US Expat Taxes in Germany: A Complete Guide

Germany is a popular destination for expats, offering a high quality of life, a robust economy, and a vibrant cultural scene. As an expatriate in Germany, you’ll have access to excellent healthcare, public transportation, and educational opportunities.

If you’re looking for tax guidance, our certified tax preparers at Greenback Expat Tax Services have prepared thousands of US tax returns for expats in Germany, and have extensive experience navigating the complexities of dual taxation, compliance with German tax laws, US tax obligations, and ensuring accurate and efficient tax preparation.

So, what are Germany’s tax filing requirements like for US expats? Let’s take a look.

Germany at a Glance

• Primary Tax Form for Residents: German tax return (Einkommensteuererklärung)
• Tax Year: January 1st to December 31st (same as the calendar year)
• Tax Deadline: July 31
• Currency: Euro (EUR)
• Population: 83.8 million
• Number of US Expats in Germany: Over 150,000
• Capital City: Berlin
• Primary Language: German
• Tax Treaty: Yes
• Totalization Agreement: Yes

What Are Germany’s Taxes like for US Expats? 

When living abroad in Germany, many American expats wonder whether they should file taxes with the US government, Germany, or both. In most cases, the answer is both, as virtually all US citizens are required to file a US Federal Tax Return, and most expats in Germany will also need to file a German tax return. 

Fortunately, thanks to the US-Germany tax treaty, expats typically won’t have to pay taxes twice on the same income. However, navigating Germany’s notoriously complex tax system can be challenging for expats. 

Here’s a tax guide on how Germany’s policies impact US expats to help you better understand which taxes you may need to file and pay.

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 any tax obligations or need 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 foreign assets or 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 law ties. There’s no exit tax involved in leaving your tax residency status, either.

What Types of Taxation Does Germany Have? 

Understanding the various types of German taxes is crucial for compliance and financial planning. In this section, we will explore the main types of taxes in Germany, including income tax, value-added tax (VAT), and other key levies that may impact your stay. You’ll be better prepared to manage your obligations and avoid potential pitfalls by gaining insights into these taxes.

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).

2023 Tax Year (Filed in 2024) German Income Tax Rates

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.

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 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 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.

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.)

Tax Rate Comparison: Germany vs. US 

When you look at Germany’s tax rate vs. that of the US, Germany’s tax rate is relatively high. Though you pay more to German tax authorities up front, the benefit you gain is savings on your US Tax Return when filing with the IRS as an American expat living in Germany.
Taxable income in Germany is employment income, post allowable, and standard deductions. The tax threshold is currently EUR 9,408 for a single individual and EUR 18,816 for those married and filing jointly. The progressive tax rate is based on income, and the first cap is 42% at EUR 57,051. This rate will then be applied until the second threshold, EUR 270,500, is reached. Any income surpassing EUR 270,500 will be taxed at 45%.

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. 
Under the treaty, US citizens living in Germany may be able to claim certain tax credits and deductions, such as the Foreign Tax Credit, which can help to reduce their overall tax liability. The treaty also outlines rules for determining residency status and provides guidance on Social Security contributions for individuals who work in both countries. 

Does the US Have a Totalization Agreement with Germany? 

Yes, the US and Germany have a totalization agreement that helps to coordinate Social Security benefits for individuals who work in both countries. The agreement ensures that individuals who pay into both the US and German Social Security systems can receive benefits from both programs without being subject to double taxation. 
Under the agreement, individuals may be able to count periods of coverage under one country’s system towards meeting eligibility requirements for benefits in the other country. In addition, the agreement also provides rules for determining which country has the primary responsibility for providing Social Security benefits, which can vary depending on an individual’s specific circumstances.

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

For Americans living in Germany, navigating tax bills is essential to ensure compliance with both US and German tax regulations. In this section, we’ll outline the key tax forms that expats must file, including those required by the IRS and the German tax authorities.

German Tax Forms for Expats 

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 by a CPA in a tax office, that deadline automatically extends to December 31. Additional extensions are also available in extenuating circumstances at the discretion of the tax authority.

US Tax Forms for Expats 

Navigating US tax obligations while living abroad can be challenging. For American expats in Germany, specific US tax forms must be filed to comply with IRS regulations. In this section, we’ll detail the essential US tax forms for expats, including those for income reporting, foreign assets, and claiming tax benefits.

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. 
Typically, taxpayers must file Form 1040 by April 15th every year. However, the IRS automatically extends expats’ due date to June 15th every year. Taxpayers can also request a further extension to October 15th.

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 it 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 15th.

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: 

• Foreign Earned Income Exclusion (FEIE)
• Foreign Tax Credit 
• Foreign Housing Exclusion (or Deduction) 

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

Navigating Tax Compliance for US Expats in Germany

We trust that this guide has provided you with a comprehensive understanding of how Germany’s tax policies impact US expats. However, if you require further information or assistance, our team of experienced tax experts at Greenback Expat Tax Services is available to provide you with additional guidance. Please don’t hesitate to contact us if you have any further questions or concerns.

Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.