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US Expat Taxes in Germany: A Complete Guide

What you’ll learn:

As a US expat living in Germany, you may find yourself wondering what taxes you need to file—and when. Here’s what you need to know. 

Living as an Expat in Germany 

Germany is home to a wide variety US of expats. This is due to the many Americans who choose to live abroad in Germany, as well as the international headquarters and US military bases throughout the country. 

But what are Germany’s taxes like for US expats? Let’s take a look. 

Germany’s Taxes at a Glance

  • Primary Tax Forms: Mantelbogen ESt
  • Date Primary Tax Form is Received: January 1
  • Tax Deadline: July 31
  • Currency: Euro (EUR)
  • Population: 80.9 million
  • Number of US Expats in Germany: Over 100,000
  • Capital City: Berlin
  • Primary Language: German
  • Tax Treaty: Yes
  • Totalization Agreement: Yes

What Are Germany’s Taxes like for US Expats? 

The first question most Americans living abroad in Germany have is whether they should file their taxes with the US government or Germany. Well, in many cases, the answer is both. This is because: 

  • Virtually all US citizens are required to file a US Federal Tax Return regardless of where they live 
  • Most expats living and working in Germany will also need to file a German tax return 

The good news is that because of the US-Germany tax treaty, expats generally won’t have to pay taxes twice on the same income. However, that still leaves German taxes, which are notoriously complicated. In fact, Germany has one of the most complex tax systems in all of Europe. 

To clarify what taxes you may have to file—and pay—here’s a rundown of how Germany’s taxation policies impact US expats. 

Who Has to File Taxes in Germany? 

Expats who qualify as tax residents of Germany will be taxed on their worldwide income, while non-residents are only taxed on German-source income. In either case, if your only income is a salary or wages from a German employer, you may not have to file a tax return. This is because your employer will most likely withhold your taxes at the source. 

US expats living in Germany generally only need to file a return if: 

  • They are self-employed 
  • They have multiple streams of income 
  • They receive income from a foreign (non-German) source 

However, even if you aren’t required to file a tax return as a resident, it can still be wise. There are quite a few potential tax deductions and exemptions that aren’t automatically applied to employee tax withholdings. By filing a return, you can claim these credits and receive a refund. 

Who Qualifies as a Tax Resident in Germany? 

As a US expat living in Germany, your nationality and long-term intentions have no bearing on your residency status. Instead, anyone who has a domicile or “habitual abode” in Germany is considered a resident for tax purposes. 

  • A habitual abode means a home you’ve lived in for at least six months out of a given tax year 
  • A domicile is any permanent residence you own, regardless of how much time you’ve spent there during the year 

If an expat doesn’t have a domicile or habitual abode in Germany, they are a non-resident. 

Once you qualify as a tax resident, you can eliminate your residency by simply moving out of Germany—as long as you don’t maintain a permanent residence in Germany or have lingering financial ties to the country. Even if you’re a German national, leaving the country is sufficient to cut tax ties. There’s no exit tax involved in leaving your tax residency status, either. 

What Types of Taxation Does Germany Have? 

Income Tax 

In Germany, taxable income includes: 

  • Wages 
  • Salary 
  • Trade or business income 
  • Rental income 
  • Investment income 
  • Profit received from independent personal services 
  • Income from royalties, agriculture, or forestry 
  • Gains from personal transactions (such as alimony or annuities) 

The various forms of income are taxed at progressive rates. 

Below, you can see the most recent German income tax rates for single and married residents. (All amounts are given in euros (EUR). 

2021 German Income Tax Rates for Single Tax Residents

Taxable Income (EUR)Tax Rate (%)
0-9,7740%
9,745-57,91814-42%
57,919-274,61242%
Over 274,61345%

2021 German Income Tax Rates for Married Tax Residents

Taxable Income (EUR)Tax Rate (%)
0-18,3360%
18,336-111,92014%
111,920-530,65242%
Over 530,65245%

Capital Gains Tax 

Germany taxes capital gains, with the rate depending on the nature of the gain. 

  • If an expat held a direct or indirect interest of 1% or more in a domestic or foreign corporation within the last five years, 60% of the capital gain from the subsequent sale of shares is taxable. 
  • If an expat held less than 1%, the entire capital gain from the sale of privately held shares is subject to a flat tax rate of 26.375% (25% flat rate plus the solidarity surcharge), irrespective of the amount of time the shares have been held. 

Pro Tip: If your individual tax rate is lower than the options above, you have the option of being taxed at your customary rate instead. 

Selling real estate that was held for less than a decade can also incur a tax. The sale of private assets is also taxable if the assets were held for less than one year. (Standard tax rates apply in both of these instances.) 

Inheritance and Gift Tax 

Germany levies a tax on inheritances and gifts, with the rate ranging between 7% and 50%. (Exemptions are available in certain circumstances.) 

Church Tax 

If you are a registered member of an official church, you may be subject to a church tax on your income. The exact rate varies, but usually hovers around 8%–9%. 

