Tax guide for Americans in Germany
Germany’s tax system can seem overwhelming at first. There are types of taxes you knew existed, and specific requirements that differ from what you’re used to as a US citizen/resident. Thrown in your tax obligations to Uncle Sam, and it’s a bit of a pickle.
But it doesn’t have to be. We’ve put together this guide to help you navigate taxes in Germany as a US expat. We’ll break down residency rules, tax types for individuals and businesses, when and how to file – and more.
This article is brought to you by Taxes for Expats (TFX) – a top-rated tax firm serving US citizens, residents, and anyone with US tax obligations, both at home and abroad. Living in Germany and need help with your US taxes? Schedule your free discovery call, and we’ll review your case and walk you through the next steps.
Overview of Germany’s tax landscape
Germany’s tax system is structured and predictable, and once the basic rules are clear, it becomes much easier to understand how your German and US tax obligations fit together.
| Primary tax form for residents | The main form is the German individual income tax return (Einkommensteuererklärung). Most people file it online using ELSTER, Germany’s official tax portal |
| Tax year | The German tax year runs from January 1 – December 31 |
| Tax due date | For the 2025 German tax return filed in 2026, the deadline is July 31, 2026, if you file on your own. When a tax advisor (Steuerberater) or wage-tax help association files for you, the deadline usually moves to February 28, 2027 (or the next business day) |
| Criteria for tax residency | Germany looks at whether you have a residence (Wohnsitz) in the country or a habitual abode (gewöhnlicher Aufenthalt). A stay of more than six months can trigger residency, even if there are short breaks. Many people refer to this as the “183-day rule,” but the legal test focuses on residence and habitual presence |
| US tax filing requirements | US citizens and many US residents abroad still file Form 1040 and must report worldwide income, even while living in Germany |
| Eligibility for FEIE | The Foreign Earned Income Exclusion is available when you meet one of the residency tests. These are US rules and are separate from Germany’s residency rules |
| Methods of double tax relief | Double taxation is usually reduced through the Foreign Tax Credit. The US–Germany income tax treaty also helps coordinate taxing rights, but the US “saving clause” often means credits and exclusions do most of the work for US citizens. |
| Tax residency for dual citizens | Holding both US and German citizenship does not remove tax obligations. Germany can tax based on residence, and the US can tax based on citizenship. Relief typically comes from credits, exclusions, and treaty rules rather than a full exemption |
| Estate and inheritance tax | Germany applies inheritance tax (Erbschaftsteuer). US citizens may also face US estate or gift tax filing requirements, depending on the situation and asset values |
| Overview of local tax rates | German income tax uses progressive rates up to 45%. A solidarity surcharge can still apply in higher-income cases, although most taxpayers no longer pay it due to higher exemption thresholds in place for 2025 |
Do US expats need to file for taxes in Germany?
For many employees, Germany already collects income tax through wage withholding, so an individual return is not always required.
But if you:
- Are self-employed
- Receive multiple income streams (for example, other income over €410 or wage replacement benefits over €410)
- Benefit from foreign assets (for example, investment income where no German capital gains tax was withheld)
… then filing a German tax return is commonly required under German rules, once your status as resident or non-resident is clear.
Resident vs. non-resident of Germany
When preparing for US taxes while living in Germany, it helps to pin down whether Germany treats you as fully taxable or limited taxable. Germany generally applies full tax liability when you have a home (Wohnsitz) or habitual abode (gewöhnlicher Aufenthalt) in Germany.
That classification matters because residents are typically taxed on worldwide income, while non-residents are generally taxed on German-sourced income. When a return is required for 2025 income, the usual German filing deadline is 31 July 2026 for self-prepared returns.
Who can be considered a resident of Germany?
Under German tax law, residency is tied to where life is actually anchored – not just what your passport says.
- Physical presence. A continuous stay of more than six months is treated as a habitual abode from the start, and short breaks can still count as one stay.
- Permanent residence. Keeping a home available in Germany can establish a German tax home even without daily presence.
- Intent to stay. A stay of less than six months can still qualify when the circumstances show it was meant to be more than temporary.
