1. What are the Tax Implications for U.S. Citizens and Green Card Holders living in Germany?
U.S. citizens and green card holders living in Germany are subject to the same tax rules as German citizens. This includes filing an annual income tax return with the German authorities, where income from Germany and other countries must be declared. The threshold for filing a tax return begins at a taxable income of approximately 8,652 euros per year. Residents in Germany must file a U.S. Expat Tax return every year to ensure that they are compliant with U.S. tax laws, even if they have no U.S.-source income.In addition to German income tax, U.S. citizens and green card holders may also be subject to U.S. federal income taxes on their worldwide income, including income earned in Germany. This is true even if the individual is not living in the U.S., and even if the individual does not owe German taxes on particular types of income (such as capital gains or dividends).
There are certain exemptions available for expats living abroad, such as the Foreign Earned Income Exclusion (FEIE), which allows for up to $105,900 in earned income to be excluded from taxable income for 2020 (subject to certain qualifications). Additionally, there are certain foreign tax credits available for taxes paid to foreign countries, which can be used to offset any U.S. taxes that may be due.
However, it is important for expats living abroad to be aware of their filing obligations with both the US and German governments, as failure to file could result in significant penalties and interest being imposed by both governments on any taxes that are due but not paid.
2. Are there any Tax Credits available for U.S. Citizens and Green Card Holders in Germany?
Yes, there are tax credits available to U.S. Citizens and Green Card Holders in Germany. The Foreign Earned Income Exclusion (FEIE) allows U.S. citizens and green card holders to exclude up to $105,900 (2020) of their foreign earned income annually from U.S. federal income tax. This amount is adjusted for inflation each year and can be used to reduce or eliminate any taxes owed to the United States. Additionally, the U.S.-Germany Tax Treaty may allow for additional tax credits for certain types of income, such as interest, dividends, capital gains, and royalties.3. Are U.S. taxes levied on the income of U.S. Citizens and Green Card Holders earned in Germany?
Yes, U.S. citizens and green card holders living in Germany are still required to file and pay taxes in the United States on all of their earned income, regardless of where it is earned. The U.S. tax system is based on a worldwide income tax system, meaning that all income earned by its citizens and green card holders must be reported and is subject to taxation.4. Is there a Double Taxation Agreement between Germany and the United States?
Yes, there is a Double Taxation Agreement between Germany and the United States. The agreement was signed on August 31, 1989 and entered into force on April 1, 1990. The agreement was amended by a Protocol signed on December 3, 2003 and came into force on June 28, 2004.5. What are the filing requirements for U.S. Citizens and Green Card Holders in Germany?
U.S. citizens and green card holders who are living in Germany must file an annual U.S. federal tax return form, Form 1040, regardless of their residency status or the amount of income they earned during the year.In addition, U.S. citizens and green card holders must generally report their worldwide income on this form. This includes any income earned from sources in Germany, such as wages and rental income.
Also, U.S. citizens and green card holders living in Germany must file a U.S. federal tax return if their gross income exceeds certain thresholds: $12,000 for single filers and $24,000 for married filing jointly in 2020. These thresholds increase each year to adjust for inflation and other factors.
It is important to note that U.S. citizens and green card holders may be subject to taxes in both the U.S. and Germany on their global income, so it is important to consult with a tax professional to ensure compliance with both countries’ tax laws.
6. Are there any special tax incentives for companies owned by U.S. Citizens and Green Card Holders in Germany?
Yes, there are special tax incentives for companies owned by U.S. Citizens and Green Card Holders in Germany. U.S. citizens and green card holders are eligible for the Foreign Tax Credit, which allows them to deduct any taxes paid in Germany from their U.S. tax liability. They are also eligible for the section 25a of the German Income Tax Act, which allows them to deduct expenses associated with operating a business in Germany from their income for tax purposes. Additionally, they may be able to take advantage of the reduced taxation of dividends and capital gains in Germany. Finally, they may be eligible for certain research and development tax credits depending on their activities in Germany.7. What is the maximum amount of foreign earned income that is exempt from U.S. taxation for U.S. Citizens and Green Card Holders in Germany?
The maximum amount of foreign earned income that is exempt from U.S. taxation for U.S. Citizens and Green Card Holders in Germany is USD 107,600 for the 2021 tax year.8. Are there any gift or inheritance tax implications for U.S. Citizens and Green Card Holders in Germany?
Yes, there are. According to German inheritance and gift tax laws, U.S. citizens and green card holders may be liable for German inheritance tax on any assets they inherit or receive as gifts from German residents. Additionally, U.S. citizens and green card holders may be subject to gift taxes if they give away more than a certain amount of money or assets to a relative or non-relative. The exact amount of gift tax liability will depend on the amount of the gift as well as the relationship between the donor and the recipient.9. Are U.S. Citizens and Green Card Holders required to report foreign bank accounts to the IRS while living in Germany?
