The 2026 Tax Guide for US Expats in Germany

Berlin – For American citizens living in Germany, tax season always brings a common question: If I already pay taxes in Germany, do I still need to file a return with the US Internal Revenue Service (IRS)? The answer is yes. The United States is one of the few countries in the world that practices citizenship-based taxation. This means that regardless of where you live, if you hold US citizenship or a green card, you must declare your global income annually, even if you haven't set foot on US soil for years and all your income comes from Germany. While this rule is often confusing, the vast majority of Americans in Germany can effectively avoid double taxation through existing tax credits and exemptions. The key is to accurately understand the relevant rules and correctly complete the required forms to ensure compliance and avoid penalties. Who Needs to File? American residents in Germany must file a federal tax return if their annual income exceeds the IRS's filing threshold. Since the average salary level in Germany is generally higher than this threshold, most employed individuals are required to file. Self-employed individuals with net earnings of more than $400 are also required to file. All income must be reported in US dollars, including wages from German employers, self-employment income, rental income from properties, and investment income. Important Dates

US taxpayers living abroad automatically receive a two-month extension, with the filing deadline for the 2025 tax year being June 15. However, please note that even if the filing is delayed, taxes are still due by April 15 to avoid late payment penalties. How to Avoid Double Taxation? Many expats worry about having to pay taxes to both countries, but in practice, most people do not need to pay additional US taxes. This is mainly due to two tools: 1. Foreign Earned Income Exclusion (FEIE): In 2025, you can exclude up to $126,000 of foreign earned income; 2. Foreign Tax Credit (FTC): Use German taxes already paid to offset US tax liability. The choice of which one to use, or a combination of both, depends on individual income structure, family situation, and long-term financial planning. Reporting German Bank Accounts In addition to tax returns, if an individual holds foreign financial accounts in Germany (such as savings accounts, checking accounts, or certain investment accounts) with a total value exceeding $10,000 at any point during the year, they must file a Report of Foreign Bank and Financial Accounts (FBAR).

Furthermore, if the total value of foreign assets exceeds a certain threshold (such as $200,000 for single individuals), IRS Form 8938 (Statement of Specified Foreign Financial Assets) must also be filed. Note: Both FBAR and Form 8938 are information reporting obligations and not new taxes, but failure to file on time may result in penalties of up to $10,000 or even higher. The Role of the US-Germany Tax Treaty The double taxation agreement between the United States and Germany clarifies the taxation priority of various types of income and provides special treatment rules for pensions, social security benefits, and corporate profits, effectively reducing compliance conflicts. Typical Case For example, consider an American software engineer living in Munich: she receives a salary through a German employer, and German income tax has already been withheld by the company. When filing her US tax return, she converts her income to US dollars and applies for a foreign tax credit to offset the German taxes already paid. In most cases, this is sufficient to completely offset her US tax liability, so although she needs to file, she does not actually need to pay US taxes. Accurately understanding the rules and completing the filing in a timely manner is the key for every American expat in Germany to avoid legal risks and financial losses.