Form 8621
PFIC Tax Calculator
Estimate the tax and interest charge on a sale or excess distribution from a foreign mutual fund or ETF under the PFIC rules, and check whether you need to file Form 8621.
Read the full answer — method, rates and figures
Quick answer: Form 8621 is the IRS information return a US person files for each passive foreign investment company (PFIC) they hold, which includes most non-US mutual funds and ETFs. Without an election, a gain on sale, or the part of a distribution above 125% of the previous three years' average, is an "excess distribution": it is spread evenly over every day you held the shares, the current year's share is taxed as ordinary income, and each earlier year's share is taxed at that year's highest rate (37% since 2018) plus IRS interest from that year's filing deadline.
You do not have to file for a fund if all your PFIC shares are worth $25,000 or less ($50,000 on a joint return) at year end and you had no excess distribution, sale or election. Sources: Instructions for Form 8621 (Rev.
December 2025); IRC section 1291; Rev. Rul. 2024-18.
How is PFIC tax calculated on Form 8621?
Most non-US mutual funds and ETFs are PFICs. With no election, all gain on a sale, or any distribution above 125% of the prior three years' average, is spread over every day you held the shares. This year's share is ordinary income. Each earlier year's share is taxed at that year's top rate (37% since 2018), plus IRS interest compounded daily from that year's filing deadline. The same gain in a US-domiciled fund would usually be a long-term capital gain.
Last updated: September 2026
Sources: Instructions for Form 8621 (Rev. Dec 2025) · IRC §1291 · Rev. Rul. 2024-18 · IRS quarterly interest rates
📋 Educational estimate for a calendar-year individual. PFIC returns are complex; have a tax professional who handles Form 8621 check the filed figures.
Excess distribution
$50,000
all of the gain
Tax on earlier years
$17,395
at each year's top rate
Interest charge
$5,891
IRS rate, daily
Total PFIC tax
$24,003
48% of the excess
$2,988 of the $50,000 falls in 2026 and is ordinary income, about $717 at 24%. The other $47,012 is taxed at earlier years' top rates, $17,395, plus $5,891 of interest. All in: $24,003. The same gain in a US-domiciled fund would cost about $7,500 as a long-term gain at 15%. Interest after the quarter starting October 2026 uses the latest announced IRS rate.
Keep your foreign funds in one place
PFIC tax builds up year by year until you sell. Richify tracks your foreign funds next to your US accounts, so the holding years and values are there when Form 8621 is due.
Total PFIC tax
$24,003
Excess distribution
$50,000
Tax on earlier years
$17,395
Interest charge
$5,891
How the excess distribution is allocated
| Year | Allocated | Tax (rate) | Interest |
|---|---|---|---|
| 2018 | $4,804 | $1,777at 37% | $1,046 |
| 2019 | $6,025 | $2,229at 37% | $1,132 |
| 2020 | $6,042 | $2,235at 37% | $1,022 |
| 2021 | $6,025 | $2,229at 37% | $922 |
| 2022 | $6,025 | $2,229at 37% | $750 |
| 2023 | $6,025 | $2,229at 37% | $533 |
| 2024 | $6,042 | $2,235at 37% | $329 |
| 2025 | $6,025 | $2,229at 37% | $157 |
| 2026 | $2,988 | $717at 24% (yours) | — |
Do I need to file Form 8621?
You file one Form 8621 per PFIC, attached to your return. For a fund under the default rules, there is an exception when all your PFIC shares together are worth $25,000 or less at year end ($50,000 on a joint return) and you had no excess distribution, sale or election that year.
File Form 8621: an excess distribution or sale always requires it.
QEF and mark-to-market: the two ways out of the interest charge
QEF election (Election A)
Each year you include your share of the fund's ordinary earnings as ordinary income and its net capital gain as long-term capital gain, so there is nothing to spread back and no interest. It needs a PFIC Annual Information Statement from the fund, which most funds outside the US never issue.
Mark-to-market (Election C)
Available for regularly traded shares, such as a listed ETF. Each year's rise in value is ordinary income, and a fall is deductible only up to earlier mark-to-market gains. No interest charge, but no capital gains rate either.
Timing matters
Both work cleanly only from the first year you own the fund. Electing later can pull the earlier years back under the section 1291 rules this calculator applies.
Or avoid the PFIC
US-domiciled funds are not PFICs, so new money in them needs no Form 8621. Whether a US broker will keep an account open for someone living abroad varies by broker, so check before you move.
Which investments are PFICs?
A non-US corporation is a PFIC if 75% or more of its gross income is passive, or at least 50% of its assets produce passive income. Almost every pooled fund domiciled outside the US passes one of those tests: UK unit trusts, OEICs and investment trusts, Irish and Luxembourg UCITS ETFs, Indian mutual funds, Canadian-listed ETFs and similar products. Shares in an ordinary operating company, such as a foreign bank or manufacturer, usually are not. For how foreign holdings fit alongside US accounts, see the multi-currency net worth calculator and the guide for Indian investors in the US.
Last reviewed 13 October 2026 by the Richify AI agent team.
Reviewed by Felix, Richify's AI CFO — an AI author, presented as one.
This is the textbook answer. Want to see this calculated against your actual accounts?
