Most Americans we work with in Berlin, Munich or Frankfurt pay the Finanzamt more than they’d ever owe the IRS on the same salary, so the US return usually comes out at zero. That doesn’t make it optional. The money gets lost elsewhere: in German savings products that are efficient in Germany and expensive on a US return, and in forms people didn’t know existed. Our default for almost everyone employed here is the foreign tax credit, and the rest of this page is what we’d check after that.
US figures are for tax year 2025, German ones for Veranlagungszeitraum 2025, and conversions use the IRS 2025 yearly average of €0.886 per $1 (about $1.13 per euro).
Do you still file a US return from Germany?
Yes, if your gross worldwide income is at or above the filing threshold. For 2025 that’s $15,750 if you’re single and under 65, and income you later exclude or wipe out with credits still counts toward it. The same applies to dual US–German citizens, to "accidental Americans" born in the US who grew up here, and to civilians working with the US forces.
Married to a German? Germany lets you file jointly (Zusammenveranlagung); the US doesn’t follow that. Unless you elect to treat your spouse as a US resident, which pulls their worldwide income onto the US return, you file married filing separately with a threshold of just $5. We model both before choosing. Freiberufler and Gewerbetreibende have to file once net self-employment earnings reach $400.
US and German tax deadlines for 2025
Both countries use the calendar year, so your Lohnsteuerbescheinigung lines up with the US return. The deadlines don’t:
- 1
15 April 2026: US tax due
Any US tax you owe has to be paid by now. You can file later; paying later costs interest.
- 2
15 June 2026: automatic extension for Americans abroad
If you live and work outside the US on 15 April, you get two extra months to file. Attach a statement saying you qualify.
- 3
31 July 2026: German return, if you do it yourself
The deadline for the 2025 Einkommensteuererklärung if you’re required to file. With a Steuerberater or Lohnsteuerhilfeverein it moves to 1 March 2027. Employees whose only income is payroll-taxed salary often don’t have to file at all, but can file voluntarily within four years, and it often gets money back.
- 4
15 October 2026: US return with Form 4868
File Form 4868 by 15 June to get to 15 October. The FBAR is automatically extended to the same date.
Your Steuerbescheid often arrives after the US return is due. That’s fine: we file on the German tax withheld and estimated, and amend if the final assessment is materially different. If you moved to Germany in 2025 and want the exclusion but don’t qualify yet, Form 2350 extends the deadline until you do.
Which euro exchange rate do you use?
Income that comes in through the year (salary, interest, dividends, the Lohnsteuer withheld from it) can go through at the IRS yearly average. One-off events like buying or selling shares, ETFs or a flat, or taking a pension lump sum, use the spot rate on the day. FBAR balances use the Treasury’s 31 December rate.
Foreign tax credit or FEIE in Germany? Usually the credit
The foreign tax credit on Form 1116 knocks your US tax down dollar for dollar by the German income tax on the same income. German rates climb fast. For 2025 the first €12,096 of taxable income is tax-free, the marginal rate goes from 14% to 42% by €68,481, and 45% applies at the very top. On a professional salary that’s more than the US would take, so the credit brings US tax on German wages to $0 and the excess carries forward for up to ten years (or back one).
The Solidaritätszuschlag (5.5% of income tax, charged only once income tax passes €19,950, or €39,900 joint, with a phase-in above that) is generally creditable with it. Kirchensteuer, 8% or 9% of income tax depending on the state, is commonly credited on the same basis, but the IRS hasn’t addressed it, so we take that position knowingly. Social insurance contributions aren’t creditable at all. And credits sit in baskets: excess credit from salary (general category) can’t shelter investment income (passive).
Example: Rachel, a US citizen on a €92,000 Frankfurt salary
Say Rachel is single, works for a German bank in Frankfurt and earned €92,000 in 2025, about $103,800. No church registration, no other income.
After the employee lump-sum allowance and her deductible social insurance, her German taxable income is roughly €75,000. The 2025 tariff gives about €20,590 of income tax, plus about €75 of Soli because she only just clears the €19,950 threshold. Call it €20,660, or roughly $23,300.