Yes, U.S. Citizens and Green Card holders are required to report foreign bank accounts to the IRS while living in Germany, as well as any other country. U.S. taxpayers must file a Report of Foreign Bank and Financial Accounts (FBAR) with the Financial Crimes Enforcement Network (FinCEN) if they have a financial interest in or signature authority over foreign financial accounts with an aggregate value of more than $10,000 at any time during the calendar year. This includes bank accounts, securities accounts and investment accounts held in Germany. In addition, U.S. taxpayers who receive certain foreign gifts or inheritances may also need to report these items to the IRS.10. Are there any differences in taxation between U.S. Citizens and Green Card Holders residing in Germany?
Yes, there are differences in taxation between U.S. citizens and Green Card holders residing in Germany. U.S. citizens are taxed on their worldwide income, while Green Card holders are taxed only on their German-sourced income. In addition, Green Card holders may be entitled to deductions and credits that are not available to U.S. citizens, such as the foreign earned income exclusion and the foreign tax credit.11. What are the restrictions on investing in the United States from Germany?
In general, Germany’s investors face the same restrictions on investing in the United States as other foreign investors. These include compliance with certain laws and regulations, such as the Foreign Investment in Real Property Tax Act (FIRPTA) and the Foreign Corrupt Practices Act (FCPA), as well as restrictions imposed by the US government on certain types of investments. Additionally, German investors may need to obtain permission from the Federal Financial Supervisory Authority (BaFin) to make certain investments in the US. Furthermore, some US states and cities may impose additional restrictions on foreign investment.12. Are there any restrictions on the repatriation of funds from Germany to the United States?
Yes, there are restrictions on the repatriation of funds from Germany to the United States. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers regulations that restrict transactions with certain countries, individuals, and entities. In addition, the U.S. Financial Crimes Enforcement Network (FinCEN) requires financial institutions to report certain transactions to the United States government. Depending on the type of transaction, additional reporting or authorization may be required before funds can be repatriated to the United States.13. Are U.S.-sourced dividends subject to taxation by both the United States and Germany?
Yes, U.S.-sourced dividends are subject to taxation by both the United States and Germany. As a dual resident taxpayer, you may be eligible for a credit or exemption from one country for taxes paid to the other country. This must be done in accordance with a double-taxation treaty between the two countries.14. What are the residency requirements for U.S Citizens and Green Card Holders that want to take advantage of reduced tax rates in Germany?
In order to benefit from the reduced tax rates offered by Germany for U.S Citizens and Green Card Holders, the individual needs to be considered a resident in Germany for taxation purposes. This is determined by the so-called “183-day rule” which requires an individual to stay in Germany for a minimum of 183 days in a calendar year, or, if the individual has spent a minimum of three consecutive months in Germany, he/she must register as a resident within three months of the end of that month. In addition, the individual must hold a valid residence permit from the German authorities and must have their primary residence in Germany.15. Are there any capital gains tax implications for U.S Citizens and Green Card Holders residing in Germany?
Yes. U.S citizens and green card holders residing in Germany are subject to U.S taxes, including those on capital gains. For example, if a U.S citizen or green card holder sells stocks that are held in Germany, the capital gains are subject to U.S taxation, even though the sale took place in Germany. The rate of tax depends on the type of asset and how long it has been held, as well as other factors.16. Can U.S Citizens and Green Card Holders claim a foreign tax credit on taxes paid to Germany?
Yes, U.S. citizens and green card holders can claim a foreign tax credit on taxes paid to Germany. The credit is based on the amount of taxes paid to Germany against the total U.S. tax liability and must be claimed on the annual U.S. tax return.17..Are there any estate or death taxes associated with leaving a legacy to descendants of U.S Citizens and Green Card Holders in Germany?
Yes, there are estate or death taxes associated with leaving a legacy to descendants of U.S Citizens and Green Card Holders in Germany. This is known as the Erbschaftsteuer (inheritance tax), which is a tax on all inheritances and gifts made in Germany. The inheritors/beneficiaries are taxed based on their relationship to the deceased (spouse, direct descendants, etc.). For U.S. citizens, the tax rate is generally lower than for other foreigners, but it is still important to be aware of this tax and how it can affect your legacy planning.18..What are the tax implications associated with owning a home, rental property, or business assets in Germany for U.S citizens and green card holders?
The tax implications for U.S. citizens and green card holders owning a home, rental property, or business assets in Germany vary depending on the individual’s circumstances, including their residency status and the type of income generated from these assets. Generally, U.S. citizens and green card holders who are considered to be tax residents of Germany may be liable for German income tax and social security contributions on any income derived from their German assets. Income tax rates in Germany range from 0 – 45% depending on the individual’s annual income.In addition to income tax, those owning property in Germany may be subject to a range of other taxes, such as municipal taxes, real estate transfer taxes, inheritance and gift taxes, wealth taxes, and capital gains taxes. There may also be additional requirements for filing tax returns in Germany and reporting foreign assets to the Internal Revenue Service (IRS).
It is important to note that each situation is different and it is recommended that U.S. citizens and green card holders speak to a qualified tax specialist for advice on their specific circumstances.
English 
Español de México