U.S. expat taxes in Germany
As a U.S. citizen or green card holder working in Germany, taking care of your U.S. expat taxes can feel like a complicated task. Knowing which tax rules affect you and understanding your options is a lot to stay on top of.
With H&R Block, you can rest easy knowing you’ve found the right expertise for your U.S. expat taxes in Germany. Our seasoned tax pros make filing simple and secure. Whether you need expat tax guidance on filing from abroad or information on FATCA and FBAR rules, we’re here to help.
What U.S. citizens living or working in Germany should know
For starters, U.S. expats and green card holders in Germany should continue to file a U.S. tax return each year. However, filing while abroad comes with new considerations and questions. “Do I have additional information to report to the IRS? How do my German financial accounts affect my filing? What options do I have to reduce my tax bill?”
We’ve outlined a few considerations for U.S. citizens working in Germany, so you know what affects the tax you pay and which forms you need to file. Of course, tax rules for U.S. expats go beyond what we’ve listed below.
Need help? Our experienced tax advisors have seen it all and are here for you when you’re ready to tackle your taxes.
U.S. Expat Tax Filing Considerations
Working as an American in Germany can affect your taxes even if you don’t stay for very long. For example, if you earn income while on a short-term assignment, you’ll need to report that income on your U.S. taxes. As you establish deeper financial roots in Germany, you’ll have more considerations for your American tax filing.
You may need to report your German financial accounts and assets. Generally, U.S. taxpayers with more than $10,000 in foreign bank or financial accounts are subject to FBAR filing and reporting requirements. You may also be subject to FATCA reporting requirements if you have foreign assets valued at $200,000 and higher.
You can lower your U.S. bill and avoid dual taxation with certain tax strategies. Expats may take advantage of one of two options, detailed below, to lower their taxes.
- The foreign earned income exclusion allows you to exclude your wages from your U.S. taxes. This option is available to those who meet certain time-based residency requirements.
- The foreign tax credit lets you claim a credit for income taxes paid to a foreign government.
Your German pensions can get special treatment. Thanks to the United States - Germany tax treaty, you can deduct or exclude your contributions to a qualified German pension scheme or retirement investment plan on your U.S. taxes up to the U.S. limits.
- If you have a German state pension, the distributions are treated as U.S. Social Security benefits for U.S. tax purposes, meaning they may be partially or fully tax free.
- If you invest in a voluntary pension through your employer and you are a U.S. citizen, the treaty also allows you to deduct these contributions from your U.S. taxes up to the U.S. limits for qualified retirement plans. The reporting requirements for these types of accounts can vary, but income earned inside the plan is generally only taxable when distributed from the plan.
- If you invest in a private pension scheme, it may be subject to more complicated reporting requirements but generally is taxable similarly to employer-based pension arrangements.
Your H&R Block expat tax advisor will ensure that your benefits are reported correctly, so you don’t pay more tax than needed.
German Tax Filing Considerations
Your German income taxes are based on your residency status. Generally, you’re considered a German resident if you have a residence or intend to stay in Germany six consecutive months or more during the tax year (considered a “habitual abode”).
- German tax residents are taxed on all income, regardless of where they earn it.
- Nonresidents are taxed on German source income.
The income tax rates range from 0% to 45%. Similar to taxes in the U.S., the percentage of tax that you pay increases as your income increases. Due to the wide ranges of Germany’s top brackets, many U.S. expats in Germany, would pay higher income tax rates locally than in the U.S.
With this in mind, it’s typically better for most U.S. taxpayers to use the foreign tax credit rather than the foreign earned income exclusion. One of our experienced tax advisors can help determine the best choice for your situation.
2019 tax rates
|Tax rate||Taxable Income (for single filers)|
|0%||€ 0 - € 9,168|
|14%||€ 9,169 - € 14,254|
|23.97%||€ 14,255 - € 55,960|
|42%||€ 55,961 - € 265,326|
|45%||€ 265,327 and up|
In addition to income tax, there are a couple of other taxes to consider. First, your income will be subject to a separate 5.5% solidarity tax. Additionally, if you’re a member of certain registered, religions you might pay a church tax of 8% or 9%, depending on which federal state you reside in.
The tax filing season is similar to the U.S. tax year, but with a few differences. German taxes follow a January to December tax year. Tax returns are due by May 31. If a professional prepares the return, the deadline is automatically extended to December 31.
How H&R Block can help Americans working in Germany
Our highly trained experts have helped thousands of Americans as they file their U.S. expat taxes in Germany. You can trust our expertise and guidance to help you determine the best tax strategies for you.
Start your expat taxes for free today!