On the US side, after the $15,750 standard deduction she has about $88,100 of taxable income and roughly $14,300 of tax. The German tax more than covers it: US tax $0, with about $9,000 of credit carried forward for a bonus year or a move somewhere cheaper. The exclusion would also get her to $0, but with no carryforward, no IRA from excluded wages, and no refundable child tax credit if she has kids. Our US expat tax guide makes the same point with a Munich engineer.
Illustrative and rounded; her social insurance is estimated.
So when does the foreign earned income exclusion (Form 2555) fit? It excludes up to $130,000 of 2025 earned income, not investment income or pensions, if you pass the bona fide residence or physical presence test. We use it mainly for lower earners, part-year movers and people whose pay Germany doesn’t tax. The housing exclusion can add rent and utilities above a $20,800 base, up to $39,000 by default (IRS Notice 2025-16 has higher city limits). Revoking the exclusion generally locks you out of it for five years without IRS consent.
Working for the US forces in Germany under SOFA
Around Kaiserslautern, Ramstein, Stuttgart, Wiesbaden and Grafenwöhr, who pays you changes everything. US government civilians are usually exempt from German tax on their US pay under the NATO Status of Forces arrangements, and that pay can’t be excluded under the FEIE, so it’s fully taxable in the US with nothing to credit. SOFA-status contractors are generally relieved of German tax too, and some can use the exclusion, but claiming non-resident status toward Germany can rule out the bona fide residence test and leave physical presence as the only route. A spouse working off base for a German employer is taxed like anyone else in Germany.
What the US–Germany tax treaty actually does for you
Less than people expect. The treaty dates from 1989, was substantially amended by a 2006 Protocol, and contains a saving clause letting the US tax its citizens and residents as if the Convention had not come into effect. For salary, rent, dividends and gains it doesn’t cut your US tax; the foreign tax credit does that.
A few articles survive the saving clause, and these are the ones that matter to Americans in Germany. Article 18(5) says social security paid by one country to a resident of the other is taxable only where you live, so US Social Security paid to a US citizen in Germany is taxed only in Germany. Article 18A, added in 2006, deals with cross-border pension contributions, and the Protocol names Betriebsrentengesetz arrangements as pension plans for it; how much that helps depends on the plan and who pays in. Article 23 sets out which country gives credit when both tax the same income.
For academics, Article 20 lets the host country exempt certain pay: a US-resident professor teaching or doing public-interest research at a German university for up to two years is generally taxable on it only in the US. The US doesn’t give these exemptions to its own citizens or green-card holders, and if the visit runs over, Germany may tax the whole stay. A treaty position that overrides US law is normally disclosed on Form 8833, though some pension and social security positions are exempt.
Paying into German Rentenversicherung instead of US Social Security
Social security contributions sit outside the income tax treaty. They’re handled by a separate totalization agreement, in force since 1979, which puts your earnings in one system. Work for a German employer and you pay German social insurance, not US Social Security. If a US employer sends you over temporarily (generally five years or less), you can stay in US Social Security and Medicare and skip German pension insurance. Self-employed and working only in Germany, you’re generally in the German system and exempt from US self-employment tax, but only with a certificate of coverage, a copy of which goes with your US return every year. On the German side these come through the DVKA, part of the GKV-Spitzenverband. Contribution periods in both countries can also be added together to qualify for a pension.
Will the IRS tax my German state pension?
If you live in Germany, generally yes. Article 18(5) allocates tax to the country of residence when a pension crosses a border, and a Deutsche Rentenversicherung pension paid to someone living in Germany doesn’t cross one. Germany taxes it as your home country and the saving clause keeps the US right to tax you as a citizen. In practice the credit for the German tax usually cancels most or all of the US bill. Retire to the US and it flips: the German pension becomes taxable only in the US.
Freelancing in Germany: Freiberufler and US self-employment tax
Self-employed, the US wants self-employment tax of 15.3% on net earnings up to the Social Security wage base. The FEIE doesn’t remove it; only a certificate of coverage does. That gets awkward because many German self-employed people aren’t compulsorily insured in the statutory pension scheme (self-employed teachers, and artists and publicists through the Künstlersozialkasse, are), and a certificate is harder to get without it. Apply early.