The German tax system explained: Rates & classes
Germany’s Federal Constitutional Court has confirmed that the tax system follows the Basic Law’s fairness rules, including recent rulings that approved how income is taxed in stages. This legal framework shapes how income, wages, and allowances are handled each year.
German tax ID numbers: Steuer-ID vs. steuernummer
The difference usually shows up early, such as when a first salary is paid or when freelance work begins. One number stays with a person for life, while the other is tied to a specific tax record.
| Steuer-ID (Tax ID) | Steuernummer (Tax number) | |
|---|---|---|
| What it is | Personal tax identification number with 11 digits | Tax office reference number for a tax case |
| Who issues it | Bundeszentralamt für Steuern (BZSt) | Local tax office |
| When you use it | Payroll, employment records, and personal tax matters | Tax returns, self-employment, VAT, and business filings |
| Does it change | Stays the same for life | Can change, and more than one can exist |
Personal income tax rates (Einkommensteuer)
Germany uses a rising income tax system, starting with income that is tax-free and increasing as earnings go up. These rates matter to US expats because German tax paid often offsets US tax through credits.
2025 tax brackets and rates
These brackets apply to income earned in 2025 and filed in 2026, based on taxable income (zvE).
| 2025 taxable income (zvE) | Marginal rate |
|---|---|
| €0–€12,096 | 0% |
| €12,097–€68,480 | 14%–42% (gradual increase) |
| €68,481–€277,825 | 42% |
| €277,826+ | 45% |
Solidarity Surcharge (Solidaritätszuschlag)
The solidarity surcharge is added to income tax and equals 5.5% when it applies.
For 2025, it generally starts once income tax goes over €19,950, or €39,900 for married couples filing together, which means many employees pay little or none.
German tax classes (Lohnsteuerklassen)
Tax classes affect how much tax is withheld from each paycheck, which is why the Finanzamt (tax office) may request updates after life changes like marriage or taking a second job. These classes guide monthly withholding but do not replace the final tax return.
| Class | Typical use | Key amounts used in wage tax calculation (2025) |
|---|---|---|
| 1 | Single, divorced, widowed, separated | Grundfreibetrag: €12,096; Employee allowance: €1,230; Special expense allowance: €36, plus social insurance allowance |
| 2 | Single parent | Same as Class 1, plus single-parent relief: €4,260 per year, with €240 extra per year for each additional child |
| 3 | Married, higher earner | Wage tax based on income splitting; includes €1,230 employee allowance and €36 special expense allowance |
| 4 | Married, similar incomes | Standard wage tax calculation with €1,230 employee allowance and €36 special expense allowance |
| 5 | Married, lower earner | Wage tax paired with Class 3; includes €1,230 employee allowance and €36 special expense allowance |
| 6 | Second or additional job | Higher wage tax; no €1,230 employee allowance and no €36 special expense allowance, social insurance allowance still applies |
This structure keeps wage withholding predictable while the final tax bill is settled after the annual return is filed.
Additional taxes in Germany
Beyond income tax, several other charges can affect daily life, housing, and business activity. Knowing how these taxes in Germany work helps avoid surprises and makes planning easier under German tax laws.
Value-added tax (Umsatzsteuer/VAT)
VAT is built into prices you see every day, and the tax rate depends on what is being sold.
- Standard VAT: 19%
- Reduced VAT: 7% for specific goods and services set by law
- Some items are 0% or fully exempt under special rules
This tax is collected by sellers and passed on to the Finanzamt, so consumers usually pay it automatically without filing extra forms.
Church tax (Kirchensteuer)
Church tax applies when a person is officially registered as a church member. The tax rate is 8% or 9% of your income tax, depending on the state.
It is usually withheld through payroll, and a Steuerberater can confirm whether it applies and how it impacts your final assessment.
Capital gains tax (Kapitalerträge)
German capital gains tax applies when assets are sold at a profit, and the rules depend on the type of asset. For US expats, this often means learning two systems at the same time.
Stocks and securities
Most gains from stocks, bonds, and similar investments are taxed under the Abgeltungsteuer. Germany withholds a flat 25% tax, plus a 5.5% solidarity surcharge, for a combined tax rate of 26.375%.
