U.S. Expat Tax Guide: Germany (Filing in 2026)
- Why Do I Have to File Taxes in Both Countries?
- How Do the U.S. Tax Exclusions and Credits Protect Me?
- What Are Germany's Tax Rates and How Do They Compare?
- How Do I File Taxes in Germany?
- What Filing Requirements and Deadlines Do I Need to Know?
- Additional U.S. Reporting Requirements
- What Scenarios Should I Know About?
- What Tax Treaty Benefits Apply?
- What Common Mistakes Should I Avoid?
- What Are My Next Steps?
- What Other Considerations Should I Know About?
- Tax Compliance for US Expats in Germany
According to IRS data from 2016-2021, nearly 300,000 and 400,000 Americans have chosen Germany’s rich culture, strong economy, and excellent quality of life as their home. While you must file taxes in both countries, the combination of the U.S.-Germany tax treaty, Foreign Earned Income Exclusion, and Foreign Tax Credit typically eliminate any U.S. tax liability entirely. The challenge isn’t paying double taxes; it’s filing correctly and knowing which protections to use.
Germany has one of Europe’s highest tax rates, ranging from 0% to 45%, but this works in your favor. These higher German taxes usually create enough Foreign Tax Credits to reduce your U.S. tax obligation to zero. Between the $130,000 Foreign Earned Income Exclusion for the 2025 tax year and Germany’s substantial tax burden, most Americans in Germany don’t owe additional U.S. taxes. This guide shows you exactly how to file taxes in both countries, which forms you need, and how to use the tax treaty to your advantage.
Why Do I Have to File Taxes in Both Countries?
As a U.S. citizen or green card holder, you must file U.S. taxes on your worldwide income, no matter where you live. This means filing taxes as a U.S. citizen abroad is mandatory even when you’re paying German taxes.
U.S. Filing Requirements (2025 Tax Year):
| Filing Status | Minimum Income to File |
|---|---|
| Single (under 65) | $14,600 |
| Married Filing Jointly | $29,200 |
| Self-Employed (any income) | $400 |
Germany requires tax residents to file if they have multiple income sources, earn above the basic allowance (€12,096 for 2025), or want to claim deductions. Tax residency in Germany begins when you establish a dwelling or stay more than six months.
Key point: Having to file in both countries doesn’t mean paying taxes to both. The U.S.-Germany tax treaty, Foreign Tax Credit, and Foreign Earned Income Exclusion exist specifically to prevent double taxation.
Worried about filing U.S. taxes while living in Germany?
How Do the U.S. Tax Exclusions and Credits Protect Me?
The U.S. provides two primary tools to eliminate or reduce your tax burden when living in Germany.
Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion allows you to exclude up to $130,000 of earned income from U.S. taxation for the 2025 tax year (filed in 2026).
Who qualifies:
- Pass the Physical Presence Test (330 days outside the U.S. in any 12-month period), or
- Pass the Bona Fide Residence Test (establish genuine residence in Germany)
What it excludes:
- Salary and wages
- Self-employment income
- Bonuses and commissions
What it doesn’t exclude:
- Passive income (dividends, interest, rental income)
- Pension distributions
- Capital gains
Example: Marcus earns €90,000 ($99,000 USD) working for a German tech company in Munich. He meets the Physical Presence Test by living in Germany full-time. Using the FEIE, he excludes the entire $99,000 from U.S. taxation. His U.S. tax obligation: $0.
Foreign Tax Credit (FTC)
The Foreign Tax Credit provides a dollar-for-dollar credit for taxes paid to Germany. This is often more beneficial than the FEIE for higher earners because Germany’s tax rates (up to 45%) typically exceed U.S. rates (up to 37%).
When to use FTC instead of FEIE:
- Earn more than $130,000
- Have significant passive income
- Pay German taxes at rates higher than equivalent U.S. rates
- Want to preserve foreign housing exclusion flexibility
Example: Sarah earns €150,000 ($165,000 USD) as a marketing director in Berlin. She pays approximately €60,000 in German taxes. She cannot exclude the full amount using FEIE (limited to $130,000), so she uses the Foreign Tax Credit for her entire income. Her German tax payment of $66,000 creates enough credits to eliminate her U.S. tax liability completely.
You cannot use both FEIE and FTC on the same dollar of income. However, you can use FEIE for earned income up to $130,000 and FTC for amounts above that or for passive income.
