U.S. Taxes for Americans Living in Germany: The 2026 Guide

Key takeaways

• Moving to Germany does not end your U.S. filing obligation. The U.S.–Germany treaty's saving clause (Article 1(4), as rewritten by the 2006 Protocol) lets the United States tax its citizens as if the treaty did not exist, except for a closed list of carve-outs in Article 1(5).
• One of those carve-outs is unusual and favorable: U.S. Social Security paid to a German resident is taxable only in Germany — even if you are a U.S. citizen. Article 18(5) gives exclusive taxing rights to the country of residence, and Article 1(5)(a) expressly preserves this for U.S. citizens. Treasury's Technical Explanation notes this differs from the U.S. Model treaty.
• Germany's tax level usually makes the Foreign Tax Credit (FTC) at least as good as the Foreign Earned Income Exclusion (FEIE), and often better. German income tax on a typical salary exceeds the U.S. tax on the same income, so the FTC wipes out U.S. tax on wages, generates carryforwards, and — unlike the FEIE — keeps the refundable Additional Child Tax Credit available.
• The treaty protects U.S. retirement accounts from current German tax. Article 18A(1) bars Germany from taxing the internal growth of 401(k)s, IRAs and Roth IRAs until money is paid out. It also lets a U.S. citizen working for a German employer exclude contributions to a German Betriebsrente (occupational pension) from U.S. income (Article 18A(5)), within U.S. limits.
• German investment funds and ETFs are a trap. A U.S. person who owns a non-U.S. mutual fund or ETF may have a Form 8621 (PFIC) obligation, and default PFIC taxation is punitive. Ordinary German brokerage portfolios built from local funds are a common and expensive mistake.
• There is a U.S.–Germany totalization agreement (in force since December 1, 1979). It generally assigns social security coverage to one country only. Social security contributions paid to Germany cannot be claimed as a U.S. foreign tax credit or deduction.

Who is affected, and why living in Germany changes nothing on the U.S. side

Citizenship-based taxation

The IRS states that a U.S. citizen or resident alien is generally taxed on worldwide income regardless of where they live, and is subject to the same filing requirements as a person living in the United States (IRS Publication 54, Introduction). This applies equally to dual U.S.–German citizens: holding a German passport does not remove U.S. tax citizenship.

Green card holders are also U.S. tax residents under the "green card test" (Pub. 54). A green card holder who becomes a German resident may be able to claim treaty residence in Germany under the tie-breaker (see What the U.S.–Germany treaty actually says), but that has its own consequences, including for the "long-term resident" expatriation rules referenced in the treaty Protocol (Protocol ¶1, as amended in 2006). This guide focuses on U.S. citizens.

The saving clause

The 2006 Protocol replaced Article 1 of the 1989 Convention. New Article 1(4)(a) provides that, except as provided in paragraph 5, the Convention "shall not affect the taxation by the United States of its residents … and its citizens." Article 1(4)(b) extends this to former citizens and long-term residents for ten years after loss of status.

Treasury's Technical Explanation of the 2006 Protocol (2007) describes this as the "traditional saving clause found in all U.S. treaties" and gives the example of a German resident who is also a U.S. citizen: treaty limits that would otherwise stop the U.S. from taxing that person's income do not apply, and the income is taxed "under the normal Code rules."

What the saving clause does not override

Article 1(5)(a) lists the treaty benefits the United States still grants to its own citizens and residents. For an individual American in Germany, the relevant ones are:

Treaty provision preserved for U.S. citizens	What it does
Art. 13(6)	Basis step-up election when a departure ("exit") tax is imposed by the other country
Art. 18(3)–(4)	Alimony and child support rules
Art. 18(5)	Social security benefits taxable only in the country of residence
Art. 18A(1)	Deferral of tax on pension plan earnings until distribution
Art. 18A(5)	U.S. exclusion/deduction for a U.S. citizen's contributions to a German employer pension plan
Art. 19(3)	Exemption for compensation for war/persecution damages (German reparations)
Art. 23	Relief from double taxation, including the special re-sourcing rule for U.S. citizens resident in Germany
Arts. 24, 25	Non-discrimination; mutual agreement procedure

Source: Convention Art. 1(5)(a), as amended by the 2006 Protocol; 2007 Technical Explanation, Article I.

Filing deadlines when you live in Germany

• April 15 is the regular due date. A U.S. citizen living outside the United States whose main place of business is outside the United States gets an automatic 2-month extension to June 15 to file and pay, but interest runs from April 15. A statement explaining the qualifying situation must be attached to the return (Pub. 54, ch. 1).
• October 15: an additional 4 months to file (not to pay) is available by filing Form 4868 by June 15, checking the "out of the country" box (Pub. 54).
• December 15: a discretionary further 2 months may be requested by letter sent by October 15 (Pub. 54).
• Form 2350 can extend the deadline further if you need time to meet the FEIE residence or presence tests (Pub. 54; Form 2555 instructions).