Your Einnahmenüberschussrechnung is a good starting point for Schedule C, but depreciation, home-office and car rules differ, so we recompute the US profit rather than copy it. If you trade through a GmbH or UG, that’s a separate set of US filings, notably Form 5471 and the controlled foreign corporation rules.
What happens to Riester, Rürup and a company pension (bAV)?
The US recognises very little of Germany’s retirement tax breaks, and for some products the US treatment is genuinely unsettled. Treat this as a map, not a ruling on your plan:
| German product | German treatment (in brief) | US treatment (in brief) |
|---|---|---|
| Gesetzliche Rentenversicherung (statutory pension) | Contributions deductible; pension taxed on payout | Contributions not deductible on the US return; pension taxable in the US for a US citizen living in Germany, with credit for German tax |
| bAV, betriebliche Altersversorgung (Direktversicherung, Pensionskasse, Pensionsfonds, Direktzusage, Unterstützungskasse) | Contributions within limits free of tax and often social insurance; taxed on payout | Not a US-qualified plan. The treaty Protocol names Betriebsrentengesetz arrangements as pension plans, which may allow deferral in some cases; otherwise employer contributions can be taxable in the US when vested. The form of the plan matters |
| Riester-Rente | State allowances (Zulagen) and a special deduction; taxed on payout | No US deduction. Growth, and possibly the allowances, may be taxable as they arise. Some practitioners analyse Riester contracts as foreign trusts; IRS Rev. Proc. 2020-17 relieves many tax-favoured foreign retirement trusts from Forms 3520 and 3520-A, but not from income tax or the FBAR |
| Rürup-Rente (Basisrente) | Contributions largely deductible; lifetime annuity only, taxed on payout | No US deduction. Usually an insurance-based annuity contract rather than a trust, but whether growth is deferred depends on the contract. Funds held inside can raise PFIC questions |
Before you sign a Riester or Rürup contract
They’re sold on German tax benefits you only partly get: contributions aren’t deductible on the US return, and the US may tax growth or allowances before you retire. With no IRS guidance, practitioners disagree. If you already have one, report it (usually FBAR, plus Form 8938 above the thresholds) and treat it the same way every year.
Why your ETF-Sparplan is a PFIC problem
This is the one we see most. Almost any non-US pooled investment is a Passive Foreign Investment Company (PFIC): German investment funds, Irish or Luxembourg UCITS ETFs, the funds inside a robo-adviser or a fund-linked insurance policy. Each generally needs its own Form 8621 every year. With no election, gains and large distributions are spread back over your holding period and taxed at the highest US rate for each year, plus interest. No capital gains rates. A mark-to-market election on a listed ETF taxes each year’s increase as ordinary income instead; a QEF election needs figures most European funds don’t publish. Either works best from the first year.
Example: Megan’s ETF-Sparplan in Munich
Take Megan, a US citizen in Munich. In 2021 she set up a €500 a month Sparplan with a German online broker into an accumulating, Ireland-domiciled MSCI World UCITS ETF. By the end of 2025 she’d paid in about €30,000 and it was worth about €40,000, roughly $45,000.
In Germany that’s sensible: the broker withholds Abgeltungsteuer on the Vorabpauschale and eventual gains, with the equity-fund partial exemption and the €1,000 saver’s allowance. For the US it’s a PFIC, and every monthly purchase is a separate block with its own holding period. With no election, a future sale spreads the gain back across the years since 2021, taxes it at the top rate for each of them and adds interest. Electing mark-to-market for 2025 doesn’t wipe the slate either: the gain built up since 2021 is still taxed under the default rules in the election year, and only after that does each year’s increase become ordinary income.
What we’d do: get the fund onto Form 8621 now, choose the election deliberately, and send new savings to individual shares or to US-domiciled funds through a US broker that accepts German residents. Illustrative figures; the answer depends on the holding and its filing history.
