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.

US Tax Guide for Expats in Germany

Filing taxes can be complicated even for those with straightforward finances living full-time in the United States. If you have more complex finances and live in Germany, filing your U.S. taxes on your own might be a very daunting task. Our foreign tax accountants can guide you through this process and help you plan and prepare accordingly.

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.

Claiming a Foreign-Earned Income Exclusion for Expats in Germany

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 2024, this amount was $126,500, but this number is updated yearly for inflation.

Using a Foreign Tax Credit for Expats in Germany

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.

US Tax Preparation for Expats in Germany

Simply living abroad as a U.S. citizen may complicate your taxes even if your income, accounts, and holdings remain relatively simple and straightforward. You have to contend with tax laws from not one but two countries, and making sure you are in compliance might be difficult. Remember, if you are found not to be in compliance, you might have to spend time fixing the mistake, pay fines or penalties, or even face criminal sanctions in serious cases. Below are just a few services we can assist with to make sure your taxes are smooth and easy.

Audit Representation

Depending on how you file your taxes, you might be more likely to be audited by the IRS. An audit usually consists of a review of your tax and financial records from the past few years. How far back the IRS chooses to look depends on the case and what they think they might find. Many expats are audited because they have a mix of domestic and foreign holdings and often claim tax exemptions or credits to ease their tax obligations.

If you find yourself being audited, our team can represent you and help you protect yourself. Audits may be conducted by correspondence through the mail, in an IRS office, or out in the field by an IRS agent. Generally, audits are invasive and come with a lot of questions you might not fully know how to answer. Even if you have done nothing wrong, it is best to have tax professionals on your side who know how to make the audit as smooth and painless as possible.

Tax Compliance Issues

A major part of filing taxes as an expat living in Germany is making sure you are in compliance with the numerous rules and regulations of both countries. For expats, this often involves accounting for and disclosing information about foreign accounts or holdings to the IRS. If you neglect to inform the IRS of certain accounts you have in Germany, you might be accused of fraud, even if the omission was a minor clerical error.

We can review all your finances, accounts, assets, and holdings to determine what must be reported to the IRS, whether it is subject to taxation, and whether there are valid exemptions or credits you can claim. The more complicated your finances are, the harder it might be to remain in compliance.

Tax Planning and Preparation

Filing taxes often requires some level of preparation. Even those with the simplest of taxes still have multiple documents they need to gather before they can sit down and fill out tax forms. Unfortunately, the IRS and many other agencies in other countries are not forthcoming about what kind of documentation or forms you need. Taxpayers are often left on their own to figure this out. If you have complex finances on top of being an expat living in Germany, you might need assistance in your preparations.

Please speak to our team about how to prepare your taxes. Even if you manage to gather everything you need, fill out all the correct forms, and submit everything before the deadline, you might have to deal with some intense stress and anxiety. If you make a mistake, the IRS might not be pleased, and you might have to deal with audits or penalties. A professional accountant who understands tax laws in the United States and abroad should help you prepare your taxes and make plans for your financial future.

Call US Tax Help for Assistance with Your Taxes