What the U.S.–Germany treaty actually says

The treaty in force is the Convention signed at Bonn on August 29, 1989 (general effective date January 1, 1990), as amended by the Protocol signed at Berlin on June 1, 2006. The IRS treaty page lists four documents: the 1989 Convention, the 1989 Technical Explanation, the 2006 Protocol and the 2007 Technical Explanation of the Protocol. The Protocol takes effect for withholding taxes on amounts paid on or after January 1 of the year it entered into force, and for other income taxes for tax years beginning on or after the following January 1 (Protocol Art. XVII(2)). (The exact date on which instruments of ratification were exchanged (and therefore the precise first effective year) is not stated in the four documents reviewed.)

Residence and the tie-breaker (Article 4)

A person is a treaty resident of a country if liable to tax there by reason of domicile, residence, place of management, incorporation or a similar criterion (Art. 4(1), as replaced by the Protocol). If an individual is resident in both countries, Article 4(2) applies these tests in order:

1. Permanent home available to him;
2. If a permanent home in both (or neither), center of vital interests (closer personal and economic relations);
3. Habitual abode;
4. Nationality;
5. If a national of both or neither: mutual agreement between the competent authorities.

Two German-specific points matter:

• Germany will not treat a U.S. citizen as a U.S. treaty resident by citizenship alone. Protocol ¶2(a) provides that Germany treats a U.S. citizen or green card holder as a U.S. resident only if that person has a substantial presence, permanent home or habitual abode in the United States. The Technical Explanation says this requires a "reasonably strong economic nexus" with the U.S.
• For a U.S. citizen, winning the tie-breaker for Germany changes almost nothing on the U.S. side, because the saving clause applies to citizens regardless of treaty residence. The tie-breaker matters mainly for green card holders and for German-side taxation.

Residence disputes for natural persons (Article 4) are among the categories subject to mandatory binding arbitration if the competent authorities cannot agree (Art. 25(5)–(6) and Protocol ¶22, as amended in 2006).

Income categories, at a glance

Income type	Treaty article	Rule for a German resident	Effect for a U.S. citizen resident in Germany
Salaries	Art. 15	Taxable where the work is performed (183-day exception)	Saving clause: U.S. also taxes; relief by FTC/FEIE
Self-employment / professional services	Art. 7 (Art. 14 deleted by 2006 Protocol)	Business profits taxable in residence state unless attributable to a permanent establishment in the other state	Saving clause applies
Dividends	Art. 10	Source-country tax capped at 15% for portfolio holdings (5% / 0% for qualifying companies and pension funds)	U.S. taxes; special Art. 23(5) credit rules for U.S.-source dividends
Interest	Art. 11	Taxable only in residence state	Saving clause applies
Capital gains (other than real estate etc.)	Art. 13(5)	Taxable only in residence state	Saving clause applies
Private pensions	Art. 18(1)	Taxable only in residence state	Saving clause applies — U.S. also taxes; relief via Art. 23
Social security	Art. 18(5)	Taxable only in residence state	Exception to saving clause — U.S. Social Security taxable only by Germany
U.S. government pensions	Art. 19(2)	Generally taxable only by the paying state	See below
Pension plan earnings (401(k), IRA, Roth)	Art. 18A(1)	Residence state may tax only when paid out	Germany may not tax internal growth

Sources: 1989 Convention and 2006 Protocol (articles as cited).

What is different about this treaty

1. Social Security: residence-country taxation, preserved for U.S. citizens. Article 18(5) (moved from Article 19 by the 2006 Protocol) says social security benefits paid by one state "to a resident of the other Contracting State shall be taxable only in that other Contracting State," and the residence state taxes them as if they were its own social security benefits. Because Article 18(5) is listed in Article 1(5)(a), the United States gives up the right to tax U.S. Social Security paid to its own citizens who are German residents. The Technical Explanation states that this treatment "differs from that in the U.S. Model," which provides for source-country taxation. The 1989 Letter of Submittal had already described an exemption from U.S. tax on U.S. Social Security for German residents. (How Germany computes the taxable portion of a U.S. Social Security benefit under German domestic law was not reviewed; German administrative guidance was not consulted.)

