Happy Bastille Day! And a few foreign tax tips

On July 14, 1789, the French stormed the Bastille, the prison that was the symbol of the absolute power of Louis 16th's rule. Thus began the French Revolution.

We here in the fledging United States contributed to the French revolt. The cost of getting involved in our war of independence (some say in the hope that U.S. victory would weaken Britain in Europe, too; no such luck for the French) put France in a major financial bind. In that state, the aristocracy was ripe for the tumbling.

Here in Texas, we've had our own relationship with France. That country's flag was one from six sovereign nations (see, it is more than a theme park name!) that have flown over us:

• Spain (1519-1685; 1690-1821)
• France (1685-1690)
• Mexico (1821-1836)
• Republic of Texas (1836-1845) Yay!
• Confederate States of America (1861-1865) Everyone makes mistakes
• United States of America (1845-1861; 1865- )

I'd like to take credit for that open-ended date for the U.S. flag, but it comes courtesy of the Texas State Library and Archives Commission.

Yes, it's technically correct; we are still a part of the United States.

But the Texan in me also sees it as an implication that we just might one day reassert our independence!

Foreign tax considerations: The U.S. tax code has several tax breaks related to French and other nations.

First, there's the foreign income exclusion. U.S. citizens or resident aliens who live abroad are taxed on their worldwide income. But if you qualify, you can exclude a portion of your foreign earnings for your U.S. taxable income. You also might be able to deduct certain foreign housing expenses.

More information on the foreign income exclusion at this IRS Web page, as well as in this tax tip I wrote for Bankrate and this foreign earned income exclusion information from fellow tax blogger William Perez of About.com's U.S. Tax Planning.

Another tax benefit comes if you choose to add to your family via adoption of a child from another country. The adoption tax credit can help you offset up to $11,650 in costs on your 2008 taxes.

Keep in mind, however, that when you adopt a child from outside the United States, the timing of the adoption's finalization affects your credit claim. More information is available at Children's Hope International, Adoption.com and this Bankrate story.

A third tax break is available to investors who have foreign holdings. By diversifying your portfolio, you likely incurred some taxes paid to the countries in which your international holdings are based. But you can write those off either as a deduction or by claiming the foreign tax credit. The credit, for several reasons, is preferable; details in theses stories from Investopedia and Bankrate.

Finally, if you plan to leave the U.S. completely to avoid what you believe are excessive American taxes, be aware that expatriation is now a bit more expensive.

A recently enacted law, blogged about here, makes expatriation simpler, but it also imposes a new levy. Now if you renounce your residency, you'll face an immediate tax on unrealized gains of most assets at current market rates.

More details on the new expatriation tax can  be found in the Bryan Cave Private Client Bulletin (PDF format) and Don Nelson's expatriate blog.

The Tour via television: I'm going to stay put here in Texas in the good old U.S.A., but I will travel via TV to France today (and for about two more weeks) as the hubby and I watch our DVR recordings of the 2008 Tour de France.

Yes, even without Lance Armstrong to cheer for, it's a great spectacle.

If you don't get the Versus cable channel which broadcasts the Tour, you can check out these great photos from Boston.com.