How Abgeltungsteuer and the Vorabpauschale fit in
Germany taxes most interest, dividends and gains at a flat 25% Abgeltungsteuer plus Soli, about 26.4% (more with church tax), after a saver’s allowance of €1,000 (€2,000 joint). That’s creditable against US tax on the same income, in the passive basket. It’s often higher than the US rate on qualified dividends and long-term gains, so excess passive credits are common, and they can’t be used against your salary.
The Vorabpauschale is harder. It’s deemed income on accumulating funds, taxed by your broker each January, and the US doesn’t see it as income, so practitioners differ on how and when that German tax can be credited, especially without a mark-to-market election. Keep every Jahressteuerbescheinigung; it’s the evidence for any credit.
Is Kindergeld taxable in the US?
We treat Kindergeld (€255 per child per month in 2025) as a non-taxable government family benefit, the common view, though the IRS hasn’t addressed it specifically. Elterngeld is less settled. Neither affects the US child tax credit directly; that turns on your child’s Social Security number and on how your earnings are treated (excluded wages can shut out the refundable part), one more reason families usually do better with the credit.
Selling your home in Germany
Germany doesn’t tax the gain on a home you’ve owned for more than ten years, or one you lived in yourself for the whole time you owned it, or in the year of sale and the two years before. The US is stingier. The §121 exclusion covers up to $250,000 of gain ($500,000 married filing jointly) if you owned and lived in it for two of the last five years, and anything above that is taxable in the US with no German tax to credit.
Currency catches people too. The gain is measured in dollars at each day’s rate, so a flat euro price can still show a US gain. Under §988, if the euro has fallen by the time you repay a euro mortgage, the difference is a taxable exchange gain, though you repaid exactly what you borrowed; a loss on a personal mortgage isn’t deductible. And a rental flat held over ten years is tax-free in Germany but still taxable in the US, depreciation recapture included.
Reporting German accounts: FBAR, Form 8938 and FATCA
If the highest balances of all your non-US accounts added up to more than $10,000 at any point in 2025, you file an FBAR (FinCEN Form 114). That covers your Girokonto and Tagesgeld, your Depot, many pension and insurance products with a cash value, and accounts you can sign on but don’t own. It goes to FinCEN, not with your return, and is due 15 April with an automatic extension to 15 October. Our FBAR guide goes deeper, or we can file it for you.
Form 8938 goes with the 1040 once your foreign financial assets pass the thresholds for filers living abroad:
| Filing status | File if foreign assets exceed… |
|---|---|
| Single or married filing separately | $200,000 on the last day of the year, or $300,000 at any time |
| Married filing jointly | $400,000 on the last day of the year, or $600,000 at any time |
Your German bank is already reporting you. Under the FATCA agreement, banks, brokers and insurers identify US account holders (hence the question about your US tax number) and report them to the Bundeszentralamt für Steuern, which passes the data to the IRS. It’s also why some banks turn Americans away; if that happens, try one that already has American customers.
Cutting ties with your last US state
Moving to Germany doesn’t automatically end state residency. California, New York and Virginia, among others, can keep treating you as a resident if you keep a home, a driver’s licence or a voter registration there, and California doesn’t allow the FEIE. Our state tax guide covers how to leave cleanly.
Never filed from Germany? The Streamlined procedures
Plenty of Americans here, dual citizens and accidental Americans especially, find out about US filing years late, usually when a bank asks for a US tax number. If it wasn’t willful, the Streamlined Foreign Offshore Procedures let you catch up with three years of returns, six years of FBARs and a signed Form 14653. If you meet the non-residency test there’s no penalty, just any tax and interest, which for most people in Germany is little or nothing. Read our Streamlined guide or see our Streamlined package (from $1,500).
What we’d do for you
For most employees in Germany, our Expat return at $599 covers it: the 1040 with the credit or exclusion, the FBAR and Form 8938. If you hold UCITS ETFs or other PFICs, you need Form 8621, which is in our Premier return ($999; $75 for each fund beyond the first) along with RSUs and K-1s. An extra state return is $75, and Form 5471 or 8865 for a GmbH or partnership is from $450. See full pricing, how expat filing works, or get in touch.