PFIC reporting threshold: Guide for Americans and US expats

If you own foreign mutual funds or certain other overseas investments, knowing the PFIC reporting threshold can save you from mistakes in your tax filing process and IRS penalties.

The rules around Passive Foreign Investment Companies are notoriously complex, but the basic principle is pretty straightforward.

If you own enough shares in a PFIC, you need to file Form 8621 with your tax return.

This guide explains when you're required to report, how to know if you've crossed the threshold, and what happens if you don't file.

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What is PFIC?

A passive foreign investment company (PFIC) is any foreign corporation that meets one of two tests:¹

• Income test: The corporation earns 75% or more of its gross income from passive sources, including interest, dividends, rental income, or capital gains
• Asset test: At least 50% of the company's assets produce passive income or are held to produce passive income

Foreign mutual funds, unit trusts, and many exchange-traded funds are structured as foreign corporations, which is why they fall under PFIC rules. These investment products usually hold assets that generate passive income, so they typically meet one or both of the PFIC tests.

Even some foreign insurance policies with cash value can sometimes be classified as PFICs.

What is the PFIC reporting threshold?

The PFIC reporting threshold is the point at which you're required to file Form 8621 for your foreign investment.

You must file if you're a direct shareholder and you:¹

• Received a distribution from the PFIC during the tax year, or
• Recognized a gain on the sale or disposition of PFIC shares, or
• Made certain elections (like a Qualified Electing Fund or mark-to-market election), or
• Owned PFIC shares worth more than 25,000 USD (if filing single) or 50,000 USD (if married filing jointly) at any point during the year

The 25,000 USD/50,000 USD threshold applies to the aggregate value of all your PFIC holdings combined and not each investment.

Who is required to file a PFIC?

You're required to file Form 8621 if you're a US taxpayer who owns shares in a PFIC, and you meet any of the reporting thresholds listed above.

This includes:

• Americans who own shares in foreign corporations that meet the PFIC tests
• US citizens living abroad
• Green card holders
• US residents for tax purposes

Even if you didn't sell shares or receive distributions, you still need to file if your total PFIC holdings exceeded 25,000 USD (single) or 50,000 USD (married filing jointly) at any time during the year.¹

The filing requirement applies per PFIC, meaning if you own three separate foreign mutual funds, you may need to file three separate Forms 8621.

How to determine if you meet the PFIC threshold?

1. Figure out if your foreign investments are PFICs

Foreign mutual funds, unit trusts, non-US ETFs, and certain foreign insurance products typically qualify as PFICs. If you're not sure whether an investment is a PFIC, check with the fund manager or your tax advisor. They can help you figure it out.

2. Check if you meet any reporting conditions

Once you've confirmed that an investment is a PFIC, figure out whether you're required to file Form 8621. The filing requirement kicks in if you meet any of these conditions:¹

• You received a distribution from the PFIC
• You sold or disposed of PFIC shares and recognized a gain
• You made a Qualified Electing Fund (QEF) or mark-to-market election
• Your total PFIC holdings were worth more than 25,000 USD (single filers) or 50,000 USD (married filing jointly) at any point during the year

If none of these apply, you don't need to file Form 8621 for that PFIC, even if you own shares in it.

3. Calculate your total PFIC value

For the value threshold, add up all your PFIC investments combined.

If you owned shares in three foreign mutual funds worth 10,000 USD, 12,000 USD, and 8,000 USD, your total is 30,000 USD, which is over the 25,000 USD threshold (for single filers).

The value is measured at any point during the year, not just at year-end. If your holdings were 26,000 USD in June but dropped to 20,000 USD by December, you still crossed the PFIC reporting threshold and need to file.

Penalties for non-compliance

The IRS takes PFIC reporting seriously. If you don't file, you may face:

• Denial of tax benefits like the Foreign Tax Credit on PFIC income
• Interest charges on unreported PFIC income
• Increased IRS scrutiny and potential audit of your return
• Compounded penalties if you've also failed to report FBAR or FATCA

A missed filing from a prior year can affect your current year return because it impacts your reported gross income and how the IRS calculates tax on PFIC distributions or sales.

If you missed PFIC reporting in prior years, get in touch with a tax professional who can help you come into compliance as soon as possible.

Common mistakes and how to avoid them

PFIC reporting is complicated, and even well-intentioned taxpayers can make errors. Here are some common ones:

• Not realizing your foreign mutual fund is a PFIC: Most foreign investment funds qualify, even if they seem similar to US mutual funds
• Only checking your year-end account value: The threshold applies if your holdings exceeded 25,000 USD (single filers) or 50,000 USD (married filing jointly) at any point during the year¹
• Filing one Form 8621 for multiple PFICs: You need a separate form for each PFIC you own
• Assuming you don't need to file because you didn't sell: If your holdings are over the value threshold, you must file even without distributions or sales

If your foreign bank or brokerage can't provide a PFIC Annual Information Statement, you may need to make a mark-to-market election or use the excess distribution method, both of which can be quite complicated. When in doubt, consult a tax professional.

The PFIC reporting threshold requires US taxpayers to file Form 862.

It applies if you own foreign investment companies and meet certain conditions, such as receiving distributions or holding more than 25,000 USD (single) or 50,000 USD (married filing jointly) in PFIC investments at any point during the year.¹

Missing the filing can cause serious problems with the IRS.

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Sources

1. BrightTax - PFIC Form Requirements

Sources checked 05/14/2026