What Are Germany’s Tax Rates and How Do They Compare?
Germany operates a progressive tax system where higher earners pay more. Knowing these rates helps you plan which U.S. exclusion or credit to use.
German Resident Tax Rates (2025 Tax Year)
According to PwC’s Germany tax summaries, Germany uses a geometrically progressive rate structure:
| Taxable Income (EUR) | Tax Rate | Notes |
|---|---|---|
| €0 – €12,096 | 0% | Basic allowance (Grundfreibetrag) |
| €12,097 – €68,480 | 14% – 42% | Progressive calculation |
| €68,481 – €277,825 | 42% | Standard top rate |
| Over €277,826 | 45% | Highest rate (“Reichensteuer”) |
Additional German Taxes:
Solidarity Surcharge (Solidaritätszuschlag):
- Rate: 5.5% of income tax
- Exemption threshold: €19,950 for single filers (€39,900 for married couples filing jointly)
- Most middle-income earners pay no solidarity surcharge as of 2025
Church Tax (Kirchensteuer):
- Rate: 8% in Bavaria and Baden-Württemberg, 9% in other states
- Only applies if you register with a recognized church
- You can opt out by filing a church exit declaration (Kirchenaustritt)
Trade Tax (Gewerbesteuer):
- Rate: 7-17% depending on municipality
- Applies to self-employed and business income
- €24,500 exemption for individual traders
How German Rates Compare to U.S. Rates
U.S. Federal Tax Rates (2025):
| Taxable Income (USD, Single) | Tax Rate |
|---|---|
| $0 – $11,925 | 10% |
| $11,926 – $48,475 | 12% |
| $48,476 – $103,350 | 22% |
| $103,351 – $197,300 | 24% |
| $197,301 – $250,525 | 32% |
| $250,526 – $626,350 | 35% |
| Over $626,350 | 37% |
Key Difference: Germany’s rates rise faster and reach higher percentages sooner than U.S. rates. Someone earning €70,000 in Germany pays approximately 35-40% effective tax rate, while the same person in the U.S. would pay closer to 20-25%. This difference creates substantial Foreign Tax Credits that offset U.S. obligations.
How Do I File Taxes in Germany?
The German Tax System
Germany’s tax authority, the Finanzamt (local tax office), administers all tax collection. You can find your local Finanzamt office using your postal code. Most employees have taxes withheld through payroll (Lohnsteuer), but you may need to file an annual return to claim deductions or reconcile payments.
- German Tax Year: January 1 to December 31 (same as U.S.)
- Filing Deadline: July 31 of the following year (self-filed) or up to February 28 of the year after if using a tax advisor (Steuerberater)
Who Must File:
- Self-employed individuals
- Multiple income sources
- Annual income above €12,096
- Want to claim deductions
- Received unemployment, parental, or sickness benefits
Filing Methods in Germany
ELSTER (Online Filing):
Germany’s free electronic tax filing system, ELSTER (Elektronische Steuererklärung), is the official platform managed by the Federal Central Tax Office (Bundeszentralamt für Steuern). You’ll need to:
- Register for an ELSTER account
- Receive activation code by mail (takes 1-2 weeks)
- Complete your tax return online
- Submit electronically
Tax Advisor (Steuerberater):
Many expats use a German tax advisor, especially in their first years or with complex situations:
- Extended filing deadline (up to February 28 of the following year)
- Expert handling of dual taxation issues
- Maximized deductions
- Communication with Finanzamt in German
Paper Filing:
Less common but available if you cannot file electronically. Use official forms available at your local Finanzamt.
Required German Tax Documents
Employment Income:
- Lohnsteuerbescheinigung (annual wage tax certificate from your employer)
- Payslips showing gross income and deductions
Self-Employment Income:
- Business income and expense records
- Invoices and receipts
- Bank statements
Other Income:
- Rental income documentation
- Investment statements
- Pension or social security statements
German Tax Classes (Steuerklasse)
Germany assigns tax classes that affect withholding rates:
- Class I: Single, widowed, divorced, or separated
- Class II: Single parents
- Class III: Married, higher-earning spouse (combined with Class V)
- Class IV: Married couples with similar incomes
- Class V: Married, lower-earning spouse (combined with Class III)
- Class VI: Second job or multiple employers
You can change your tax class during the year by submitting a form to your Finanzamt.
