Filing US taxes as an American living in Germany in 2022: A guide
Are you an American citizen living in Germany? Madeline Beuoy, a tax accountant and managing CPA at Bright!Tax, a leading provider of US expat tax services, gives a simple explanation of the US tax requirements for Americans living in Germany in 2022.
Living in Germany is a deeply rewarding experience. Whether you move to Germany for a career opportunity, for adventure, for romance, or perhaps to reconnect with family roots, most Americans love Germany’s combination of culture, countryside, and excellent public services.
Americans do experience one drawback with living in Germany, though: having to file both German taxes as a German resident, and US taxes as a US citizen.
In this article, we’ll take a closer look at what exactly Americans living in Germany in 2022 have to do to stay compliant with their US reporting, and how they can save money as well.
Tax requirements and deadlines for US citizens in Germany
All American citizens (and Green Card holders) have to file US taxes every year if their worldwide income exceeds IRS minimum thresholds. This includes Americans living in Germany, and all around the world.
The IRS thresholds are in US dollars, so if you earn in euros (or other currencies, or multiple currencies), then you have to convert your income into US dollars to check whether you have to file (and for reporting on your US tax return).
The minimum thresholds for filing in 2022 (income received in 2021) are:
- 12.550 US dollars of any income; or
- 400 dollars of self-employment income; or
- 5 dollars of any income if you’re married to a non-American but file separately
As an American living abroad, you receive an automatic two-month filing extension until June 15, and you can request an additional filing extension until October 15, too.
If you had a total of more than 10.000 dollars in financial accounts registered outside the US (including your bank, pension and investment accounts) at any time in 2021, you’ll also have to file a Foreign Bank Account Report (FBAR) to FinCEN to report them. There’s no tax liability associated with foreign account reporting, but penalties for not reporting them are steep, and Uncle Sam is receiving the same information from the banks themselves.
How to reduce your US tax bill
Unfortunately, the US-Germany tax treaty doesn’t prevent Americans living in Germany from filing US taxes.
It does, however, stipulate that income from interest, dividends, and royalties will only be taxed in the country where you’re a resident, so if you have this type of income, it may be beneficial for you to claim a treaty provision when you file.
All Americans can reduce their US tax bill. If you’re paying more German income tax than the US tax you owe, you can claim the US Foreign Tax Credit on IRS Form 1116, which gives you US tax credits up to the same value of German income tax you’ve paid, which should eradicate your US tax bill.
There are other circumstances where you might claim German foreign tax credits instead, or claim the US Foreign Earned Income Exclusion, which lets Americans exclude up to 108.700 dollars of their earned income from US taxation.
Expat parents who claim the US Foreign Tax Credit may also claim the US Child Tax Credit, which gives them either a 2.000-dollar refund per child, or - if they already owe no tax - a 1.400-dollar refund per child. Your child must be a US citizen with a Social Security Number in order to qualify.
There are other exclusions and credits available for expat too, so consult a US expat tax specialist to ensure you file in the most beneficial way possible for you.
Self-employment and state taxes
Americans living in Germany who are self-employed are also liable to pay US self-employment taxes. However, there is a double taxation treaty called a Totalization Agreement in place that means you won’t have to pay both US and German social security taxes.
If you’re behind, catch up
If you didn’t know you had to file US taxes as an American living in Germany, there’s an IRS amnesty program called the Streamlined Procedure that lets you catch up without facing IRS penalties (and you can claim US exclusions and credits in retrospect).
The program must be used before the IRS writes to you, so we recommend that you seek advice from an expat tax expert as soon as possible to avoid possible future hassles.
The ins and outs of US filing and reporting from abroad mean that it’s almost always worth seeking help from an expat tax specialist like Bright!Tax, who will consider your whole situation and ensure that you remain compliant, while also filing in your best interests.