U.S. taxes for Americans in Germany: what to file, and how to catch up.
Americans in Germany still file a U.S. return every year, but German tax rates are high enough that most owe the IRS little or nothing. The catch is in the details: German funds, Riester plans and building-savings contracts don’t fit neatly into U.S. rules. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.
Sound familiar?
- Your employer withholds Lohnsteuer and you assumed that covered everything.
- Your German bank asked for a W-9 or your U.S. tax number.
- You save monthly into a fund savings plan (Sparplan) or ETF.
- You moved for work, married a German, and stayed.
How does the IRS treat German pensions and savings?
Every one of these goes on your FBAR. What differs is how the IRS taxes them.
| Account | U.S. treatment | |
|---|---|---|
| Statutory pension (gesetzliche Rente) | No U.S. tax while you pay in. Once you draw it while living in Germany, the U.S. can tax it too, with a credit for the German tax. If you live in the U.S. by then, only the U.S. taxes it, like U.S. Social Security. | Mostly friendly |
| Employer pension (Betriebsrente) | If you work for a German employer, the treaty keeps your contributions, and what the plan builds up, off your U.S. return while you work there, within limits. | Mostly friendly |
| Riester and Rürup plans | The treaty’s pension rules cover employer pensions, not these plans. U.S. treatment depends on the plan: growth may not be tax-deferred in U.S. eyes, and the plan is usually reportable. | Check first |
| German funds and ETFs | Funds based outside the U.S. are usually PFICs (Form 8621), with complex reporting and tax rules. | Watch out |
| Bausparvertrag | Interest and bonuses are generally taxable on your U.S. return. | Taxable |
| Tagesgeld and Festgeld | Interest is taxable for the U.S., and the accounts count toward your FBAR total. | Taxable |
| Selling your home | Germany usually doesn’t tax the sale of a home you lived in. The U.S. excludes $250,000 of gain ($500,000 for couples), measured in dollars, so euro moves change the gain. | Plan ahead |
Which German investments are PFICs?
Almost every fund sold in Germany: German Investmentfonds, and the ETFs based in Ireland or Luxembourg that German brokers and banks offer. For U.S. tax they’re passive foreign investment companies, or PFICs.
- Each fund needs its own Form 8621 in most years, and gains can be taxed at the top U.S. rate plus an interest charge, unless an election was made in time.
- A monthly Sparplan makes it harder: each monthly purchase is a separate block of shares for the PFIC rules, with its own holding period.
- Not PFICs: shares of individual companies, German government bonds, and bank deposits.
Before selling to tidy up, look at the cost both ways: a sale has German tax on the gain as well as U.S. PFIC tax.
What does the U.S.–Germany tax treaty actually say?
The treaty was signed in 1989 and updated by a protocol in 2006. For Americans living in Germany, these parts matter most:
- The saving clause. The U.S. can tax its citizens as if the treaty didn’t exist, except for the provisions the treaty lists, which include its pension and social security rules.
- Employer pensions. Since the 2006 protocol, a U.S. citizen working for a German employer can keep contributions to the company pension, and its growth, off the U.S. return, within the limits for a similar U.S. plan.
- Social security. U.S. Social Security paid to someone living in Germany is taxed only by Germany, even for U.S. citizens. The German statutory pension can be taxed by the U.S. too, with a credit for German tax.
- Relief from double tax. The U.S. gives a credit for German income tax on the same income.
Social security contributions are covered by a separate U.S.–Germany agreement, which generally means you pay into one system, not both. Read the U.S.–Germany tax treaty on IRS.gov.
When are German and U.S. taxes due?
Both tax years run January to December, so each German year lines up with one U.S. return. Your Lohnsteuerbescheinigung and your Steuerbescheid give most of what the U.S. return needs.
| Germany | United States | |
|---|---|---|
| Tax year | January to December | January to December |
| Annual return | July 31 of the next year if you have to file, and later with a tax adviser. Many employees with only a salary don’t have to, though filing often brings a refund. | April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension |
| Paying the tax | Withheld from your salary each month, with any balance due after the assessment | April 15, even if you file later |
| Foreign accounts | No separate report | The FBAR, due October 15, filed online |
Foreign tax credit or exclusion: which wins in Germany?
Usually the foreign tax credit. German income tax climbs to 42%, and 45% at the top, so German tax on a salary is normally more than the U.S. tax on it. The credit wipes out the U.S. tax, and the unused credit carries forward for up to 10 years.
- Single-earner couples can be the exception. German joint assessment (Ehegattensplitting) can bring German tax below the U.S. tax on the same salary, so the exclusion, up to $130,000 of earned income for 2025, sometimes does better.
- Families with children often keep the credit anyway, because it allows the refundable part of the U.S. child tax credit, up to $1,700 per child for 2025.
- Investment income is taxed in Germany at a flat rate of about 25%, plus surcharges, which usually covers the U.S. tax on interest and dividends, but not on fund gains taxed under the PFIC rules.
We run your returns both ways before choosing. How we compare the exclusion and the credit.
A worked example: an engineer in Munich
Michael is a U.S. citizen working in Munich for a German company on €85,000 a year. He pays into his employer’s Betriebsrente, has a Riester contract, and invests €300 a month in a world ETF through a Sparplan. He hasn’t filed a U.S. return since he moved.
| Item | How it’s handled |
|---|---|
| Salary | German tax is higher than the U.S. tax on it, so with the foreign tax credit his U.S. tax on it is $0. |
| Betriebsrente | Under the treaty, his contributions and the growth stay off his U.S. return while he works there, within U.S. limits. |
| Riester contract | Not covered by the treaty’s pension rules. The state bonuses and growth could be taxable for the U.S., so we check the contract before reporting it. |
| ETF Sparplan | A PFIC: a Form 8621 each year, with every monthly purchase tracked as its own block of shares. |
| Catching up | Three years of returns and six FBARs under the Streamlined procedures, with no penalty if he qualifies. |
Catching up from Germany
Most Americans in Germany who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.
Common questions
Do I pay U.S. Social Security tax in Germany?
Generally not if you pay into the German system. The U.S.-Germany totalization agreement prevents paying into both systems for the same work in most cases.
Will the U.S. tax my U.S. Social Security if I retire in Germany?
No. Under the U.S.-Germany tax treaty, only Germany can tax it while you live there, even though you’re a U.S. citizen.
Is my Riester plan tax-free for the U.S.?
Not necessarily. The treaty’s pension rules cover employer pensions, not Riester or Rürup plans, so the state bonuses and growth could be taxable for the U.S. We look at your contract before deciding how to report it.
Should I sell my German ETFs?
Maybe, but not before getting advice. Selling has tax consequences in both countries. We’ll show you the U.S. cost of keeping versus selling.
Does church tax count as a foreign tax?
Church tax (Kirchensteuer) could be treated as a creditable foreign tax, but the U.S. rules don’t settle it. We’ll look at how it applies to your return.
My spouse is German. How do we file?
You can file as married filing separately, or choose to treat your spouse as a U.S. resident and file jointly, which brings their income into the U.S. return. Separately is usually better. Married to a non-American.
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