U.S. taxes for Americans in Germany

Germany has a substantial American expat population — corporate transferees, tech workers, academics, military, and increasingly digital nomads on the new Freelancer visa. It also has one of the highest effective tax rates on salary income in the OECD, which simplifies the U.S. tax planning significantly: Foreign Tax Credit beats FEIE in essentially every case.

This article covers the country-specific angles for U.S. taxpayers living in Germany.

The income tax math

Germany's Einkommensteuer rates start at 14% and rise to 42% at €68,481, plus 45% above €277,826. Add the Solidaritätszuschlag (5.5% surcharge on income tax for high earners) and church tax (8–9% of income tax for declared Protestant or Catholic members), and the effective marginal rate for a typical American professional is 35–50%.

This is well above U.S. federal income tax rates at comparable incomes. The result:

• Foreign Tax Credit (Form 1116) fully offsets U.S. tax on the same German income.
• You generate substantial FTC carryforward — often $10K–$30K per year of unused credits, available for 10 years.
• Roth IRA contributions remain available since income stays taxable on your U.S. return.

See FEIE vs. Foreign Tax Credit.

Church tax (Kirchensteuer)

If you declared a religion (Protestant, Catholic, or Jewish) on your German Anmeldung, you owe church tax of 8% or 9% of your income tax (varies by Bundesland).

For U.S. tax purposes, church tax is creditable foreign tax — it's an income-based levy on the same income that gives rise to your U.S. tax. Include it in your Form 1116 calculation.

The opt-out: file a formal Kirchenaustritt at your local Standesamt. You stop paying church tax going forward (with a one-time admin fee).

The Solidaritätszuschlag

The "Soli" is a 5.5% surcharge on your income tax bill, originally for German reunification costs. As of 2021 the Soli only applies above ~€96,500 of income (or above ~€18,000 of income tax owed).

Soli is creditable as foreign tax for U.S. purposes. Include it.

Private pension accounts — Riester, Rürup, betriebliche Altersvorsorge

German tax-advantaged retirement accounts have complicated U.S. treatment:

• Riester pension: a state-subsidized private pension. The German tax-deferral does not carry over to the U.S. Contributions are not deductible on your U.S. return. Earnings inside may be taxable currently. Crucially, if the Riester invests in German mutual funds, those are PFICs — devastating tax treatment regardless of the wrapper.
• Rürup pension (Basisrente): similar treatment. PFIC trap inside.
• Betriebliche Altersvorsorge (occupational pension): depends on plan type. Treaty Article 19 provides some relief for German workplace pensions for U.S. taxpayers, but the specifics vary. Defined-benefit plans often work cleanly; defined-contribution plans may have PFIC issues with underlying investments.

The pragmatic answer: be cautious about German retirement accounts as a U.S. taxpayer. Discuss with a cross-border tax pro before contributing significant amounts to anything beyond your employer's mandatory contributions.

German broker accounts and ETFs

The U.S.–Germany treaty doesn't change the PFIC rules. A UCITS ETF held in your Comdirect, Trade Republic, or Scalable Capital account is a PFIC. So is virtually any other fund a German broker would suggest.

For investing as an American in Germany:

• Use a U.S. brokerage that accepts foreign addresses. Schwab International and Interactive Brokers work. You can hold VTI, VXUS, BND, etc.
• EU PRIIPs regulations may block your German broker from selling you U.S.-domiciled ETFs at retail. Workaround: open the account as "professional investor" (knowledge tests required), or use a U.S. broker.
• For German cash: a Sparkonto at a regular German bank is fine — interest is FBAR-reportable, but no PFIC issue.

See foreign mutual funds and the PFIC trap.

German Social Security and totalization

Americans working in Germany on a normal employment contract pay German social-security contributions (Rentenversicherung, Krankenversicherung, Pflegeversicherung, Arbeitslosenversicherung) — typically ~22% of gross salary, split with the employer.

The U.S.–Germany totalization agreement (1979) eliminates U.S. FICA / Self-Employment tax for U.S. citizens covered by the German system:

• Employed by a German employer: you pay German contributions; you owe no U.S. FICA.
• Self-employed in Germany (Freiberufler / Gewerbetreibender): apply for a German Certificate of Coverage from Deutsche Rentenversicherung. You owe no U.S. SE tax.

See totalization agreements.

Capital gains: Abgeltungsteuer

Germany taxes capital gains and dividends at a flat 25% Abgeltungsteuer plus Soli (effectively ~26.4%) plus church tax if applicable. The annual tax-free allowance (Sparerpauschbetrag) is €1,000 per individual.

For U.S. purposes:

• German cap-gains tax on dividends and gains is creditable in the passive basket of Form 1116.
• The annual €1,000 allowance means the first €1,000 of investment income is German-tax-free — that portion has no FTC available, so the U.S. tax on it is owed.

The 25%/40% withholding on U.S. dividends

If you hold U.S. stocks at a German broker, the broker withholds U.S. tax on dividends under the treaty:

• 15% U.S. withholding under the U.S.–Germany treaty (vs. 30% statutory).
• Plus German Abgeltungsteuer on the gross dividend, with credit for the U.S. withholding.

Net effect: ~26% combined tax on U.S. dividends for German residents. For U.S. citizens, this gets reconciled on your U.S. return — you owe U.S. tax on the dividend, with FTC for the German tax, leaving net German tax above the U.S. rate as your effective rate.

FBAR and 8938 for German accounts

• Girokonto and Sparkonto at any German bank: FBAR-reportable.
• Tagesgeldkonto / Festgeldkonto: same.
• Wertpapierdepot at any German broker: FBAR-reportable.
• Riester, Rürup, betriebliche Altersvorsorge accounts: generally FBAR-reportable.
• Wise, N26, Revolut: yes, foreign financial institutions for FBAR.

Form 8938 thresholds: $200K year-end / $300K mid-year for single expats. Most German workplaces with workplace pensions cross these thresholds within a few years.

State residency

The German visa system and employment registration (Anmeldung) provides clear evidence of foreign residence — useful for proving severance from a U.S. state. Couple this with the standard severance steps (driver's license, voter registration, U.S. bank-of-record change) and most U.S. states release residency cleanly.

The sticky states (California, NY, NM, VA, SC) still require affirmative action. See state residency when abroad.

Estate and inheritance

Germany has its own inheritance/gift tax (Erbschaftsteuer / Schenkungsteuer) with rates of 7–50% depending on relationship and value. The U.S. has its own estate tax with the $13.99M (2025) exemption.

There is a U.S.–Germany estate tax treaty that mostly prevents double taxation but the interaction is complex. Cross-border estate planning is its own specialty; if you have substantial assets and family in both countries, consult an attorney who handles both jurisdictions.

Common Americans-in-Germany mistakes

• Defaulting to FEIE. Wastes the FTC carryforward, often blocks Roth contribution.
• Holding ETFs at the German broker. PFIC trap — almost all UCITS ETFs are PFICs.
• Riester or Rürup pension contributions without U.S. analysis. Tax-advantaged in Germany, often a PFIC mess in the U.S.
• Forgetting to get the totalization Certificate of Coverage for self-employed work in Germany.
• Not realizing church tax is creditable — losing FTC offset on a meaningful portion of foreign tax.
• Missing Soli in the FTC calculation.
• Treating Wise / Revolut as "U.S. equivalent" accounts — they're foreign for FBAR purposes.

Next steps

• FEIE vs. Foreign Tax Credit
• Foreign Tax Credit (Form 1116)
• Totalization agreements
• The PFIC trap
• Foreign mutual funds