You still file your US expat taxes. Germany’s higher rates usually leave no US tax to pay on your salary.
A credit for the German income tax on your pay offsets the US tax on that pay. The US still taxes income Germany leaves untaxed, such as interest and dividends under the saver’s allowance.
Updated · Sources
Americans living in Germany, 2026
- 42%
- is Germany’s income tax rate from €69,879 of a single filer’s taxable income, where the US rate on $69,879 is 22%.
- $0
- of US tax is due on US Social Security paid to you while you live in Germany.
- 1979
- is the year the US-Germany totalization agreement took effect. It generally keeps you from paying into both countries’ social security.
For a single filer, German income tax rises to 45% from €277,826 of taxable income.
Which US forms does an American living in Germany need?
A US return, every year
US citizens file Form 1040 once gross income reaches the filing threshold, or net self-employment earnings reach $400, even with nothing to pay. Under Article 1(4), the treaty’s saving clause, the US taxes its citizens as it would without the treaty. Article 1(5) lists the exceptions, such as the Social Security rule in Article 18(5). Green card holders file too. A holder who claims German residence under the treaty can file as a nonresident, but a long-term holder may then be treated as expatriating.
A credit for your German tax
Form 1116 is where you claim the credit. It cannot exceed the US tax on your foreign income, so German tax never reduces US tax on US income.
An FBAR once your accounts pass $10,000
If your foreign accounts together pass $10,000 at any point in the year, all of them go on the FBAR. That includes your German current account, savings account and brokerage account (Depot). The FBAR is FinCEN Form 114, filed with FinCEN rather than with your tax return. Its deadline is April 15, with an automatic extension to October 15.
Form 8938 above a higher threshold
Form 8938 has higher thresholds for filers who pass the IRS test for living abroad. A single filer adds it above $300,000 at any time in the year, or $200,000 on its last day. On a joint return, the thresholds are $600,000 at any time or $400,000 on the last day. A German state pension does not count toward them, because foreign social security benefits are left off Form 8938.
Form 8938 does not replace the FBAR, so many Americans in Germany file both.
At 100,000 of taxable income, German tax takes almost twice the share that US tax does.
German income tax
€30,864
That is 30.9% of the income, and each further euro is taxed at 42%.
US income tax
$16,712
That is 16.7% of the income, and each further dollar is taxed at 22%.
US tax after the credit
$0
German tax exceeds the US tax here, so the credit leaves nothing to pay.
Section 32a of the Income Tax Act (EStG) sets the 2026 German formula for a single filer’s taxable income from €69,879 to €277,825. In that band, the tax is 42% of the income, minus €11,135.63. US tax uses the 2026 single brackets: 10% to $12,400, 12% to $50,400 and 22% on the rest. Each tax is figured in its own currency, so they compare as shares of income. Both figures are income tax alone.
Should you claim the credit or the exclusion on pay earned in Germany?
| Credit (Form 1116) | Exclusion (Form 2555) | |
|---|---|---|
| Pay above $132,900, the 2026 limit | Usually no US tax German tax covers it | Taxed at your top rates German tax on it can still be credited |
| Interest and dividends | German tax credited Under a separate limit | Not covered The exclusion is for earned income only |
| Unused German tax | Saved for other years One year back, then up to 10 ahead | Forfeited on excluded pay It cannot carry to other years |
| Switching later | Your choice each year | Barred for 5 years After a revocation, unless the IRS consents |
You can use both in one year, but not on the same income. You can exclude pay up to the limit and credit German tax on the rest.
Six traps the foreign tax credit does not fix.
Funds and ETFs in a German Depot
Funds and ETFs based outside the US generally count as PFICs for US tax, including those held in a German Depot. Under the PFIC rules, a gain on sale can be taxed partly at the top rate, with interest added. A separate Form 8621 can be due for each fund.
The saver’s allowance
Germany does not tax the first €1,000 of your capital income, or €2,000 on a joint return. The US does, and that slice brings no German tax to credit. US tax on it can remain, unless German tax on your other investment income covers it. Tax on your salary cannot fill the gap, because Form 1116 puts wages and investment income in separate categories with separate limits.
A savings policy with a cash value
The FBAR treats a German life insurance or annuity policy with a cash value as a foreign account. Its value counts toward the $10,000 total alongside your bank and Depot accounts. Form 8938 covers the policy too, once your assets pass its threshold.
Riester and Rürup contracts
How the US taxes Riester and Rürup contracts is not settled. The treaty names only one kind of German plan: company pensions under the Betriebsrentengesetz, Germany’s company pension law. These contracts are not on that list.