A yearly exemption applies through the Sparer-Pauschbetrag – €1,000 for singles and €2,000 for married couples filing jointly.
| Component | Rate |
|---|---|
| Capital income tax | 25.000% |
| Solidarity surcharge | 1.375% |
| Total (without church tax) | 26.375% |
Property gains are usually tax-free after 10 years of ownership under §23 EStG. Sales within 10 years are generally taxable, but homes used as a main residence in the year of sale and the two prior years are often exempt.
Trade tax (Gewerbesteuer) for self-employed
Some freelance work is treated as a business under taxation in Germany, which can trigger trade tax. This often comes up when self-employed expats run online shops, small local businesses, or structured side activities.
- The calculation starts with a 3.5% base factor set by law.
- Individuals and partnerships receive a €24,500 allowance before tax applies.
- Each municipality applies its own multiplier, with a legal minimum of 200%, which can raise the final tax rate significantly.
Pro tip by TFX tax expert. Clear separation between freelance and commercial income helps prevent unexpected trade tax bills later.
Property and transfer taxes
Property-related taxes are a major cost area and often involve several authorities. The Finanzamt plays a role in assessments, while local governments set key multipliers. These rules follow German tax laws and can vary by state and city.
Real estate transfer tax (Grunderwerbsteuer)
This tax is due when property ownership changes, and the tax rate depends on the state.
- Bavaria commonly charges 3.5%
- North Rhine–Westphalia applies 6.5%
- Across Germany, rates generally range from 3.5% to 6.5%
This tax is usually paid shortly after purchase and must be settled before registration is finalized.
Annual property tax (Grundsteuer)
Grundsteuer is an annual tax charged to property owners. Since January 1, 2025, it is calculated using new valuation rules and updated municipal multipliers.
While Steuerklasse (a tax bracket) does not affect this bill, local multipliers strongly influence the final amount and are often passed on to tenants.
Inheritance and gift tax
Inheritance and gift tax are covered by the same legal framework and depend on family relationships. Allowances include €500,000 for a spouse and €400,000 for a child, with lower thresholds for other heirs.
For US expats, these rules matter even when assets or family members are outside Germany, as taxation in Germany can still apply under certain conditions.
Dog tax (Hundesteuer)
Dog tax is set by local governments and varies by city.
In Berlin, the rate is €120 per year for the first dog and €180 for each additional dog. These smaller taxes add up and are part of everyday compliance, which many newcomers do not expect at first.
Germany vs. US tax rates: A comparison
This overview gives a clear picture of how tax costs can add up differently in Germany and the US, especially for Americans managing income and assets in both systems.
| Tax category | Germany | United States |
|---|---|---|
| Personal income tax | 0% up to €12,096, then 14%–42%, with a top rate of 45% on very high income | 10%–37%, based on income |
| Solidarity surcharge | 5.5% of income tax; generally applies only when income tax exceeds €19,950 (single) or €39,900 (joint) | Not applicable |
| Church tax | 8%–9% of income tax for registered members | Not applicable |
| Capital gains tax | Flat 25% on most investment income, plus 5.5% solidarity surcharge (and church tax if applicable) | 0%–20% long-term rates, plus 3.8% NIIT for higher earners |
| Estate/inheritance tax | 7%–50%, based on family relationship and amount | 18%–40%, with a $13,990,000 exemption for 2025 |
| Property tax | Local Grundsteuer; amount depends on property value and city rate | Varies by state and county, often under 0.5% to over 2% |
| Real estate transfer tax | 3.5%–6.5%, depending on the state | Varies by location, often 0.1%–2%+ |
| Value-added tax | VAT 19% standard rate, 7% reduced rate | No VAT; sales tax 0%–11.5% |
Filing your German tax return (Einkommensteuererklärung)
The first year of filing in Germany often feels straightforward until official mail from the Finanzamt arrives. At that point, timing and accuracy matter. Having the right support in place helps you stay compliant and avoid follow-up issues later.
Tax year and deadlines
Germany uses a calendar tax year that runs from January 1 to December 31. For the 2025 tax year, which is filed in 2026, the standard filing deadline is July 31, 2026. When a Steuerberater (tax advisor) prepares the return, the deadline is automatically extended to February 28, 2027.
