Let's say I'm a U.S citizen and have money in a brokerage account at a U.S institution, but I have moved to Germany. Let's imagine that this money generates capital gains. Assuming that I have to pay taxes on these gains in Germany, how are those gains treated by the U.S tax code?

What if the gains are generated at an institution in Germany? How does the U.S tax code treat the gains then?

  • What country are you living in, and what is the country of your citizenship? If you are a US citizen or permanent immigrant to the US, then you have to file a US income tax return and pay incline tax to the US on your world-wide income regardless if where you actually live. Feb 15, 2017 at 0:04
  • @DilipSarwate I'm a U.S citizen soon to move to Germany. I edited the question to reflect that. I'm aware that the U.S is one of only two countries in the world that taxes their citizens who live abroad. Thankfully, though not ideally, you get to apply your foreign taxes as a tax credit against your U.S taxes and you get to exempt around $100,000 from your income. However, this only applies to earned income, I haven't been able to find what happens to unearned income, like capital gains, thus my question. Feb 15, 2017 at 0:16
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    You've answered yourself. Only earned income can be excluded, so you must report these items on your US return and include them in your tax calculation, but you get a credit for foreign tax(es) paid up to but not exceeding the US tax (pro rata by category, see form 1116 and instructions), so you actually pay US tax only if and to the extent it exceeds the foreign tax(es). PS @Dilip: income not incline :-) Feb 16, 2017 at 3:46
  • @dave_thompson_085 Dang auto-complete! Feb 16, 2017 at 3:54
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    @Matthias You don't get to choose. You first pay taxes to whatever country you reside in, and then to the U.S whatever is left after applying the credits. Jan 27, 2020 at 14:51


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