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Suppose I am a dual citizen of the US and Germany. Suppose further, that I currently live and work (employed by a german company) in Germany, and this will stay like this for the foreseeable future.

A) Is there any situation where my income from my job would be taxed in both the US and Germany? E.g., if my income exceeds some specific amount/threshold, or some other situation?

B) What about other types of income, such as capital gains, dividends, or income from renting out property? Is there any situation where this income would be subject to taxation in both the US and Germany?

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  • Both answers cover the general double-taxation issue (handled in US by the Foreign Tax Credit, form 1116), but not the special issue of US citizen living and working abroad (for which up to a cap the Foreign Earned Income Exclusion applies, form 2555). See my answer to this previous Q -- although it is for US-only citizen and US employer those don't affect the result. Jun 6, 2021 at 7:12

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In general, when 2 countries have good diplomatic relations, it is very rare for there to purposesful cases of 'double-taxation', where you pay the same tax in each country as you normally would. Typically, you have the ability to claim 'foreign tax credits' in one or both jurisdictions, that reduce your other tax liability down somewhat. Mathematically, this is typically intended to result in you paying a combined tax equal to the higher of the two rates, with some going to each country.

For example, a US citizen living in Canada with a regular job would likely pay all their tax to Canada, which has the first right to tax employment income earned on its soil, and since Canada typically has higher taxes on employment income than the US. In a case where the total Canadian tax paid would be less than your US tax otherwise owing, you would pay what basically amounts to a 'top-up' payment of tax to the IRS, and when you add your Canada + US taxes paid, it would equal to the same as the amount of tax a US-located person would pay on the same income.

Note that the US is one of only 2 countries that taxes you as a citizen effectively the same as if you lived there [the other country is Eritrea]. For other citizenships, this situation only arises if you do something like live in one place half the year, or work offshore, or other specific circumstances.

In reality, to know the exact nature of taxes owing in your situation would depend on arrival / departure dates in Germany, type of income, and many other factors. Either commit to doing 10-20 hours of research yourself to get comfortable with how to do it yourself [start by researching 'tax treaties' between the US and Germany], or expect to pay probably 1-5k to a tax professional to sort it out for you. If you go the professional route, make sure in advance they commonly work with US immigrants living in Germany.

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As @Grade 'Eh' Bacon wrote, an exact answer would take a lot of research.
However, as a rough overview: as a US citizen, your global income is taxable in the US, and you need to file your taxes to uncle Sam (one of the reasons many US citizen living permanently abroad abandon their US citizenship). Fortunately, any taxes already paid in Germany reduce your taxes in the US, and US taxes tend to be lower, so you'll end up with zero in most cases - just a lot of extra work.

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