Dog Tax 

This unusual tax is for pet owners who buy a pet instead of adopting a rescue. These taxes are intended to help cover waste pickup and keep pet numbers low. 

Property Tax 

Property is taxed at the municipal level, with the exact rate varying based on your location. 

Real Estate Transfer Tax 

Real estate transfers are also taxed. The rate ranges from 3.5%–6.5%. 

Solidarity Surcharge 

The German solidarity surcharge (Solidaritaetszuschlag) isn’t a tax per se. It’s an additional fee attached to the income tax, capital gains tax, and corporate tax. However, only about the top 10% of earners are subject to this fee. 

For those who are subject, the rate is 5.5% of whatever tax payment the fee is attached to. 

Value-Added Tax 

Because Germany is part of the EU, services and sales are subject to a value-added tax (VAT). The standard rate for this tax is 19%, but certain items, such as food and books, are taxed at a rate of 7%. 

Business owners are required to submit electronic quarterly VAT (value-added tax) returns by the 10th day of the subsequent month and pay any amount of VAT that is due. A refund may apply if the input tax exceeds the VAT. If the tax for the prior year exceeds EUR 7,500, once-a-month preliminary returns are an additional requirement. 

Pro Tip: Expats can typically deduct the VAT charged on inputs from VAT that are payable on related output. 

Social Security 

Like the US, Germany has a social security system in place to provide for its citizens and residents. This could lead to confusion over which system a US expat living in Germany should contribute to. Fortunately, the US-Germany totalization agreement establishes rules for social security contributions. 

  • If a US company assigns you to work in Germany for less than five years, you will pay into US Social Security 
  • If the assignment exceeds five years, you will pay into German social security 
  • If you are working for a German employer in Germany, you will pay into German social security 

Self-employed Americans living abroad in Germany may choose to contribute to either social security system. 

Pension 

If you pay into a German pension system for at least 60 months, you are entitled to a partial pension. You can also transfer a foreign pension to Germany if you plan to retire there. (The German retirement age is 65–67, depending on your birth year.) 

Does the US Have a Tax Treaty with Germany? 

Yes—the US has a formal tax treaty with Germany. This US-Germany tax treaty helps US expats avoid double taxation while living in Germany. 

The US also has a totalization agreement with Germany, which clarifies whether an American living abroad should contribute to the German or US social security system. 

What Tax Forms Do Americans Living in Germany Have to File? 

German Tax Forms for Expats 

Annual Income Tax Return 

Most Americans living abroad in Germany will have to file an annual income tax return with the German government. The form you use will depend on your personal situation. 

  • Most resident expats with only German-sourced employment income can use the simplified tax return, Mantelbogen ESt 1V 
  • Resident expats with multiple sources of income, foreign income, or other forms of income not derived from employment in Germany will likely need to use Mantelbogen ESt 1A 
  • Non-residents will need to use Mantelbogen Est 1C 

Regardless, the deadline for filing your German annual income tax return is July 31. However, if your taxes are prepared professionally, that deadline automatically extends to December 31. Additional extensions are also available in extenuating circumstances at the discretion of the tax authority. 

Pro Tip: Germans who have their taxes taken out automatically by their employer have up to four years to submit tax returns. 

US Tax Forms for Expats 

IRS Form 1040: Individual Income Tax Return 

Form 1040 is the standard US individual income tax return. Every US citizen is required to file this form regardless of where they live in the world. 

The due date for Form 1040 is typically April 15, but in the case of expats, that due date is automatically extended to June 15. (You can also request a further extension to October 15.) 

IRS Form 8938: Statement of Specified Foreign Financial Assets (FATCA) 

As an expat, if you own non-US financial assets above certain thresholds, you must file a FATCA report. The specific threshold for your finances will depend on your filing status and whether you qualify as a bona fide resident of Germany. 

If you are required to file a FATCA report, attach it to your Form 1040 once you’ve completed it and file them together. 

FinCEN Form 114: Report of Foreign Bank and Financial Accounts (FBAR) 

If you have a total of at least $10,000 in a non-US bank account, you’ll have to report it by filing FinCEN Form 114, better known as FBAR. (This applies whether the money is in a single account or spread out over multiple.) 

You should file the FBAR electronically using the FinCEN BSA E-Filing System. The standard due date for the FBAR is April 15, but if you miss that deadline, there’s an automatic extension until October 15. 

What Tax Deductions Are Available for Expats Living in Germany? 

Because of the US-Germany tax treaty, most Americans living in Germany are already exempt from double taxation. However, the IRS also provides several other potential tax credits and deductions for expats, such as: 

Most expats who use these tax credits can erase their US tax debt entirely. 

Get Expert Help with Your Expat Tax Return 

We hope this guide has given you a better understanding of how Germany’s tax policies impact US expats. If you’d like to learn more, though, our team of tax experts are here to help. 

At Greenback Expat Tax Services, we’ve spent years helping expats optimize their financial strategies and file their taxes accurately and on time. Just contact us, and we’ll be happy to answer any questions you have. 

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