For US expats in Germany, the US filing deadline is April 15, with an automatic extension to June 15. Form 4868 can extend filing to October 15, and an additional request may allow filing as late as December 15 (based on IRS discretion).
How to file: ELSTER vs. tax advisors
There are two common methods for filing.
Step 1: Register for ELSTER early, since account setup and activation can take several weeks.
Step 2: Complete the Einkommensteuererklärung online by entering income, deductions, and required details, then save or upload your records.
Step 3: Submit the return through ELSTER, keep the confirmation, and review the tax assessment (Steuerbescheid) once it arrives to see whether you owe tax or receive a refund.
vs. filing with tax advisors
- A Steuerberater (tax advisor) prepares and files the return for you, which many expats prefer when rules or language feel overwhelming.
- Using an adviser usually comes with the later German deadline of 28.02.2027 for the 2025 tax year.
- This approach can also help make sure your German filing lines up with your US return and related forms.
Penalties for late filing
Germany takes deadlines seriously.
- Filing late can lead to a penalty of 0.25% per month of the assessed tax, with a minimum of €25 per month and a maximum of €25,000.
- Any unpaid tax can also earn interest at 0.15% per month, which equals 1.8% per year, under § 233a AO.
- Incorrect or misleading filings can trigger extra penalties, and intentionally false information may lead to criminal consequences.
Social security contributions (Sozialversicherungsbeiträge)
Germany has a broad social security system that covers health insurance (Krankenversicherung), pension insurance (Rentenversicherung), unemployment insurance (Arbeitslosenversicherung), and long-term care insurance (Pflegeversicherung).
For most employees, these contributions are taken directly from each paycheck, and the employer pays a matching share, so the cost is shared.
- Core payroll rates: pension insurance is 18.6% total (9.3% employee / 9.3% employer). Unemployment insurance is 2.6%. Statutory health insurance is 14.6%, plus an average additional contribution of 2.5% for 2025 and 2.9% for 2026, depending on the health fund.
- Long-term care insurance: since January 1, 2025, the standard rate is 3.6% of gross pay. Childless adults pay 4.2%, which includes a 0.6% surcharge paid by the employee.
- The US–Germany Totalization Agreement helps prevent double social security taxes. When it applies, coverage stays in one system, proven by a Certificate of Coverage, such as form D/USA 101.
Deductions and credits for expats in Germany
US expats in Germany can rely on different deductions and credits to bring down the amount of tax they owe in both countries. These include:
- Foreign Earned Income Exclusion. The FEIE allows qualifying expats to exclude up to $130,000 (2025 limit) of foreign-earned income from US taxation. To qualify, expats must meet either the Physical Presence or the Bona Fide Residence Test. Before filing, run your numbers with our FEIE calculator for expats to verify day counts and your expected exclusion amount.
- Foreign Tax Credit. The FTC can be used to bring down the taxable amount to the US. This credit is particularly beneficial for those with income above the FEIE threshold.
- Housing exclusion or deduction. Expats paying for housing in Germany may qualify for a housing exclusion or deduction on their US tax return.
The tax treaty between the US and Germany
The US–Germany income tax treaty, signed on August 29, 1989, helps decide which country has the main right to tax income when both are involved. Under Article 15, employment income is usually taxed where you live, with the 183-day rule applying when work is done in the other country.
For retirees, Article 18 generally assigns private pensions and annuities to the country of residence, while Article 19 covers government pensions and Social Security benefits, which are usually taxed only where the recipient lives. Even with these rules, the treaty includes a saving clause that allows the US to tax its citizens under US law. When a return relies on treaty positions beyond standard credits, the IRS may require disclosure on Form 8833.
Most popular tax forms for US expats
US expats living in Germany often deal with two systems at once, so the right forms keep everything clean and consistent. These are the filings that come up most often when reporting foreign income and foreign accounts.
- Form 1040 – The main US income tax return used to report worldwide income, with common add-ons like Form 2555 or Form 1116.
- Form 2555 – Used to claim the Foreign Earned Income Exclusion, up to $130,000 for the 2025 tax year, based on the physical presence test or bona fide residence test.
