Guide to US Expat Taxes in Germany

December 5, 2023 | | 9 minute read
Expat Tax Blog. Tax Tips for US Americans abroad.

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Photo of Neuschwanstein Castle in Germany. Expat Taxes in Germany.

Picture this: you’ve swapped your daily grind for the kaleidoscope of life in Germany – from chill lakeside cafes to the wild Oktoberfest scenes in Bavaria, where you’ll find the best pretzels, beer that’s practically an art form, and lederhosen shops that are just too cool. Whether you’re soaking up the calm of Alpine villages or diving into the buzz of Berlin and Hamburg, Germany’s got it all. So, you took the plunge, packed up, and moved here. But wait, what about those American taxes? We know, adulting can be a buzzkill, but don’t worry, we’ve got your back. Let’s chat about filing your US expat taxes as an American in Germany!

If you’re a US citizen, you may be surprised to learn only some things from your old life can be left entirely behind. The IRS wants to stay in touch. Well, sort of. We’re trying to say that just because you’ve left the US for Germany doesn’t mean you don’t need to get in touch from time to time.

When it comes to your taxes, the IRS expects to still hear from you annually. Through your yearly tax return, that is. To help you navigate your new life, we’ve put together this guide for expats like yourself.

American Expat Taxes in Germany | Topics We’ll Cover

Who needs to File?Expat Tax DeadlinesExpat Streamlining
Your Tax Filing Status Child Tax CreditsAvoid Double Taxation
Report Foreign AssetsSelf-Employment TaxesInvesting from Germany
Buying & RentingRetiring in GermanyMyExpatTaxes Can Help

Who Needs to File US Expat Taxes from Germany?

Are you a US citizen? Are you a US Green Cardholder? If you can answer yes to one of those questions, you may need to file American expat taxes from Germany every year.  

Once you suspect that you might need to file, understanding the criteria for mandatory tax return submission is key. Per the IRS, US citizens (category A) or Greencard holders (category B) are required to file a tax return if their income surpasses the specified minimum threshold. The IRS insists on income reporting from these groups, regardless of their global location. In summary, if you fall under US citizen or Green Card holder categories and your income exceeds the set threshold, filing an annual tax return is a financial responsibility.

For 2023 (filing in 2024), the minimum income thresholds are:

Married Filing Jointly$27,700
Married Filing Separately$5
Head of Household$20,800
Qualifying Widow(er)$27,700
*Regardless of filing status, if you are self-employed with more than $400 of net self-employment income. Source

Anyone whose 2023 income met or exceeded the Income Filing Threshold must file a US tax return in 2024. If you are filing as Married Filing Separately, that means if you made just $5 of income in 2023, you would need to file!

Expat Tax Tip: if you are living in Germany and married to a non-US Citizen, you will probably be filing as Married Filing Separately, so you will need to file an American Tax Return from Germany if you make more than $5.

We’ve got a lot more information about tax-filing thresholds for American expats in Germany and worldwide. 

IRS Deadlines for US Expat Taxes in Germany

Expats living in Germany need to be aware of American tax return deadlines abroad. As opposed to our friends and family back home, who only need to remember the April 15th deadline, expats may want to be aware of a few more tax return deadlines.

April.15Traditional Tax Filing Deadline. Expats who need to pay US Taxes should file by this date.
June.15Automatic extended deadline for Americans Abroad. Expats can file by June 15th without having to request an extension. It’s automatic.
Oct.15Additional Extension Deadline. Anyone who still needs more time can request an additional extension. Request the extension for free before June 15th. 
Dec.15Last Extension Deadline. Do you need a lot of time to file? You can write to the IRS and request an even later deadline. You’ll have to give a good reason and need to file by then. There are no further extensions! Everything after December 15th is officially late.

Note: If any deadline falls on a weekend or holiday, that deadline, as well as the corresponding extensions, are pushed forward. A good example of this is in 2024 with the June 15th deadline. This deadline falls on a Saturday, so the official filing date is June 17th. This also occurs with the December deadline, which falls on December 16th, 2024.

Never Filed Abroad? Get Caught up From Germany

If you hold US Citizenship, you probably need to file US taxes each year, even if you live in Germany. For American expats who moved to Germany from the United States, filing a tax return is nothing new. But it may be news to you that you still have to file, even when you move abroad.

If you’re a US Citizen who has never lived in the United States, an “Accidental American,” you may be surprised to learn about your tax filing burden. If this is the first time you learn about your duty to file a US tax return, don’t worry. We can help! 

Getting Caught Up via The Streamlined Procedure

Anyone outside the US who didn’t know they needed to file US taxes can use The Streamlined Procedure to catch up. Both Accidental Americans and Americans who moved abroad later in life can use it.

