Germany is one of the top destinations for Americans living abroad. The industrial powerhouse of Europe, Germany has a work hard, play hard culture, and the rest of Europe is on its doorstep. With the US dollar currently strong and the Euro weak, it’s a good time to move to Germany, so read on to find out what you need to know about filing your US expat tax return as an American expatriate living in Germany.
All US citizens and green card holders living abroad are required to file a US federal tax return every year reporting their worldwide income. So if you're American and you live in Germany, whether you work for a German or international company, or if you’re self-employed, you still have to file a US return declaring your worldwide income. In theory, you're liable to pay US taxes on it too, however in practice most people don't end up paying US tax as they claim either the Foreign Earned Income Exclusion (which excludes up to around $100,000 of foreign earned income from US tax liability), and/or the Foreign Tax Credit, which allows you to claim a dollar tax credit for every US dollar equivalent of tax paid in another country. While which you claim will depend on your personal circumstances, both need to be actively claimed by filing the relevant form when you file your federal return
Filing Dates for Expats
While any tax you may owe to the IRS still has to be paid by April 15th, expats get a filing extension until June 15th, with a further extension available upon request until October 15th. The reason for this extra time to file is that there's often more to file when you’re an expatriate.
Extra Filing Requirements for Expats
“This means, for example, that if a French national works and pays taxes in Germany, then French officials don't require additional tax reporting; the same is not true for Americans, who are required to file a U.S. tax return no matter where they live or how much tax they may pay to the nation in which they reside.”
- USA TODAY
What about German Taxes?
The German tax year is the same as the US tax year, however tax returns are due by May 31st, or by December 31st if prepared by an accountant. If your only income is from employment in Germany, tax is deducted at source, and you don’t have to file a tax return, however many people do anyway, as they can claim allowances and so claim a tax refund. German tax returns should be filed to BZSt (Bundeszentralamt für Steuern), and the German tax return form is called form ESt 1.
Expat tax requirements are more complex compared with Americans living in the US, and they also potentially have to be filed as well as a German tax return. We recommend that for your US expatriate taxes you consult an expat tax specialist who will ensure that you employ the right strategies and claim the right exemptions to minimize your US tax liability with respect to your individual situation.