2. A dedicated pension article (Article 18A). Added in 2006. See U.S. retirement accounts below.

3. A special double-tax mechanism for U.S. citizens (Article 23(5)). Because the U.S. taxes citizens on U.S.-source income at full rates, the treaty splits relief: Germany credits only the U.S. tax the treaty would allow on a non-citizen German resident (e.g., 15% on U.S. portfolio dividends, nothing on U.S. interest), and the United States then credits the residual German tax, re-sourcing just enough income to Germany to make that work (Art. 23(5)(a)–(c)). The Technical Explanation's worked example: on a $100 U.S. dividend, with a 35% U.S. rate and 40% German rate, total U.S. tax ends at $15 and Germany collects $25.

4. Government pensions. Under new Article 19(2), pensions paid by the U.S. government for services to it are generally taxable only in the United States, unless the recipient is both resident in and a national of Germany. (Application to dual U.S.–German nationals resident in Germany was not analyzed in the sources reviewed beyond the treaty text; the Protocol also exempts from the new Article 19 individuals already employed by the U.S. government on August 29, 1989 (Protocol Art. XVII(3)(b)).)

5. Departure-tax coordination. Article 13(6) lets a person taxed on a deemed sale when leaving one country elect a fair-market-value basis in the other country. It is preserved for U.S. citizens (Art. 1(5)(a)).

FEIE vs. Foreign Tax Credit in Germany

For the general mechanics of each tool, the stacking rule, and worked 2026 examples outside Germany-specific rates, see our guide on FEIE vs. Foreign Tax Credit.

The two tools

Foreign Earned Income Exclusion (Form 2555). For 2026, up to $132,900 of foreign earned income per qualifying person (Rev. Proc. 2025-32, §4.39). You must have a foreign tax home and meet either:

• the bona fide residence test — bona fide resident of a foreign country for an uninterrupted period including an entire tax year; or
• the physical presence test — at least 330 full days in foreign countries during any 12 consecutive months (Form 2555 instructions).

Key restrictions (all from the Form 2555 instructions):

• No credit or deduction for foreign taxes on the excluded income.
• No Additional Child Tax Credit and no Earned Income Credit if you claim either exclusion or the housing deduction.
• Income that is not excluded is taxed at the rates that would apply without the exclusion (the "stacking" rule, via the Foreign Earned Income Tax Worksheet).
• Once you revoke the election, you cannot claim it again for 5 tax years without IRS approval.
• The FEIE does not reduce self-employment tax (Pub. 54, ch. 3).

Foreign Tax Credit (Form 1116). A dollar-for-dollar credit for German income taxes, limited to the U.S. tax on foreign-source income in each separate category (general vs. passive). Excess credits may be carried back 1 year and forward 10 years (Pub. 514). The treaty guarantees that the U.S. will continue to allow a credit for German income tax, the Solidarity Surcharge-type "substantially similar" taxes included, subject to U.S. law limitations (Art. 23(1); Art. 2(2); Protocol ¶19). (No primary source reviewed expressly confirms that the German Solidaritätszuschlag or Kirchensteuer (church tax) are creditable foreign income taxes; church tax creditability in particular was not found in the sources reviewed.)

Social security contributions paid to Germany are not creditable or deductible: Pub. 514 states that no deduction or credit is allowed for social security taxes paid to a country with which the U.S. has a social security agreement.

Why the FTC usually wins in Germany

German income tax rates for 2026 run from 14% just above the basic allowance of €12,348, rising progressively to 42% from €69,879 of taxable income, with 45% from €277,826 (single filers; doubled for joint assessment). (Schürmann Steuerberatung (Berlin tax adviser newsletter, Dec. 2025) and Sparkasse.de; the primary statutory text, § 32a EStG on gesetze-im-internet.de, blocked automated retrieval and the Federal Ministry of Finance page was not retrieved.)

Because German tax on a given salary is typically higher than U.S. tax on the same salary, the FTC usually reduces U.S. tax on wages to zero on its own, and the unused German tax becomes a carryforward. In that situation the FEIE adds nothing on wages — and costs you the refundable child credit, IRA eligibility on excluded pay, and flexibility.

The FEIE can still be attractive in narrower cases: low German tax years (e.g., first partial year), a large foreign housing amount, or income just above the U.S. standard deduction where the FTC limitation is awkward. These are judgment calls.

Worked example (2026, single filer, salary only)

Assumptions (illustrative): Single U.S. citizen, full-year resident of Munich, employed by a German company. Gross salary €90,000. German taxable income (zu versteuerndes Einkommen) after social contributions and standard allowances assumed at €72,000 (The €18,000 gap between gross and taxable income is an assumption, not a computation of German social security and allowance deductions.). No church tax. Exchange rate: the IRS 2025 yearly average for the euro, 0.886 € per $1, used as a placeholder because the 2026 average is not yet published.