The IRS created the Streamlined Procedure to provide amnesty for anyone who didn’t know they needed to file a US tax return. Americans who use The Streamlined Procedure catch up by filing a limited number of past tax returns and FBARs. All without penalty from the IRS. 

The key is to use The Streamline Procedure BEFORE the IRS catches up with you. Otherwise, you won’t be eligible for the program and could face hefty fines.

Why does the IRS offer this program? In all honesty, it eases the IRS’s burden of chasing down accidental “tax evaders” while encouraging anyone who didn’t know they needed to file to report their income and foreign assets. 

MyExpatTaxes offers the most affordable Streamlined Procedure, which includes all the necessary tax returns and FBARs required and a tax professional to support you and sign off on your submission.

Filing US Taxes for Your Family Abroad 

Now that you know IF you need to file US income taxes based on the minimum income threshold, you also need to understand which filing status you should use. 

Should you file jointly or separately from your spouse? Are you married and living in the US? You probably file Jointly because you’ll typically get the best tax breaks. But what about when you are married and living in Germany? How should you file, then?

To answer this question, you need to ask another one: Is your spouse a US citizen? 

Your Spouse is a US Citizen or Greencard Holder: Since you both must report your foreign income and your foreign assets, the best option is probably Married Filing Jointly. In the eyes of the IRS, as a married couple, it makes little difference where in the world you live, including Germany. 
Your Spouse is a non-US Citizen: If you live outside the United States, your foreign spouse is not required to file a US tax return. In most cases, filing as married-filing separately is the best way to go. Remember, they must be a non-US Citizen without a Greencard to file separately.

Child Tax Credits for Families Living Abroad

Whether Married or Single, most expat parents can benefit from the Child Tax Credit. You can claim up to $1,600 per child in refundable child tax credits when you live abroad. Since most expats won’t owe US taxes, chances are you will receive the total amount as a tax return. Now that’s a win. 

If you were hoping to receive the new, higher Child Tax Credit, you must have lived in the US for at least half of the tax year. Read more about if your child qualifies for the Child Tax Credit and exactly how much you could receive. 

MyExpatTaxes‘ tax software will automatically determine if you are eligible for a refund. You can always ask a tax professional to review your prior year’s US tax returns to see if they are worth amending.

Anyone who doesn’t qualify as married according to the IRS but still has dependent children can consider if they should file as Head of Household.

Head of Household: When you pay more than half in maintaining your home/household during the tax year, and you have a qualifying child, you can claim this status

Tax Forms Expats Should Know

Sure, you may know a bit about filing a 1040, but for Americans in Germany, there are several tax forms expats should be aware of when filing taxes. FEIE, FATCA, FTC, or FBAR are more than fancy acronyms. They are important documents you might need to file. 

Two of the most common expat tax form categories are Forms that help you avoid Double Taxation and Forms that help you report your foreign assets.

Forms That Help You Avoid Double Taxation
Foreign Tax Credit – Form 1116. It gives you credit for income taxes you paid in Germany
Foreign Earned Income Exclusion – Form 2555. Excludes a certain amount of the income you made in Germany
Forms That Help You Report Your Foreign Assets
FATCA – Form 8938. Mandatory report to the IRS of foreign assets over $200,000 for singles and $400,000 for married couples living abroad.
FBAR – Form 114. Mandatory report to FinCEN of foreign assets over $10,000.

Self-Employment in Germany

Congrats! You’re living your best life in your favorite German town, AND you’re self-employed. That is no small feat! As any American self-employed expat in Germany will probably tell you, the Germans sure love their taxes! 

While you’re busy getting your “Steuererklärung” in order, don’t let this be an excuse to forget your US tax return. 

3 Things to know about self-employment in Germany:

  1. Anyone who earns $400 or more per year from self-employment needs to file a US Tax Return
  2. Expats might have to pay about 15.3% of net profit in Self-Employment taxes to the US government
  3. Since Germany has a totalization agreement with the US, you can use the treaty benefit to offset US Self-Employment taxes

One of the most common mistakes when using US-based tax software is US expats getting incorrectly charged with US self-employment taxes. That’s why MyExpatTaxes was created to prevent you from paying more taxes than you should!

Basics of Investing as an American in Germany

Diversifying your investments while residing in Germany offers various avenues. Although the U.S. imposes stringent rules on expat investments, navigating them is far from impossible. With a clear understanding of suitable investment avenues, the process becomes relatively straightforward. Identifying strategic investment destinations becomes crucial, ensuring you stay within compliance boundaries while making the most of available opportunities.

Common Ways to Invest in Germany:

  • Property: Americans living in Germany are allowed to buy property both for personal use or as an investment.
  • IRAs/Roth IRAs: Ready to save for retirement? Great. Expats can invest up to Default String per year in a Retirement Account. 
  • US-based Stocks & Bonds: Make your life easy and your wallet happy, and keep your portfolio US-based. There are often high fees and even higher tax rates when Americans invest in foreign investment products like mutual funds based outside of America!

