to your federal return and file both by that return’s due date, including extensions. If no income-tax or other return is required, send Form 8621 directly to Internal Revenue Service Center, Ogden, UT 84201-0201. The instructions state that a separate form is required for each PFIC; they list no separate government filing charge (Form 8621 Instructions, p. 1; https://www.irs.gov/pub/irs-pdf/i8621.pdf).
Requirements
After the calendar year closes
File the account-level reports separately
File the electronically through FinCEN’s BSA E-Filing System at https://bsaefiling.fincen.gov/ if the aggregate foreign-account value exceeded $10,000 at any time. It is due April 15 after the reported year, with an automatic extension to October 15 and no extension request. If you are within the U.S.-resident Form 8938 thresholds, attach to your annual return by its due date, including extensions: more than $50,000 year-end or $75,000 anytime for unmarried or married-separate filers; more than $100,000 year-end or $150,000 anytime for joint filers. Neither instruction lists a separate government filing charge.
Requirements
You are not the first to go through this. Here is how it went for others who asked the same thing.
u/Unlucky_Branch6541r/USExpatTaxesJul 17, 2026
This answer is grounded in IRS Publication 519, the official Form 8621 and Form 8938 instructions, IRS Publication 551, and IRS/FinCEN FBAR guidance.
IRS Publication 519 (2025)
This establishes when first-year resident taxation begins and that residents report worldwide income.
pp. 9, 77
If you are a U.S. resident for the calendar year, but you were not a U.S. resident at any time during the preceding calendar year, you are a U.S. resident only for the part of the calendar year that begins on the residency starting date. You are a nonresident alien for the part of the year before that date. Resident aliens are taxed on their worldwide income, the same as U.S. citizens.
Instructions for Form 8621 (Rev. 12-2025)
This supplies the two tests used to determine whether a foreign corporate fund is a PFIC.
p. 2, Definitions and Special Rules
A foreign corporation is a PFIC if it meets either the income or asset test described next. 1. Income test. 75% or more of the corporation's gross income for its tax year is passive income (as defined in section 1297(b)). 2. Asset test. At least 50% of the average percentage of assets (determined under section 1297(e)) held by the foreign corporation during the tax year are assets that produce passive income or that are held for the production of passive income.
Instructions for Form 8621 (Rev. 12-2025)
This establishes the QEF election deadline and the issuer information required to use it.
pp. 6–7, Election To Treat the PFIC as a QEF
Generally, a shareholder must make the election to be treated as a QEF by the due date, including extensions, for filing the shareholder's income tax return for the first tax year to which the election will apply (the ‘election due date’). For each year of the PFIC ending in a tax year of a shareholder to which the QEF election applies, the PFIC must provide the shareholders with a PFIC Annual Information Statement.
Instructions for Form 8621 (Rev. 12-2025)
This establishes who can elect mark-to-market treatment and its filing deadline.
pp. 2, 8, Mark-to-Market Election
A shareholder of a PFIC may elect to mark to market the PFIC stock under section 1296 if the stock is “marketable stock.” This election must be made on or before the due date (including extensions) of the U.S. person's income tax return for the tax year in which the stock is marked to market under section 1296.
Instructions for Form 8621 (Rev. 12-2025)
This shows why retaining a PFIC under the default regime can produce unusually harsh tax and interest treatment.
pp. 2, 14–15, Section 1291 Fund
The entire amount of gain from the disposition of a section 1291 fund is treated as an excess distribution. An increase in tax is determined for each PFIC year by multiplying the part of the excess distribution allocated to each year (as determined on line 16a) by the highest rate of tax under section 1 or section 11, whichever applies, in effect for that tax year. Interest is charged on each net increase in tax for the period beginning on the due date (without regard to extensions) of your income tax return for the tax year to which an increase in tax is attributable and ending with the due date (without regard to extensions) of your income tax return for the tax year of the excess distribution.
Instructions for Form 8621 (Rev. 12-2025)
This proves that the small-PFIC exception is limited and disappears when there is an excess distribution or disposition gain.
p. 6, Exceptions To Filing Part I
A shareholder is not required to complete Part I with respect to a specific section 1291 fund if the shareholder meets the $25,000 exception on the last day of the shareholder’s tax year and the shareholder does not receive an excess distribution from, or recognize gain on the sale or disposition of, the stock of the section 1291 fund. Shareholders filing a joint return have a combined threshold of $50,000 instead of $25,000 for purposes of this exception.
FinCEN Form 114 (FBAR) guidance
This establishes that foreign brokerage and mutual-fund accounts can trigger FBAR and gives its aggregate threshold and deadlines.
Who must file; When to file
Per the Bank Secrecy Act, every year you must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. The aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported. The FBAR is an annual report, due April 15 following the calendar year reported. You’re allowed an automatic extension to October 15 if you fail to meet the FBAR annual due date of April 15. You don’t need to request an extension to file the FBAR.
Instructions for Form 8938 (Rev. 11-2021)
This gives the domestic Form 8938 thresholds and confirms that Form 8938 does not replace FBAR.
pp. 1, 4, Reporting Thresholds
If you are not married, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. If you are married and you and your spouse file a joint income tax return, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year. If you are married and file a separate income tax return from your spouse, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Filing Form 8938 does not relieve you of the requirement to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), if you are otherwise required to file the FBAR.
IRS Publication 551 (Rev. 12-2025)
This establishes why original purchase records must be retained after the move.
p. 2, Introduction
Basis is the amount of your investment in property for tax purposes. Also, use it to figure gain or loss on the sale or other disposition of property. The basis of property you buy is usually its cost.
IRS Publication 519 (2025)
This establishes the limited closer-connection route and its filing deadline.
pp. 7–8, Closer Connection to a Foreign Country
Even if you meet the substantial presence test, you can be treated as a nonresident alien if you: • Are present in the United States for less than 183 days during the year, • Maintain a tax home in a foreign country during the year, and • Have a closer connection during the year to one foreign country in which you have a tax home than to the United States. You must file Form 8840 by the due date for filing Form 1040-NR. If you do not timely file Form 8840, you cannot claim a closer connection to a foreign country or countries.
These are the official rules as published on the cited dates; tax rules, forms, and thresholds can change.
This is general information about official processes, not legal, tax, or investment advice, and SettleKit is not a law firm.
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