Step	Amount
German income tax on €72,000 (2026 tariff)	€19,104
Solidarity surcharge (below €20,350 exemption threshold)	€0 (Threshold per Schürmann Steuerberatung, Dec. 2025.)
German tax in USD (÷ 0.886)	$21,562
Salary in USD (€90,000 ÷ 0.886)	$101,580

(The German tax figure was computed with the 2026 § 32a EStG zone formulas as understood by the author; the zone boundaries match secondary sources and the formulas are internally continuous at each boundary, but the primary statutory text could not be retrieved.)

Option A — FTC. U.S. taxable income = $101,580 − $16,100 standard deduction = $85,480. U.S. tax (2026 single brackets) = $13,518. Foreign tax credit limited to $13,518 → U.S. tax due: $0. Unused German tax of about $8,044 carries forward (general category).

Option B — FEIE. $101,580 is below $132,900 → fully excluded → U.S. tax due: $0. No carryforward is generated.

Reading the result: both options give $0 U.S. tax this year, but the FTC route builds a carryforward that can later shelter other general-category foreign income, preserves IRA contribution eligibility, and preserves the refundable child credit (see the full example in Full worked example below).

Social security: the totalization agreement

The U.S.–Germany Agreement on Social Security was signed January 7, 1976 and took effect December 1, 1979, with supplementary agreements effective March 1, 1988 and May 1, 1996. It applies to the territory of the former GDR from October 3, 1990 (SSA, Status of Totalization Agreements).

On the German side, it covers wage earners' and salaried employees' pension insurance, miners' pension insurance, farmers' old-age security, and the taxes financing German sickness and long-term care insurance (SSA, Totalization Agreement with Germany).

Employees

• Hired locally / working for a German employer: covered by Germany only (SSA general agreement rules).
• Sent by a U.S. employer for five years or fewer: remains covered by U.S. Social Security and exempt in Germany; more than five years → German coverage (SSA).
• To prove exemption from U.S. coverage, the employer in Germany requests certificate of coverage form D/USA 101 from the local German sickness fund (Krankenkasse) that collects the contributions (SSA Germany page). For U.S. coverage, the employer requests a U.S. certificate from SSA (online for employers and self-employed persons).

Self-employed

• Self-employed persons working only in Germany are assigned German coverage; only in the U.S., U.S. coverage. Someone normally self-employed in one country who transfers the business to the other for five years or fewer stays covered by the original country (SSA Germany page).
• This matters because U.S. self-employment tax is otherwise owed by citizens abroad on net earnings of $400 or more, and the FEIE does not reduce it (Pub. 54, ch. 3). The totalization agreement is what removes U.S. self-employment tax for a self-employed American covered by the German system.
• A self-employed person covered by Germany writes to the local German sickness fund for a certificate (SSA Germany page). Pub. 54 describes the general rule that a self-employed person subject to dual taxation is covered only by the system of the country of residence. (The exact way the German certificate must be attached to or referenced on Schedule SE was not confirmed in the sources reviewed.)

Benefits

• If you lack enough U.S. credits, German coverage can be counted toward a partial U.S. benefit, provided you have at least six U.S. credits. Germany counts U.S. credits if you have at least 18 months of German coverage (SSA Germany page).
• Medicare is not covered by the agreements (SSA general page).
• Tax treatment of U.S. Social Security received while living in Germany: see What the U.S.–Germany treaty actually says (Article 18(5)).

U.S. retirement accounts (401(k), IRA, Roth)

Germany cannot tax the growth inside U.S. plans

Article 18A(1): where a German resident participates in a pension plan established in the United States, income earned by the plan "may be taxed as income of that individual only when, and, to the extent that, it is paid" out. The Technical Explanation gives exactly this example: a U.S. citizen who contributed to a U.S. qualified plan and then moves to Germany — Germany may not tax the plan's earnings currently.

"Pension plan" for the United States expressly includes §401(a) qualified plans, IRAs (including SEP and SIMPLE §408(p) accounts), Roth IRAs under §408A, §403(a), §403(b) and §457(b) governmental plans (Protocol ¶16(a)(aa)).

Distributions

Private pensions paid to a German resident are taxable only in Germany under Article 18(1), but this article is not on the saving-clause exception list, so the U.S. also taxes distributions to its citizens. Double tax is relieved under Article 23. (How Germany taxes distributions from a U.S. Roth IRA (whether the U.S. tax-free status is respected in Germany) is not found in the sources reviewed. Note that Protocol ¶16(b)(aa) recognizes U.S. plans "other than Roth IRAs" as corresponding to German occupational plans for contribution-relief purposes — which suggests, but does not establish, different German treatment of Roths.)

