This article will explore the German tax system and its implications for American expats, covering essential topics such as German taxes, the tax year in Germany, the German tax deadline, different types of taxes in Germany, pensions, and investments, as well as US-specific tax obligations like the FBAR and FATCA filing requirements.
If you need help with your US expat taxes in Germany, feel free to contact Universal Tax Professionals. We offer a wide range of US expat tax services and have extensive experience assisting many American expats in Germany.
Taxes for American Expats Living in Germany
Tax liability in Germany depends on residency status. Tax residents are taxed on worldwide income, while non-residents are taxed only on German-sourced income.
Tax returns are due by July 31 of the following year, with an extension available if using a tax professional.
US citizens in Germany must file US taxes, reporting worldwide income. Key forms include: Form 1040 (standard return), Form 2555 (Foreign Earned Income Exclusion), and Form 1116 (Foreign Tax Credit).
US expats must report foreign financial accounts if balances exceed $10,000 (FBAR) or $200,000 (FATCA).
Prevents double taxation, especially on income like wages, pensions, and investments, with tax credits helping reduce US tax liability.
German pensions are taxed in Germany, but must still be reported to the US. US pensions may be taxed in both countries; tax treaty provisions help clarify liabilities. Investment income (interest, dividends, capital gains) is taxed by both countries, with the tax treaty providing relief.
Universal Tax Professionals offers remote, year-round support to American expats in Germany, providing personalized assistance on US tax compliance.
The German tax system is built on a principle of income redistribution and operates on a progressive tax scale, meaning that higher earners pay a larger percentage of their income in taxes. Germany’s tax authority is the Bundeszentralamt für Steuern (Federal Central Tax Office), responsible for collecting taxes at the federal and local levels.
Tax Residency in Germany
Your tax liability in Germany is primarily based on your residency status. Generally, you are considered a tax resident in Germany if you meet either of the following criteria:
As a tax resident, you are taxed on your worldwide income in Germany. Non-residents, on the other hand, are only taxed on German-sourced income.
Expats in Germany must deal with several types of taxes, which include:
Income tax in Germany is a progressive tax ranging from 14% to 45%. This applies to income from employment, self-employment, rental income, pensions, and capital gains. Germany also imposes a solidarity surcharge (Solidaritätszuschlag), which adds 5.5% of your income tax liability to support economic development in former East Germany.
In Germany, the tax year follows the calendar year, running from January 1 to December 31. American expats must file their tax returns based on this tax year, which is important when coordinating with US tax filing requirements. While the tax year is straightforward, the timing of when taxes are due can differ from the US system.
| Income Range | Tax Rate |
| Up to €10,908 | 0% |
| €10,909 to €62,809 | 14% to 42% |
| €62,810 to €277,825 | 42% |
| Over €277,826 | 45% |
If you are registered as a member of a recognized religious community in Germany, you may be liable for church tax, which is typically 8% to 9% of your income tax. If you do not wish to pay this tax, you can officially opt out of church membership through a process called Kirchenaustritt.
As mentioned earlier, the solidarity surcharge is an additional tax of 5.5% on your income tax liability. Although initially intended as a temporary measure to support the reunification of Germany, it still applies to higher-income individuals.
Germany’s VAT applies to most goods and services at a rate of 19%, although some items (such as groceries) have a reduced VAT rate of 7%. As a consumer, this tax is included in the price you pay for goods and services.
If you sell investments such as stocks or real estate, you may be subject to capital gains tax in Germany. The standard rate is 25%, plus the solidarity surcharge, making the effective rate 26.375%. If you hold real estate for more than 10 years, you may be exempt from capital gains tax on its sale.
Property owners in Germany must pay Grundsteuer, which is calculated based on the value of the property and the local municipality’s tax rate. Rates vary depending on location but are generally lower than property taxes in the US.