Leaving Germany with company shares
When your German tax residence ends, Germany can tax your shares in a company as if you had sold them at fair value. The exit tax in Section 6 of the Foreign Tax Act (AStG) generally applies to stakes of 1% or more. It reaches you if you were taxed as a German resident for at least 7 of the last 12 years. That can include founders and early employees of German startups.
Working for yourself
The exclusion does not lower US self-employment tax, and the credit offsets income tax only. A self-employed American in Germany can therefore owe self-employment tax with no US income tax due. Only the US-Germany totalization agreement can remove that tax. It generally puts self-employment carried on only in Germany under German coverage. You prove that with a certificate from the German fund that collects your contributions. A business moved from the US for five years or fewer stays under US coverage.
Your German tax adviser files in Germany, and a Valim CPA files in the US.
We handle the US side only, alongside your Steuerberater. Your German return, and any German tax advice, stay with them.
- We claim your German income tax as a US credit on Form 1116.
- We apply the treaty to your US Social Security and any Betriebsrente. We file the FBAR for your German accounts, and Form 8938 once they pass its threshold. The instant quote asks how many foreign accounts and funds you hold.
- We check whether the exclusion would leave less US tax than the credit.
- We calculate estimated tax on freelance income from Germany.
- An IRS or state letter about a return we prepared, even one questioning the German tax credit, gets our reply within your fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
How the US and Germany split the tax on your income.
Who pays more taxes, the US or Germany?
Germany usually taxes a similar income more heavily. In 2026, German income tax on €150,000 of a single filer’s taxable income is €51,864, or 34.6%. US income tax on $150,000 of taxable income is $28,598, or 19.1%. That gap is why the foreign tax credit for German tax usually leaves nothing to pay on a German salary.
Is there double taxation between the US and Germany?
Usually not. The treaty’s saving clause keeps the US free to tax its citizens in Germany. Article 23 then commits the US to credit German income tax against US tax on the same income. Some income, such as US Social Security paid to a resident of Germany, is taxed by one country alone. A separate totalization agreement, in force since December 1, 1979, generally keeps your work in one social security system.
Does Germany tax my US Social Security?
Yes, and only Germany taxes it while you live there. Article 18(5) of the US-Germany treaty makes social security taxable only in the country where the recipient lives. Germany taxes your US benefits as if they were a German state pension. IRS Publication 915 confirms that US citizens living in Germany, Canada or the UK owe no US tax on these benefits.
Does the US tax my German pension?
The US generally does not tax money paid into a Betriebsrente, or its growth, while you work in Germany for a German employer. A Betriebsrente is a workplace pension under Germany’s company pension law. The treaty caps that relief at both the German and the US limits. Riester and Rürup contracts fall outside the treaty’s list, so their US treatment is uncertain. After a move to the US, a German state pension is taxed there like US Social Security, but only France taxes a French one.
When is the German tax return due?
If you have to file in Germany, the return is due July 31 of the year after the tax year. A German tax adviser can file as late as the end of February of the second year after. Your US return is due June 15 while you live abroad, about six weeks before the German date.
Sources
- Germany, AO § 149, Abgabe der Steuererklärungen (filing deadlines)
- US-Germany income tax convention (1989)
- Protocol to the US-Germany convention (2006)
- Treasury, Technical explanation of the 2006 protocol
- Protocol to the US-France convention (2004)
- Protocol to the US-France convention (2009)
- IRS, Publication 915, Social Security and Equivalent Railroad Retirement Benefits
- Social Security Administration, Totalization Agreement with Germany
- Social Security Administration, US international social security agreements
- Germany, EStG § 32a, Einkommensteuertarif (income tax rates)
- Germany, EStG § 20, Kapitalvermögen (capital income and the saver’s allowance)
- Germany, AStG § 6, Besteuerung des Vermögenszuwachses (exit tax on shareholdings)
- IRS, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- 26 U.S.C. § 901, Taxes of foreign countries and of possessions of United States
- 26 U.S.C. § 904, Limitation on credit
- 26 U.S.C. § 911, Citizens or residents of the United States living abroad
- 26 U.S.C. § 6017, Self-employment tax returns
- 31 C.F.R. § 1010.350, Reports of foreign financial accounts
- IRS, Instructions for Form 8938
- IRS, Comparison of Form 8938 and FBAR requirements
- 26 U.S.C. § 1297, Passive foreign investment company
- 26 U.S.C. § 1291, Interest on tax deferral
- IRS, Instructions for Form 8621
Reviewed and updated September 2026. General information, not advice for your situation.