Continuing to contribute

• To a U.S. plan while working in Germany (Art. 18A(2)–(3)): allows a German deduction for contributions to a U.S. plan, but only if contributions began before the work in Germany started and the plan is accepted as corresponding. Under Article 1(5)(b), this benefit is not available to U.S. citizens or green card holders on the U.S. side — it is aimed at relief in the host country. (How German employers and tax offices apply Art. 18A(2) in practice for Americans was not reviewed.)
• IRAs: if you claim the FEIE, special rules apply to the IRA deduction (Form 2555 instructions; Pub. 590-A not reviewed). (The rule that excluded income does not count as compensation for IRA purposes was not confirmed in a primary source reviewed for this guide.)

German occupational pensions (Betriebsrente) — U.S. side

Article 18A(5) lets a U.S. citizen resident in Germany, employed by a German employer (or German permanent establishment), exclude or deduct from U.S. income contributions to a German pension plan, and not treat employer contributions or benefit accruals as current U.S. income — but only:

• to the extent the contributions qualify for German tax relief;
• up to the relief the U.S. would give for a generally corresponding U.S. plan; and
• where the U.S. competent authority has agreed the plan corresponds. Protocol ¶16(b)(bb) records that the United States recognizes arrangements under §1 of the German Betriebsrentengesetz as corresponding.

The Technical Explanation adds that these contributions count against U.S. limits — for example, when determining whether you exceed the annual IRA contribution limit.

German state and private pensions (Riester, Rürup)

• The German statutory pension (gesetzliche Rentenversicherung) is a social security system covered by the totalization agreement. (Whether the U.S. treats German statutory pension benefits paid to a U.S. citizen resident in Germany as "social security" for the §86 inclusion rules was not found in the sources reviewed; Article 18(5)'s "as though" rule applies only to cross-border payments.)
• Riester and Rürup contracts are not listed in Protocol ¶16; for Germany only Betriebsrentengesetz arrangements are named. Their U.S. treatment (including whether they could be foreign trusts or PFIC-holding structures) was not found in the sources reviewed. (No IRS guidance specific to Riester or Rürup was located.)

German investments: PFIC risk and local accounts

For the full mechanics of the default §1291 regime, the QEF and mark-to-market elections, and Form 8621 reporting, see our guide on PFICs.

Funds and ETFs domiciled outside the U.S.

A foreign corporation is a PFIC if 75% or more of its gross income is passive, or at least 50% of its assets produce passive income (Form 8621 instructions). Pub. 54 warns directly: an individual who owns a mutual fund or ETF not domiciled in the United States "may have a Form 8621 obligation."

Most funds sold through German banks and brokers (including UCITS ETFs domiciled in Germany, Ireland or Luxembourg) are non-U.S. funds. (The general proposition that typical German retail funds meet the PFIC tests is a widely held professional view, but no IRS ruling on specific German fund types was reviewed.)

Consequences under the default "section 1291 fund" regime (Form 8621 instructions):

• Gains on sale are treated entirely as excess distributions — not capital gains.
• Excess distributions are spread over the holding period, taxed at the highest ordinary rate for each prior year, plus an interest charge.
• Losses do not reduce §1291 gain.
• Elections: QEF (requires an annual information statement from the fund, which many European funds do not provide) or mark-to-market for marketable stock (annual ordinary income on unrealized gains).

Filing relief: Part I of Form 8621 is not required for a §1291 fund if the aggregate value of all PFIC stock is $25,000 or less ($50,000 joint) at year-end and there was no excess distribution or disposition. This is a reporting exception, not a tax exception.

Holdings inside a U.S. IRA or §401(a) plan are not treated as PFIC shareholdings (Form 8621 instructions). There is also a Part I exception for interests held through an arrangement treated as a foreign pension fund under a treaty (Reg. §1.1298-1(c)(4), cited in the instructions).

German-side note: the treaty treats German Investmentvermögen as German residents and caps U.S. withholding on their distributions at 15% (Protocol ¶2(b); Art. 10(4)). This does not affect U.S. PFIC status.

German bank accounts

Interest on German bank accounts is U.S.-taxable for a citizen (Art. 11 interest rule overridden by the saving clause), generally foreign-source passive-category income for the FTC. Germany taxes most private investment income at a flat withholding rate after an annual saver's allowance. (The flat rate (commonly stated as 25% plus surcharges) and the saver's allowance (Sparer-Pauschbetrag, commonly stated as €1,000 single / €2,000 joint) were not confirmed in a primary German source.) If little or no German tax is paid on interest, the U.S. tax on it is often not offset by excess credits from wages, because wages and interest fall in different FTC categories (Pub. 514, separate limit income).

Foreign life insurance and cash-value contracts

A foreign-issued life insurance or annuity contract with cash value is reportable on both Form 8938 and the FBAR (IRS FBAR/8938 comparison). (Income-tax treatment of German Kapitallebensversicherung contracts under §7702 was not reviewed.)

