US Expat Taxes in Germany: Avoiding Double Taxation & Filing Rules
US citizens in Germany file taxes in both countries. This guide explains citizenship-based taxation, the FEIE vs Foreign Tax Credit choice, FBAR and FATCA bank reporting, and how the US-Germany tax treaty fits — without telling you which to claim.
Unlike almost every other nationality, US citizens and green-card holders must file a US tax return every year regardless of where they live — and if you reside in Germany, the Finanzamt wants its return too. This guide explains how citizenship-based taxation works, how the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC) relieve double taxation differently, and how FBAR and FATCA reporting covers your German bank accounts. It is general information, not individualized tax advice — the right choice depends on your income, its source, and your whole filing picture, so confirm the current rules with the IRS, FinCEN, and a qualified tax adviser before you file.
The Worldwide Taxation Rule for US Citizens
The United States taxes its citizens and resident aliens on worldwide income, no matter where they live. This is citizenship-based taxation, and it is the exception rather than the rule — most countries, including Germany, tax only their residents. The practical consequence: even after you move to Germany, register your address, and pay German income tax, you still have a US filing obligation. Germany, in turn, taxes residents on their worldwide income under § 1 EStG once you are resident for tax purposes. Two countries, two returns, overlapping claims on the same income — which is exactly the double-taxation problem the FEIE, the FTC, and the US-Germany tax treaty exist to mitigate, not eliminate.
FEIE vs. Foreign Tax Credit: Which Should You Claim?
The FEIE and the FTC are the two main US mechanisms that stop you being taxed twice on the same income. They work very differently, they can be combined on a single return, and the better choice depends on your numbers — not on a universal rule. The comparison below explains how each works and where they interact; it is not a recommendation.
Foreign Tax Credit (FTC — Form 1116)
The FTC gives you a dollar-for-dollar US tax credit for income tax you actually paid to Germany on German-source income. It is not a deduction — it offsets US tax directly, up to the US tax on that same income. It applies to any income type (earned, dividends, interest, rental), and unused credits can be carried back one year and forward ten. You cannot claim the FTC on income you have already excluded under the FEIE.
Foreign Earned Income Exclusion (FEIE — Form 2555)
The FEIE lets you exclude a set amount of foreign earned income from US tax each year — $130,000 for tax year 2025 and $132,900 for tax year 2026 per qualifying person, plus a separate housing amount. It covers only earned income (salary, self-employment), not passive income like interest, dividends, or capital gains. To qualify you need a tax home in a foreign country and either bona fide residence or 330 days of physical presence abroad. Once elected, the FEIE stays in effect until you revoke it.
| Feature | FEIE (Form 2555) | FTC (Form 1116) |
|---|---|---|
| What it does | Excludes foreign earned income from US tax | Credits foreign income tax paid against US tax |
| Income covered | Earned income only (wages, self-employment) | Any income type taxed by the foreign country |
| 2025 / 2026 cap | $130,000 (2025) / $132,900 (2026) per person | No dollar cap; limited to US tax on that foreign income |
| Refundable? | No — it removes income, cannot create a refund | No — credit cannot exceed US tax on that income |
| Carryover | No carryover | Carry back 1 year, forward 10 years |
| Can combine with the other? | Yes, on non-excluded income | Yes, but not on FEIE-excluded income |
| Election consequence | Stays in effect until revoked; revocation may require a 5-year wait | Claimed annually; no lock-in |
Two interactions matter. First, you cannot double-dip: the FTC cannot be claimed on income the FEIE has already excluded, so higher earners often exclude earned income up to the FEIE cap and claim the FTC on the remaining income and on passive income. Second, choosing the FEIE is an election that remains in effect for subsequent years until you revoke it — and a revocation generally means you cannot re-elect the FEIE for five years without IRS consent. The FTC, by contrast, is claimed year by year. Neither choice affects your separate German filing duty.
Essential IRS Reporting Requirements for Expats
Reporting foreign bank accounts is separate from the FEIE/FTC income decision. The US runs two distinct reporting regimes — FBAR and FATCA — with different forms, different thresholds, different agencies, and different coverage. You may need to file one, both, or neither in a given year, and filing one does not satisfy the other.
FBAR (FinCEN Form 114)
File if the aggregate value of all your foreign financial accounts exceeded $10,000 at any time during the calendar year. The threshold is aggregate — every foreign account is added together, not judged individually. It is filed electronically with FinCEN, separately from your IRS return, with an automatic extension to 15 October. German current accounts, savings, and brokerage accounts all count.
FATCA (Form 8938)
Attach Form 8938 to your IRS Form 1040 if your specified foreign financial assets exceed the threshold for your filing status. For taxpayers living abroad, that is more than $200,000 on the last day of the year or more than $300,000 at any time (single), or more than $400,000 / $600,000 (married filing jointly). US-resident thresholds are far lower — $50,000 / $75,000 (single). Thresholds are adjusted periodically, so confirm the current figures before you file.
| Feature | FBAR (FinCEN 114) | FATCA (Form 8938) |
|---|---|---|
| Filed with | FinCEN (separate from IRS return) | IRS (attached to Form 1040) |
| Threshold basis | $10,000 aggregate, all filers | Varies by residency & filing status |
| Abroad, single | >$10,000 aggregate | >$200,000 year-end / >$300,000 any time |
| Abroad, married joint | >$10,000 aggregate | >$400,000 year-end / >$600,000 any time |
| What counts | Foreign financial accounts | Specified foreign financial assets (broader) |
| Deadline | 15 April (auto-ext. to 15 Oct) | Tax return deadline (with extensions) |
| Separate regimes? | Yes — filing one does not satisfy the other | Yes — filing one does not satisfy the other |
Your German filing duty is separate and independent. Once you are resident in Germany, you report worldwide income to the Finanzamt under § 1 EStG, and German income tax is progressive — for 2025/2026 it runs from 0% below the Grundfreibetrag (about €12,096 single) up to 42%, with a 45% top rate (Reichensteuer) above €277,826, plus a 5.5% solidarity surcharge for higher earners and church tax if applicable. The US-Germany tax treaty helps coordinate the two systems: under its relief article, the US allows a foreign tax credit for German tax, and Germany generally exempts or credits US-source income. Crucially, the treaty contains a saving clause — the US retains the right to tax its citizens as if the treaty were not in force, so the treaty does not switch off your US filing obligation. A few narrow items, including certain social-security payments, are carved out of the saving clause. The treaty reduces double taxation; it does not eliminate US reporting.
Frequently Asked Questions About US-German Tax Treaties
Once you understand the US filing picture, line up the German-side basics that affect both returns. These guides cover the documents and accounts most US expats sort out next.
Reviewed by the Expat Germany Guide editorial team
This guide is informational and based on publicly published IRS, FinCEN, and German tax-authority guidance, including the Foreign Earned Income Exclusion (Form 2555), the Foreign Tax Credit (Form 1116), FBAR (FinCEN Form 114), FATCA (Form 8938), the German Einkommensteuergesetz (EStG), and the Convention between the United States and Germany for the Avoidance of Double Taxation. Exclusion amounts, filing thresholds, tax rates, and deadlines change periodically, and the treaty's saving clause means US citizens remain subject to US taxation. This is general information, not individualized legal or tax advice — always confirm the current rules for your situation with the IRS, FinCEN, your Finanzamt, or a qualified tax professional before you file.