What Filing Requirements and Deadlines Do I Need to Know?
U.S. Filing Deadlines
- Primary Deadline: April 15, 2026 (for 2025 tax year)
- Automatic Extension for Expats: June 15, 2026 (no form required if living abroad on April 15)
- Extended Extension: October 15, 2026 (file extension request by June 15)
- Payment Deadline: April 15, 2026 (extensions to file are NOT extensions to pay)
Even with filing extensions, any taxes owed are due April 15. Interest accrues on unpaid balances even if you’re on extension.
Additional U.S. Reporting Requirements
FBAR (FinCEN Form 114):
Report foreign financial accounts if the aggregate value exceeds $10,000 at any time during the year.
- Includes: Bank accounts, investment accounts, pension accounts
- Deadline: April 15, 2026 (automatic extension to October 15, 2026)
- Filed separately from tax return through FinCEN website
- Severe penalties for non-compliance
FATCA (Form 8938):
Report foreign assets if exceeding threshold amounts:
Living Abroad (filing status):
- Single/Married Filing Separately: $200,000 on last day OR $300,000 anytime during year
- Married Filing Jointly: $400,000 on last day OR $600,000 anytime during year
Filed with your U.S. tax return.
Strategic Filing Sequence
Best Practice: File German taxes first (by July 31), then U.S. taxes (by October 15 with extension).
Why this sequence works:
- German tax documents (Steuerbescheid) show exactly what you paid
- You can calculate precise Foreign Tax Credits
- Your German return clarifies your residence status
- No need to estimate or amend later
What Scenarios Should I Know About?
Scenario 1: Corporate Employee on Assignment
Profile: Jennifer, sent to Frankfurt by her U.S. employer for a 3-year assignment
- Salary: $110,000 USD (€100,000)
- German taxes paid: €32,000 ($35,200)
- Housing allowance: $24,000
U.S. Tax Strategy:
- Uses FEIE to exclude $110,000 of salary (within the $130,000 limit)
- Uses Foreign Housing Exclusion for $18,000 of housing costs
- U.S. tax owed: $0
German Tax Obligations:
- Tax resident after 183 days
- Reports worldwide income to Germany
- Pays German tax through payroll withholding
- May need to file return to claim deductions
Social Security: Under the U.S.-Germany totalization agreement, continues paying U.S. Social Security for assignments under 5 years (requires certificate of coverage).
Scenario 2: Self-Employed Freelancer
Profile: Thomas, American freelance software developer living in Berlin
- Income: €85,000 ($93,500)
- German taxes paid: €28,000 ($30,800)
- German health insurance: €7,200
- Trade tax: €2,100
U.S. Tax Strategy:
- Uses Foreign Tax Credit instead of FEIE (better for self-employment tax)
- German tax credits (including trade tax and health insurance) offset U.S. tax
- Self-employment tax considerations (see below)
- U.S. tax owed: $0
German Tax Obligations:
- Quarterly advance tax payments (Vorauszahlungen)
- Annual tax return required
- Trade tax if income exceeds €24,500
- Mandatory health insurance contributions
Social Security: After 5 years in Germany, totalization agreement typically places him under German social security system, exempting him from U.S. self-employment tax (requires certificate).
Scenario 3: Retiree Living in Germany
Profile: Robert and Linda, retired couple in Bavaria
- U.S. Social Security: $36,000
- U.S. 401(k) distributions: $40,000
- German state pension: €18,000 ($19,800)
- Savings interest: $2,000
U.S. Tax Strategy:
- Cannot use FEIE (no earned income)
- Uses Foreign Tax Credit for German taxes paid on pension
- U.S. Social Security taxable in both countries (treaty allows both to tax)
- Reports all income on U.S. return
- U.S. tax owed: Minimal after Foreign Tax Credits
German Tax Obligations:
- Tax residents (living in Germany full-time)
- German pension taxed in Germany
- U.S. Social Security taxable in both countries
- Must report U.S. retirement distributions
Scenario 4: Dual Citizen
Profile: Anna, dual U.S.-German citizen born in Germany, living in Hamburg
- Salary: €75,000 ($82,500)
- German taxes paid: €24,000 ($26,400)
- Married to German citizen (no U.S. connection)
U.S. Tax Strategy:
- Uses FEIE to exclude $82,500
- U.S. tax owed: $0
- No requirement to report non-U.S. citizen spouse’s income
German Tax Obligations:
- Files as German tax resident
- May benefit from tax class III if higher earner
- Spouse’s income separate unless filing jointly in Germany
Special Consideration: Since Germany reformed its citizenship laws in June 2024, obtaining German citizenship no longer requires renouncing U.S. citizenship, making dual citizenship much more common.