Suppose you invest in German mutual funds; there is no need to sell them all now. MyExpatTaxes is the only tax software that will help walk you through how to report these investments to the IRS on Form 8621 (PFICs).

Property in Germany

Another common way to invest is by buying property. If you’re unable to purchase just yet, then renting may be a better choice.

Buying & Selling Property

Buying: Depending on where you want to live in Germany, you may consider whether buying a property is worthwhile. Germany has a competitive market because of low interest rates on home mortgages. 

A photo of the outside of German styled house in Germany

Purchasing a home in Germany will not trigger a US taxable event. However, if you suddenly have a large deposit made into your German bank account for your new mortgage, expect to report that on the FBAR and potentially Form 8938.

See also: 8 Things to consider when buying property abroad.

Selling: When it comes time to dispose of your foreign property, you will need to make sure to document the cost basis and selling fees accurately so you are only taxed on the profit from the sale. Just like with US properties, you might be able to exclude up to $250,000 or more of profit from the sale of your foreign property if you satisfy the Section 121 Exclusion requirements.

Perks of buying in Germany:

  • Own your own home and have the right to make decisions about it
  • Possibly a good return on your investment if done right
  • The German property market is considered relatively stable

Downsides of buying in Germany:

  • If you plan to sell your home after fewer than ten years, you will pay significant capital gains taxes to the German government.
  • If you plan to use the property for rental income, beware of the laws that protect renters; they are robust. They could potentially lead to trouble as a landlord if you don’t prepare ahead of time. 

Renting Property

Renting: It may come as a surprise to some, but the majority of the German population famously prefers to rent. For Americans, this may come as a bit of a surprise. With rental prices in most areas quite reasonable, many Germans don’t see the benefit of buying their home.

Perks to Renting in Germany:

  • Strong renter’s rights! Those same renter’s rights that can challenge property owners provide you security.
  • Little commitment. If you move unexpectedly, you only need to honor your rental agreement. 

Downsides when Renting in Germany:

  • You’ll need to return the property in the same condition in which you received it. If you rented a freshly painted apartment, you’d have to paint it when you move out, especially if you hope to get your deposit back.
  • Kitchen Not Guaranteed. Yup! In Germany, renting out property without any kitchen cabinets or appliances is prevalent. You’ll need to provide those yourself.

Like with US rental income, you will need to report any rental income and expenses from your German properties on your US Tax Return via Schedule E. Just a heads up, the US calculates depreciation differently than the Germans do, so let MyExpatTaxes figure out the rental depreciation for you.

The Foreign Housing Exclusion:

When we’re talking about housing options for expats abroad, we can’t forget to share another way to reduce your US tax bill. Use the Foreign Housing Exclusion to account for expenses associated with your foreign housing, such as:

  • Rent
  • Utilities
  • Property Insurance
  • Household repairs…and more!

Retiring Abroad in Germany

Ahhh….retirement. In German, we don’t call them “Senior Citizens” but “Pensionär.” As in, a person receiving their pension. Retiring abroad is an excellent opportunity to experience a new culture, travel easily around Europe, and perhaps even learn a new language! 

Before retiring, you might want to look into saving up for retirement with these accounts:

  1. German pension through your employer – thanks to the German/US Tax Treaty, contributions and earnings in these plans are deferred from taxation until you withdraw the income!
  2. German state pension – thanks to the German/US Tax Treaty, this income would generally be exempt from US taxation
  3. US Individual Retirement Account (IRA)
  4. US Social Security Benefits

2 Tips for Retiring Abroad in Germany

  1. You can still receive your US Social Security payments while living in Germany. Just like anyone receiving social security, you’ll need to be eligible for benefits in the first place.
  2. Your worldwide pension income is still taxable in the US. Claim any German income taxes paid to offset your US taxes.

Get Help Filing From the Experts

MyExpatTaxes is here to help. If you still have questions after reading all 2,500+ words of this guide to expat taxes in Germany, don’t worry! You can check out our Help Center, get in touch with a tax professional, or simply start filing your tax return and ask questions as you go via the live chat!

3 Reasons to file your US expat taxes from Germany with

  1. Made by expats for expats. No one knows the trials and tribulations of US expat taxes like an expat! We built MyExpatTaxes to help others like ourselves.
  2. Clear, transparent pricing. We pride ourselves on our transparent pricing plans. No surprises from us!
  3. E-file! We can e-file 99% of expat tax returns. No more printing off your tax forms and mailing them to Texas. With us, it’s easy to e-file online.

Written by Ellen M

December 5, 2023 | | 9 minute read

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