Germany also imposes an inheritance and gift tax, which depends on the relationship between the giver and receiver and the value of the assets. Tax rates range from 7% to 50%, with closer relatives receiving higher exemptions and lower tax rates.
In Germany, the tax year follows the calendar year, running from January 1 to December 31. American expats must file their tax returns based on this tax year, which is important when coordinating with US tax filing requirements. While the tax year is straightforward, the timing of when taxes are due can differ from the US system.
The deadline for filing your German tax return is typically July 31 of the year following the tax year. For example, if you are filing your 2023 taxes, they would be due by July 31, 2024. However, if you use a tax advisor or professional, the deadline can be extended to the end of February of the following year, giving you more time to prepare your return.
If you miss the deadline, you may be subject to penalties and interest on unpaid taxes, so it’s essential to stay on top of these dates.
As an American expat living in Germany, you are subject to tax obligations in both Germany and the United States. This dual taxation system can seem overwhelming, but there are mechanisms in place to help reduce the burden of paying taxes to two countries.
The United States is one of the few countries that taxes its citizens on their worldwide income, regardless of where they live. This means that even if you live in Germany full-time, you are still required to file a US tax return each year. The key forms American expats must file include:
The combination of FEIE and the FTC is designed to help reduce or eliminate the risk of double taxation for American expats in Germany.
In addition to your regular US tax obligations, American expats must also be mindful of FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act) requirements. These are critical for any US citizen living abroad who has foreign financial accounts.
The FBAR (Foreign Bank Account Report) must be submitted to the US Treasury Department, not the IRS. While the FBAR deadline aligns with the tax filing deadline, there is no extension beyond October 15. Therefore, it must be filed on time to avoid potential penalties
The US-Germany Tax Treaty is a bilateral agreement designed to prevent double taxation for individuals and businesses operating in both countries. For American expats living in Germany, this treaty provides crucial relief by determining which country has the primary right to tax different types of income, reducing the risk of being taxed twice on the same earnings.
One of the key provisions in the treaty is the allocation of taxing rights. For example, if you are employed in Germany, Germany has the primary right to tax your income from employment, while the US allows you to claim the Foreign Tax Credit (FTC) for the taxes you’ve paid to Germany. This means you won’t be taxed twice on your salary. Similarly, the treaty helps clarify the treatment of other types of income, including pensions, interest, dividends, and capital gains.
Pensions and investments are often a source of confusion for American expats living in Germany, especially when it comes to reporting them to both German and US authorities.
Pensions are a key concern for expats, particularly how they are taxed in Germany and the US. Under the US-Germany Tax Treaty, pensions are typically taxed by the country where the individual is a resident, although specific rules depend on the source of the pension and the type of pension.
Expats with investments, such as stocks, bonds, or mutual funds, face additional complexities due to taxation in both Germany and the US. Germany taxes investment income, including interest, dividends, and capital gains. For US citizens, investment income must also be reported on their US tax return, regardless of whether it was earned in Germany or another country.
For American expats living in Germany, dealing with both US and German tax rules can be confusing and stressful. That’s where the expertise of American tax preparers in Germany becomes invaluable. These tax professionals specialize in understanding the tax requirements for US citizens living abroad, ensuring that you stay compliant with both US and German tax laws, while minimizing your tax burden.
The good news is, you don’t need a tax firm that’s physically located in Germany to manage your taxes. Here at Universal Tax Professionals, we offer a comprehensive range of services remotely, making the entire process more convenient and efficient. With modern communication tools, everything can be handled online or via phone and video calls, eliminating the need for in-person meetings.
We provide personalized tax preparation services tailored to the unique needs of American expats. Whether you’re filing for the first time or have more complex tax situations involving foreign pensions, investments, or self-employment income, our expertise ensures that everything is handled efficiently and accurately. Plus, at Universal Tax Professionals, we offer year-round support, meaning we can assist you with any tax concerns beyond the filing deadline, such as tax planning, extensions, or dealing with the IRS.