What Tax Treaty Benefits Apply?
The U.S.-Germany tax treaty, signed in 1989 and amended in 2006, prevents double taxation and clarifies which country has primary taxing rights. The complete treaty text is available from the IRS.
Additionally, the U.S.-Germany Totalization Agreement (effective since 1979) coordinates social security coverage between both countries.
Key Treaty Provisions
Pensions and Social Security:
- German state pensions: Taxable in country of residence (primary right)
- U.S. Social Security: Taxable in U.S. (primary right), but Germany can also tax
- German company pensions: Generally treated as foreign pension income by IRS
Business Income:
- Taxed where services performed unless you maintain a permanent establishment
- Freelancers pay where they reside and work
Investment Income:
- Dividends: Limited withholding (5% if owning 10%+, otherwise 15%)
- Interest: 0% withholding in most cases
- Royalties: 0% withholding
The Savings Clause
The U.S.-Germany tax treaty contains a “savings clause” that preserves the U.S. right to tax its citizens as if the treaty didn’t exist. This means:
- You must still report all income to the IRS
- You cannot claim treaty exemptions as a U.S. citizen in most cases
- Your main benefit comes through Foreign Tax Credits, not treaty exemptions
Example: The treaty says Germany has primary right to tax state pensions. As a U.S. citizen receiving a German state pension while living in Germany, you still must report it to the IRS, but you can claim Foreign Tax Credits for the German taxes paid.
What Common Mistakes Should I Avoid?
Mistake 1: Not Filing U.S. Taxes Because You Pay German Taxes
Many Americans in Germany mistakenly believe that paying German taxes eliminates their U.S. filing requirement. It doesn’t.
Why it matters: Failure to file can result in penalties of up to $10,000 per year, plus percentage-based penalties on any tax owed.
How to avoid it: File U.S. taxes every year, even if you owe nothing. If you’re behind, the streamlined filing procedures offer penalty relief for non-willful non-filers.
Mistake 2: Missing FBAR Deadlines
German bank accounts, investment accounts, and pension accounts all count toward the $10,000 FBAR threshold.
Why it matters: FBAR penalties can reach $10,000 per violation for non-willful failures, and much higher for willful violations.
How to avoid it: Track your highest combined balance monthly. Even if it only exceeds $10,000 for a single day, you must file FBAR.
Mistake 3: Choosing the Wrong Tax Strategy (FEIE vs. FTC)
Using FEIE when FTC would be better (or vice versa) can cost thousands in unnecessary taxes.
Why it matters: Once you elect FEIE, you cannot switch to FTC for 5 years without IRS permission. This locks you into a potentially suboptimal strategy.
How to avoid it: Calculate both scenarios annually. Generally:
- FEIE works best: Income under $130,000, lower German tax bracket, simple situation
- FTC works best: Income over $130,000, high German taxes, passive income, self-employment
Mistake 4: Not Tracking German Tax Payments Precisely
To claim Foreign Tax Credits, you need exact amounts paid in euros and the exchange rate used.
Why it matters: Estimated credits or missing documentation can result in IRS rejection or audit.
How to avoid it: Keep copies of your German Steuerbescheid (tax assessment), payment receipts, and document exchange rates when paying German taxes.
Mistake 5: Ignoring State Tax Obligations
Moving to Germany doesn’t automatically end your U.S. state tax obligations.
Why it matters: Some states (California, Virginia, New York, South Carolina, New Mexico) maintain you’re still a resident unless you properly sever ties.
How to avoid it: Before moving, establish non-residency by closing accounts, changing driver’s license, selling property, and filing final part-year return.
Mistake 6: Overlooking German Pension Reporting Requirements
German pensions (state pension, company pensions, Riester, Rürup) have complex U.S. reporting requirements that many expats overlook.
Why it matters: Some German pensions may be considered foreign trusts by the IRS, requiring Forms 3520/3520-A with penalties up to $10,000 for non-filing.
How to avoid it: Understand which German pension you have and its U.S. reporting requirements. See our comprehensive guide on German pension options and U.S. tax reporting.