FBAR, FATCA (Form 8938) and banking

	FBAR (FinCEN Form 114)	Form 8938
Who files	U.S. persons with foreign financial accounts	Specified individuals (incl. U.S. citizens) with specified foreign financial assets
Threshold	Aggregate account value over $10,000 at any time in the year	Living abroad: single/MFS — over $200,000 on the last day of the year or over $300,000 at any time; MFJ — over $400,000 / $600,000
Where	Electronically with FinCEN, not with the tax return	Attached to Form 1040
Due	April 15, automatic extension to October 15	With the return, including extensions
Foreign mutual funds	Reportable	Reportable
Foreign social-security-type benefits	Not reportable	Not reportable
Penalties (summary)	Inflation-adjusted civil penalties; willful violations can reach the greater of $100,000 or 50% of the balance (pre-adjustment figures); criminal penalties possible	Up to $10,000, plus $10,000 per 30 days after IRS notice (max $60,000); criminal penalties possible

Source: IRS, Comparison of Form 8938 and FBAR requirements (page reviewed September 19, 2026); Pub. 54.

Failure to file international information returns can also extend the assessment statute of limitations and reduce the allowed foreign tax credit (Pub. 54).

Bank access. The treaty's exchange-of-information article allows authorities to obtain information held by financial institutions (Art. 26; Protocol ¶23(a)). (The existence and terms of a FATCA intergovernmental agreement between the U.S. and Germany, and German banks' practice of requesting Form W-9 or a U.S. TIN from U.S. customers, were not confirmed in the primary sources reviewed.) Not found in the sources reviewed: any official statement on German banks declining U.S. customers.

U.S. state taxes

Whether you still owe tax to a U.S. state depends on that state's own rules, typically whether you remain domiciled there (your intended permanent home) rather than where you physically live. Some states make it hard to shed domicile if you keep a home, driver's license, voter registration or other ties; others do not have an income tax at all. The federal–German treaty does not bind U.S. states (Art. 2(1) covers only federal income taxes imposed by the Internal Revenue Code). (State-by-state domicile rules were outside the scope of the primary sources reviewed; check the revenue department of your last state of residence. See our guide on state taxes after moving abroad.)

Full worked example (2026)

Assumptions (illustrative):

• Married couple, both U.S. citizens, filing jointly; one child under 17, U.S. citizen with a valid SSN. Both spouses have valid SSNs.
• Full-year residents of Frankfurt; both meet the bona fide residence test.
• Spouse A: German employer, salary €120,000. Spouse B: part-time, salary €30,000.
• German bank interest: €2,000.
• A U.S. Roth IRA from earlier years (no distributions).
• No church tax; no PFICs.
• German joint taxable income assumed at €118,000 after social contributions and allowances (Assumption, not a computation.).
• Exchange rate placeholder: 0.886 € per $1 (IRS 2025 yearly average; 2026 not yet published).

German side

Item	Amount
Income tax on €118,000 under joint assessment (2 × tax on €59,000)	€27,698
Solidarity surcharge (below €40,700 joint threshold)	€0
Tax on interest (assumed fully covered by €2,000 joint saver's allowance)	€0
Total German income tax	€27,698 ≈ $31,262

(Tariff formulas, the Soli threshold and the saver’s allowance come from the secondary sources flagged in FEIE vs. Foreign Tax Credit in Germany and German investments above, not from a primary statutory text.)

U.S. side — income

Item	USD
Wages A (€120,000 ÷ 0.886)	$135,440
Wages B (€30,000 ÷ 0.886)	$33,860
Interest (€2,000 ÷ 0.886)	$2,257
AGI	$171,557

Option 1 — Foreign Tax Credit

Step	USD
Taxable income ($171,557 − $32,200 standard deduction)	$139,357
U.S. tax (2026 MFJ brackets)	$20,083
FTC limit, general category (wages share of income)	≈ $19,818
FTC limit, passive category (interest share)	≈ $264
German tax available: general $31,262; passive $0
FTC allowed	$19,818
Tax after FTC	$264 (the U.S. tax attributable to the interest)
Child tax credit, non-refundable portion (limited to remaining tax)	−$264
Additional Child Tax Credit (refundable): lesser of $1,700, 15% × (earned income − $2,500), or unused CTC ($1,936)	−$1,700
Result	≈ $1,700 refund
German tax carried forward (general category)	≈ $11,443

The FTC limitation here is simplified: it apportions the standard deduction pro rata to all income, which is the general approach of Form 1116 line 3 but ignores other allocable deductions. Schedule 8812's Credit Limit Worksheet A subtracts the Schedule 3 line 1 foreign tax credit before computing the non-refundable child tax credit, and the refundable portion is capped at $1,700 per child for 2026 (Rev. Proc. 2025-32 §4.05; Schedule 8812 instructions). Beginning in 2025, a valid SSN is required for at least one spouse and for the child (Schedule 8812 instructions). (The Schedule 8812 instructions reviewed are the 2025 version; 2026 instructions were not yet available. No requirement that the taxpayer's main home be in the U.S. was found in the 2025 instructions.)