- Form 1116 – Used to claim the Foreign Tax Credit for certain foreign income taxes paid or accrued, which can reduce US tax on the same income.
- FBAR (FinCEN Form 114) – Required when the total value of foreign financial accounts is over $10,000 at any time during the calendar year.
- Form 8938 (FATCA) – Often required with the return when specified foreign financial assets exceed $200,000 (end of year) or $300,000 (any time) for many filers living abroad, and $400,000 / $600,000 for many joint filers living abroad.
German tax forms for US expats
US expats in Germany often attach a few standard German forms to their Einkommensteuererklärung so the Finanzamt can see your pay, foreign income, and investment income in one clean file. These are the forms clients most often run into when filing through ELSTER or with a local tax office.
- Einkommensteuererklärung – This is the main German income tax return that pulls your income and deductions together for the year.
- Anlage N (Employment income) – This is where German employment pay and related work costs are reported.
- Anlage AUS (Foreign income) – This is used to report foreign income and, when needed, the foreign tax paid so Germany can apply the right relief or credit.
- Anlage KAP (Investment income) – This covers capital income like interest and dividends and is also used when the Finanzamt needs details to credit or refund withholding taxes.
Living expenses for US expatriates in Germany
Aside from understanding your tax obligations, you need to be aware of the living expenses in Germany. These costs can vary significantly depending on the city and lifestyle.
Large cities such as Berlin, Munich, and Frankfurt generally have a higher cost of living compared to smaller towns. Typical living costs in Germany include rent, utilities, transportation, food, health insurance, and entertainment.
Simplify your tax filing — get professional assistance
We covered the main aspects of living in Germany as a US expat. However, navigating the tax landscape on your own might still appear daunting. Don’t worry: we are ready to take that weight off your shoulders.
At Taxes for Expats, we have been making life easier for US expats around the globe for 25 years. We cover 190+ countries and have lent a hand to 50,000+ clients.
FAQ
Many US citizens and resident aliens abroad still file a US return when they meet the normal filing rules, because the US taxes worldwide income. Germany can also tax worldwide income once you are treated as a German tax resident, and a German return may be required depending on your situation.
The Finanzamt (tax office) can push the filing process forward by setting enforcement penalties and can estimate your tax if no return is filed. Germany can also charge a late filing surcharge under the German Fiscal Code (AO 152). The result is usually extra cost and a harder cleanup later.
The Foreign Tax Credit can reduce your US tax by giving you credit for certain income taxes paid to Germany. Most individuals claim it on Form 1116, attached to Form 1040, and the credit is limited by an IRS formula. This is often the main way Germany-based filers avoid double taxation on the same income.
The US-German tax treaty determines which country has the right to tax retirement income. Generally, US-sourced annuities can remain taxable only in the US, but it's wise to check with a tax advisor, as treaty benefits may vary depending on the type of retirement account.
Germany has a general health insurance obligation, so coverage is expected through the public system (GKV) or private coverage (PKV), depending on eligibility. The legal duty is reflected in German law and is also explained by the Federal Ministry of Health. For public insurance, the general contribution rate is 14.6% (plus any additional contribution set by the insurer).
FBAR and FATCA reporting include foreign financial accounts such as bank accounts (checking, savings), foreign brokerage accounts, mutual funds, pensions, and certain foreign insurance policies. FBAR applies if the combined balance exceeds $10,000, while FATCA has higher thresholds for reporting - and these are not limited to just accounts, instead they cover all your foreign assets..
US-based accounts and assets, such as domestic bank accounts, US brokerage accounts, 401(k)s, IRAs, and direct US real estate, are exempt from FBAR and FATCA. Generally, only foreign accounts and assets managed abroad are reportable.
Under the Germany-US FATCA agreement, German financial institutions use due diligence steps to identify US reportable accounts, including collecting a self-certification in many cases. Reporting German institutions also register with the IRS to obtain a GIIN, then report required account data to the Bundeszentralamt für Steuern (BZSt), which supports the exchange framework. The BZSt guidance also notes a common reporting deadline of July 31 following the reporting year for FATCA data sent to BZSt.