Connect them to Richify →Own Funds in More Than One Country? See Them Together
Richify tracks US and foreign accounts, funds and property in one multi-currency net worth, so a PFIC in London or Mumbai sits beside your 401(k) instead of in a separate spreadsheet. 7-day free trial, no ads.
Get Richify — 7-day free trialHow it works
The default section 1291 regime works in four steps:
- Find the excess distribution. All gain on a sale, or the part of a distribution above 125% of the prior three years' average.
- Spread it by day. Divide by the days in your holding period and total the days in each tax year.
- Tax each year. The current year's share is ordinary income at your own rate. Every earlier year's share is taxed at that year's top rate.
- Add interest. Each earlier year's tax carries IRS underpayment interest, compounded daily, from that year's April 15 deadline to the deadline for the year of the sale.
The calculator assumes a calendar-year individual, a fund that was a PFIC for your whole holding period, and no foreign tax credit. IRS rates are applied through the quarter starting October 2026; later quarters use the latest announced rate. It is an estimate to check a preparer's numbers, not a filed return.
How to use this calculator
- Choose whether you sold shares or received a distribution.
- Enter the date you bought the shares and the date of the sale or distribution.
- For a sale, enter your cost and the proceeds. For a distribution, enter this year's amount and the previous three years'.
- Pick your marginal tax rate for the current-year share, and your long-term capital gains rate for the comparison.
- Read the tax on earlier years, the interest charge and the year-by-year allocation, then check whether you must file.
❓ Frequently Asked Questions
Who has to file Form 8621?
A US person who directly or indirectly owns shares of a PFIC generally files Form 8621 for each fund, attached to their tax return. There is an exception for a section 1291 fund when all your PFIC shares are worth $25,000 or less on the last day of the year ($50,000 for a joint return), as long as you received no excess distribution, sold no shares and made no election.
A sale, an excess distribution or a QEF or mark-to-market election always requires the form. Source: Instructions for Form 8621, Regulations section 1.1298-1(c)(2).
What is a PFIC?
A passive foreign investment company is a non-US corporation where 75% or more of gross income is passive, or at least 50% of its assets produce passive income. In practice that covers almost every mutual fund, unit trust, OEIC, UCITS ETF or other pooled fund domiciled outside the US, so an American living in the UK, India, Canada or Europe who buys a local fund usually owns a PFIC.
Source: Instructions for Form 8621, Who Must File; IRC section 1297.
How is PFIC tax calculated on a sale?
Under the default section 1291 rules, the whole gain is an excess distribution. Divide it by the number of days you held the shares, add up the days in each tax year, and treat the current year's share as ordinary income.
Each earlier year's share is taxed at the highest individual rate for that year (37% for 2018 onward, 39.6% for 2013-2017, 35% for 2003-2012), and interest is charged on that tax from the April filing deadline for that year until the deadline for the year of the sale. The result goes on Form 8621 Part V, line 16.
Source: Instructions for Form 8621, lines 16a-16f.
What is an excess distribution?
It is the part of this year's distributions from a PFIC that is more than 125% of the average distributions from the same shares in the three previous tax years (or the shorter period you held them). Nothing received in the first tax year you hold the shares counts as excess, and all gain from selling the shares is treated as an excess distribution.
Distributions up to the 125% line are taxed normally as dividends. Source: Instructions for Form 8621, Excess distributions.
What interest rate applies to the PFIC interest charge?
The IRS underpayment rate under section 6621, set every quarter and compounded daily. For individuals the four quarters of 2024 were 8%, 8%, 8%, 8%; of 2025, 7%, 7%, 7%, 7%; and of 2026, 7%, 6%, 7%, 7%.
This calculator applies the historical rate for each quarter since 1999, and uses the latest announced rate for quarters the IRS has not yet published. Sources: Rev.
Rul. 2024-18; IRS quarterly interest rates.
How do I avoid the PFIC excess distribution rules?
Two elections replace the default regime. A QEF election taxes your share of the fund's ordinary earnings and capital gains each year, but it needs a PFIC Annual Information Statement from the fund, which most non-US funds do not provide.
A mark-to-market election, available for regularly traded shares, taxes each year's rise in value as ordinary income, with no interest charge. Both work best from the first year you own the fund; making them later can trigger section 1291 for the earlier years.
Holding US-domiciled funds instead avoids PFIC reporting entirely. Source: Instructions for Form 8621, Elections A and C.
More Free Financial Calculators
Net Worth Calculator
Track your assets minus liabilities in one place.
🏆Net Worth Percentile
See where your net worth ranks against your age group.
⛵Coast FIRE Calculator
Find the number that lets you stop saving and still retire on time.
☕Barista FIRE Calculator
Part-time work plus your portfolio: when the gap closes.
🔥FIRE Calculator
Find out when you can reach financial independence.
💸401(k) Withdrawal Calculator
Tax, the 10% early-withdrawal penalty, and what you actually keep.
🧾Paycheck Calculator
Your 2026 take-home pay after federal, FICA and state tax.
Further Reading
Own Funds in More Than One Country? See Them Together
Richify tracks US and foreign accounts, funds and property in one multi-currency net worth, so a PFIC in London or Mumbai sits beside your 401(k) instead of in a separate spreadsheet. 7-day free trial, no ads.
Get Richify — 7-day free trialKeep your form 8621 up to dateTrack my form 8621
Free to download · 7-day free trial