Option 2 — FEIE

Step	USD
Excluded wages: A $132,900 (capped); B $33,860	$166,760
Remaining income: $2,540 of A's wages + $2,257 interest	$4,797
Taxable income after $32,200 standard deduction	$0
U.S. income tax	$0
Additional Child Tax Credit	Not allowed (Form 2555 filed)
FTC carryforward generated	None

Comparison

	FTC	FEIE
U.S. income tax	$0 after credits	$0
Refundable child credit	≈ $1,700	$0
Carryforward of German tax	≈ $11,443	None
IRA contribution base	Wages remain compensation	Excluded wages: special rules apply

For this family, the FTC is better by roughly $1,700 a year, before considering the carryforward and IRA flexibility. This is typical of Germany's tax level, but each situation needs its own calculation.

Common mistakes Americans make after moving to Germany

1. Assuming German tax compliance satisfies U.S. obligations. It does not; a Form 1040 is still due, and FBAR/Form 8938 are separate.
2. Buying German or other EU funds/ETFs through a local bank or Depot without considering PFIC rules (Form 8621 instructions; Pub. 54 note on non-U.S. funds).
3. Defaulting to the FEIE when the FTC would preserve the refundable child credit and build carryforwards (Form 2555 instructions; Schedule 8812 instructions).
4. Paying U.S. tax on U.S. Social Security while a German resident, overlooking Article 18(5) and its saving-clause exception.
5. Missing the FBAR because balances are in euros; the $10,000 test is on the aggregate maximum value converted to dollars (IRS comparison page).
6. Claiming German social security contributions as a foreign tax credit. Not allowed for a totalization-agreement country (Pub. 514).
7. Self-employed Americans ignoring U.S. self-employment tax, assuming the FEIE covers it, or not obtaining the German certificate of coverage that establishes German-only coverage (Pub. 54; SSA Germany page).
8. Contributing to a Roth IRA or traditional IRA with no eligible compensation after excluding all wages under the FEIE. (See the sourcing caveat in U.S. retirement accounts above: this specific point was not confirmed in a primary source.)
9. Mixing up FTC categories — expecting excess credits from heavily taxed wages to offset U.S. tax on lightly taxed German interest or dividends (Pub. 514).
10. Not documenting German tax actually paid. The credit is for the "legal and actual" foreign tax liability; refunds after filing are foreign tax redeterminations that may require amended returns (Pub. 514).

Frequently asked questions

Do I still have to file a U.S. return if all my income is from Germany and I pay German tax on it?

Yes, if your worldwide gross income meets the filing threshold. Citizens abroad have the same filing requirements as citizens in the U.S., and income you could exclude under the FEIE still counts toward the threshold (Pub. 54, ch. 1).

Will the United States tax my U.S. Social Security once I live in Germany?

Under the treaty, U.S. Social Security paid to a German resident is taxable only in Germany, and this applies to U.S. citizens too (Art. 18(5); Art. 1(5)(a); 2007 Technical Explanation, Article VIII).

Can Germany tax the gains inside my 401(k) or Roth IRA each year?

No. Germany may tax pension plan income only when it is paid out; Roth IRAs are expressly included in the definition of "pension plan" (Art. 18A(1); Protocol ¶16(a)(aa)). How Germany taxes Roth distributions was not found in the sources reviewed.

Should I use the FEIE or the Foreign Tax Credit?

In Germany the FTC is usually at least as good because German income tax generally exceeds U.S. tax on the same wages; the FEIE also bars the refundable Additional Child Tax Credit (Form 2555 instructions; Pub. 514). Run both before choosing; revoking the FEIE locks you out for five years without IRS consent.

I'm self-employed in Germany. Do I pay U.S. self-employment tax?

Under the totalization agreement, self-employed people working only in Germany are generally covered by the German system; you should obtain a certificate from the German sickness fund to establish the exemption (SSA Germany page; Pub. 54, ch. 3). Without that exemption, self-employment tax is due regardless of the FEIE.

What are the FBAR and Form 8938 thresholds for someone living in Germany?

FBAR: aggregate foreign accounts over $10,000 at any time. Form 8938 for filers living abroad: over $200,000 at year-end or $300,000 at any time (single), over $400,000 / $600,000 (joint) (IRS FBAR/8938 comparison page).

