US Taxes for Expats Living in Germany

Living and working in another country can be the most exciting time in a person’s life. It can also be legally complex, especially when filing taxes. Talk to our team about how you can file U.S. taxes even though you live in Germany.

If you are still a U.S. citizen while living in Germany, there is a good chance that you are still legally obligated to pay U.S. taxes. You might also have to pay German taxes, making living abroad as an expat very expensive. The U.S. may tax you on your worldwide income, including income earned in Germany. If Germany also taxes this income, you face paying taxes on the same income twice. We can help you understand your tax obligations in both countries and figure out how to minimize these obligations in the United States, saving you money.

Call US Tax Help and let our team of professionals help you with your taxes. Call us at (541) 362-9127 to get started.

Do I Have to Pay U.S. Taxes if I Move to Germany?

Moving to a new country can be an exciting yet frustrating time, but you must keep track of many legal issues in both your new country of residence and the country you are leaving behind, the United States. One important legality you must keep in mind is your tax obligations.

Generally, if you move to Germany, or any other country for that matter, and remain a United States citizen, you are obligated to pay U.S. taxes. If you are moving because you have lost or renounced your U.S. citizenship, you might still owe certain tax obligations to the United States.

If you have relinquished your U.S. citizenship or plan on doing so soon, you must be mindful of your tax obligations. According to 26 U.S.C. § 877(a)(1), people who renounce or relinquish their U.S. citizenship may still be liable to pay U.S. taxes for the year leading up to the day they gave up their citizenship. For example, if you relinquished your citizenship in December of 2023, you would still have to pay your U.S. taxes for that year even though you are no longer a citizen of the United States as of 2024.

If you are a high-income earner, you might be subject to an exit tax under 26 U.S.C. § 877A. Exit taxes are usually based on income or net worth in the time leading up to expatriation. The level of income that obligates someone to pay an exit tax is adjusted annually for things like the cost of living, so talk to our team to determine if this applies to you.

Am I Taxed Twice on My Income in the U.S. and Germany?

Double taxation sounds downright illegal, but it is possible under certain circumstances. One such circumstance is having tax obligations in two different countries. If you live and work in Germany, you might owe German taxes. You might also owe U.S. taxes if you have retained or only recently renounced your U.S. citizenship. Generally, you owe taxes based on your worldwide income, meaning the money you earn might be taxed by both the United States and Germany.

To determine if you owe taxes in both countries, you should contact our team for help. Generally, you may be taxed by the United States no matter where you live and work as long as you are a citizen. Even if you are not a German citizen, you might still owe taxes if you live and work there long enough.

Even if you are not a citizen of Germany, you might be considered a tax resident if you have lived there long enough. Also, owning or renting a home and having a job in Germany might mean you are a tax resident, depending on the circumstances. If you are a tax resident of Germany and a legal citizen of the United States, you may face two sets of taxes on your income.

How Our Team Can Help U.S. Expats in Germany Take Advantage of Tax Breaks and Credits

The expenses involved in paying taxes in two countries might be more than you can afford. To help alleviate this burden, our team can help you explore certain tax credits and exclusions. If applicable, these tax breaks might help you save money on your U.S. taxes.

Foreign-Earned Income Exclusion

One option we can look into is the foreign-earned income exclusion. This tax option allows people earning income from foreign sources to exclude that income from their U.S. taxes, at least up to a certain extent. Remember, your United States taxes are based on worldwide income. This means that if you are earning money in German from a German source, the United States might still tax it as long as you are a U.S. citizen.

To qualify for this exclusion, you must first be a tax resident in a foreign country, like Germany. Next, you must meet one of the three following criteria:

First, you are a U.S. citizen residing in a foreign country for an uninterrupted amount of time including an entire tax year.

Second, you are a U.S. resident alien residing in a country with an income tax treaty with the U.S., and you live in that country uninterrupted for an entire tax year.

Third, you are a U.S. citizen or U.S. resident alien who is physically present in another country for no less than 330 full days during any consecutive 12-month period.

If you can take advantage of this exclusion, you may exclude a certain amount of the income you earn from German sources. As of 2023, this amount was $120,000, but this number is updated yearly for inflation.

Foreign Tax Credit

Another possible option is to claim a foreign tax credit. This might apply to those who have paid taxes or owe taxes in a foreign country. The taxes you pay in Germany may be applied as a credit to your U.S. taxes. This is typically taken as a deduction on your U.S. taxes on Form 1040. Overall, this should reduce your tax liability in the United States.

There is a catch here. If you choose to exclude any foreign-earned income, as discussed before, you cannot claim a foreign tax credit based on the foreign-earned income you have excluded.

Call US Tax Help for Assistance with Your Taxes