US Tax CPA for Americans in Germany

Often it means you owe little, but not automatically nothing. The foreign tax credit covers only tax you actually paid, it has to be an income tax, and it is applied category by category — so credits sitting in one basket do not always offset income in another.

The gaps usually show up on investment income, on pension events, and in years when your income mix shifts. That is where a US return stops being a formality.

The US side, and only the US side. We are a US CPA practice: we prepare the 1040 and the international schedules that go with a life abroad, run the elections and credit calculations, and handle the account and pension reporting. We do not prepare Germany returns and we are not German tax advisers.

What we do bring is the American consequence of your German decisions, which is the part that usually goes unexamined. Where you have a local accountant we coordinate with them so both returns tell the same story. More detail: our US expat tax guide, our international tax services, and expat support in other countries.

It depends on the arrangement, and this is one of the places where guessing gets expensive. Employer schemes, the public pension and lump sums are not all treated the same way, and the treaty gives positions that have to be claimed deliberately rather than assumed.

What we do is look at the actual arrangement, decide the position with you, take it consistently year to year, and file the reporting that goes with it.

A foreign corporation is a passive foreign investment company if 75% or more of its gross income is passive, or at least 50% of its average assets produce passive income. A German fund will typically meet one of those tests.

Without a qualified electing fund or mark-to-market election, distributions and gains fall into the section 1291 excess distribution rules, which throw the gain back over your holding period and add an interest charge. Each holding is reported separately on Form 8621 — so a portfolio assembled sensibly by a local adviser can produce a long and expensive US filing.

It depends on how much local tax you actually pay. The foreign earned income exclusion covers up to $132,900 of earned income for 2026 but does nothing for investment income, and taking it means the foreign tax paid on the excluded income is not creditable. The credit has no such ceiling but only helps to the extent local tax was paid.

In a high-tax year the credit usually wins and builds carryforwards. In a year where a local regime has sheltered your income, neither does much, and the US bill is simply the US bill. We run it both ways.

Yes, and it catches people out. The unlimited marital deduction that lets one US spouse leave everything to the other does not apply where the recipient spouse is not a US citizen. Lifetime gifts to such a spouse are limited to an annual exclusion of $194,000 for 2026, and transfers at death generally need a qualified domestic trust if the tax is to be deferred. Worth planning years ahead.

The Streamlined Foreign Offshore Procedures exist for exactly this. They require three years of returns, six years of FBARs, and a certification that the failure was non-willful — due to negligence, inadvertence, mistake, or a good faith misunderstanding of the law — along with physical presence outside the United States for at least 330 full days in one of the relevant years.

Where the requirements are met, the IRS states the taxpayer will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties. Most people who simply did not know are eligible.