When to hire a professional

Seek a qualified U.S. international tax adviser — and coordinate with a German Steuerberater — if any of these apply:

• You hold German, Irish or Luxembourg funds or ETFs, or are considering a German Depot.
• You are self-employed, a freelancer (Freiberufler), or own a German company (GmbH/UG) — CFC, Form 5471 and GILTI-type rules may apply (Pub. 54 lists Form 5471).
• You participate in a Betriebsrente, Riester or Rürup plan, or have German cash-value life insurance.
• You plan to take distributions from a Roth IRA while living in Germany.
• You are a green card holder, a dual national, or considering renouncing U.S. citizenship — see our guide on the US exit tax (Form 8854; treaty Art. 1(4)(b)).
• You have unfiled prior-year returns or FBARs — see our guide on the Streamlined Filing Compliance Procedures.
• You receive a U.S. government pension, or are married to a non-U.S. spouse and considering the election to file jointly (Pub. 54).
• You face German exit taxation or a large capital gain on moving back.

Sources

Source	URL	Used for	Page date
IRS — Germany tax treaty documents	https://www.irs.gov/businesses/international-businesses/germany-tax-treaty-documents	List of treaty documents	Reviewed 09-Aug-2026
U.S.–Germany Income Tax Convention (1989), with 1989 Protocol and letters	https://www.irs.gov/pub/irs-trty/germany.pdf	Treaty articles 1–33; Letter of Submittal	Signed Aug. 29, 1989
Protocol amending the Convention (2006)	https://www.irs.gov/pub/irs-trty/germanprot06.pdf	Arts. 1, 4, 10, 13(6), 18(5), 18A, 19, 23, 25, 28; Protocol ¶¶1–24; effective dates	Signed June 1, 2006
Treasury Technical Explanation of the 2006 Protocol	https://www.irs.gov/pub/irs-trty/germanyte07.pdf	Saving clause, Art. 18(5), Art. 18A, Art. 23(5) example	2007
Rev. Proc. 2025-32	https://www.irs.gov/pub/irs-drop/rp-25-32.pdf	2026 FEIE, brackets, standard deduction, CTC amounts	Oct. 9, 2025
IRS Publication 54	https://www.irs.gov/publications/p54	Filing, extensions, FBAR/8938, Form 8621 note, SE tax, totalization	Rev. Dec. 2025
Instructions for Form 2555 (2025)	https://www.irs.gov/instructions/i2555	FEIE tests, revocation, ACTC bar, FTC interaction	Reviewed 30-Apr-2026
IRS Publication 514 (2025)	https://www.irs.gov/publications/p514	FTC rules, carryovers, categories, no credit for totalization-country social taxes	2025
Instructions for Form 8621 (12/2025)	https://www.irs.gov/instructions/i8621	PFIC definition, §1291, QEF, MTM, $25,000 exception	Reviewed 30-Apr-2026
Instructions for Schedule 8812 (2025)	https://www.irs.gov/instructions/i1040s8	CTC/ACTC, SSN rules, Form 2555 bar, Credit Limit Worksheet A	Reviewed 30-Apr-2026
IRS — Comparison of Form 8938 and FBAR requirements	https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements	Thresholds, due dates, penalties, asset types	Reviewed 19-Sep-2026
IRS — Yearly average currency exchange rates	https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates	2025 euro rate (0.886) as placeholder	Reviewed 17-Sep-2026
SSA — Totalization Agreement with Germany	https://www.ssa.gov/international/Agreement_Pamphlets/germany.html	Coverage rules, D/USA 101, benefits	Certified 2019-11-25
SSA — International Agreements (general)	https://www.ssa.gov/international/agreement_descriptions.html	5-year detached worker rule, certificates, Medicare	Certified 2019-11-25
SSA — Status of Totalization Agreements	https://www.ssa.gov/international/status.html	Germany effective dates	Certified 2019-11-25
Schürmann Steuerberatung (secondary)	https://www.steuerberater-berlin-schuermann.de/steuernews_mandanten/dezember_2025/steuertarif_2026/	2026 German tariff zones and Soli thresholds	Dec. 2025
Sparkasse.de (secondary)	https://www.sparkasse.de/aktuelles/steuer-aenderungen.html	2026 basic allowance and top-rate threshold (corroboration)	2026

A note on scope: this guide is general information, not tax or legal advice. Which treaty provisions and elections apply to you, how the saving clause and Article 1(5) interact in your case, and how Germany treats your specific accounts all depend on your own facts. Get advice from a US preparer experienced with Forms 1116, 8621 and 8938 and a German Steuerberater before you rely on anything in this guide.