What Are My Next Steps?
For New Arrivals in Germany
Germany’s official portal, Make it in Germany, provides comprehensive information for expats settling in the country. For visa and consular information, visit Germany.info.
First 90 Days:
- Register your address (Anmeldung) at your local Bürgeramt
- Apply for German tax ID (Steuer-ID) automatically issued after registration
- Open German bank account
- Enroll in German health insurance (mandatory)
- Determine your German tax class
- Track your days in Germany for Physical Presence Test
Before December 31:
- Calculate whether you’ll meet Physical Presence Test
- Gather all tax documents from both countries
- Determine optimal strategy (FEIE vs. FTC)
- Consider consulting expat tax professional
Annual Tax Compliance Timeline
January – March:
- Receive German Lohnsteuerbescheinigung from employer
- Gather U.S. tax documents (W-2s, 1099s, K-1s)
- Track exchange rates for currency conversion
- Review highest account balances for FBAR
April – July:
- File or extend U.S. taxes (April 15 deadline, June 15 automatic extension)
- Pay any U.S. taxes owed by April 15
- Prepare German tax return
- File German taxes by July 31 (or arrange tax advisor extension)
August – October:
- Receive German Steuerbescheid showing final tax calculation
- File U.S. taxes with extension (October 15 deadline)
- Use actual German tax paid for Foreign Tax Credit calculations
- File FBAR by October 15
If You’re Behind on Filing
Don’t panic. The IRS offers streamlined filing procedures for non-willful non-filers:
Requirements:
- Living outside U.S. for at least 330 days per year
- Non-willful failure to file
- File last 3 years of returns
- File last 6 years of FBARs
Benefits:
- No penalties in most cases
- Get into compliance
- Peace of mind
What Other Considerations Should I Know About?
Cost of Living in Germany
Germany offers high quality of life but costs vary significantly by city:
Major Cities (Munich, Frankfurt, Hamburg):
- Monthly expenses: €1,200 – €2,500 for single person
- Rent: €1,000 – €2,000 for 1-bedroom apartment in city center
- High salaries typically offset higher costs
Smaller Cities (Leipzig, Nuremberg, Dresden):
- Monthly expenses: €800 – €1,500 for single person
- Rent: €600 – €1,200 for 1-bedroom apartment
- Lower costs with excellent quality of life
Mandatory Costs:
- Health insurance: 14.6% of gross salary (split with employer) plus average 2.5% supplemental
- Public transport: €50 – €100 monthly (Deutschland-Ticket €58 nationwide)
- Internet/phone: €30 – €50 monthly
German Healthcare System
Health insurance is mandatory for all residents. You choose between:
Public Health Insurance (Gesetzliche Krankenversicherung):
- Income-based premiums (approximately 14.6% + 2.5% supplemental)
- Split 50/50 with employer
- Covers family members at no additional cost
- Required for employees earning under €73,800 (2025 threshold)
Private Health Insurance (Private Krankenversicherung):
- Risk-based premiums (age, health status)
- Available if earning over €73,800 or self-employed
- Often cheaper when young and healthy
- Costs increase with age
- No free coverage for family members
Building Credit in Germany
Your U.S. credit score doesn’t transfer to Germany. Germany uses the SCHUFA system (scores 0-100, higher is better).
To establish German credit:
- Open German bank account (Girokonto)
- Pay all bills on time (especially phone, internet, rent)
- Use German credit card responsibly
- Avoid multiple credit applications
- Register all addresses properly
Tax Compliance for US Expats in Germany
Living in Germany offers incredible lifestyle benefits, from world-class beer gardens and castles to excellent public transport and work-life balance. With proper tax planning and compliance, you can focus on enjoying Germany’s rich culture and high quality of life without worrying about your tax obligations.
No matter how late, messy, or complex your return may be, we can help. Greenback is an American company founded in 2009 by US expats for expats. We’ve helped over 23,000 expats file over 71,000 returns while maintaining a 4.9-star average across 1,200+ TrustPilot reviews.
If you’re ready to be matched with a Greenback accountant, click the Get Started button below. For general questions on US expat taxes or working with Greenback, contact our Customer Champions.
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This article is for informational purposes only and should not be considered tax advice. Tax situations vary greatly, and you should consult with a qualified tax professional for advice specific to your circumstances.
