German income taxation of US pensions and similar retirement provisions
von Peter Scheller
1. Introduction
If expatriates receive pensions or similar retirement remunerations from the US the following tax regulations have to be observed:
- Germany income tax law
- US income tax law
- Double Taxation Convention between Germany and the US (DTC USA)
The same applies if a person receives also retirement remunerations from Germany or other countries.
Unfortunately the definition of terms like pensions or annuities are not the same in German or US tax law and may have another meaning in respective provisions of the DTC USA. This makes it sometimes difficult to qualify a US retirement scheme correctly for German tax purposes.
Another difficulty is the use of different types of retirement plans in both countries. US pension plans often use securities, usual common stocks and bonds and mutual funds as financing instruments. German ways of financing retirement plans traditionally depend on retirement funds, pension insurances or pensions directly paid by employers.
Whether expatriates have to pay taxes in Germany, in the US or in both countries, depends on the character of the pension or retirement remuneration. The DTC USA has various provisions to avoid or minimize double taxation scenarios.
The following criterions have to be considered:
- State or private retirement scheme: Will the retirement remunaration be paid by the federal government, by a federal state, a municipality or official organizations set up by one of these authorities? The most common ones are social security benefits based on the Old Age, Survivors, and Disability Insurance (OASDI). Or will the pension be paid by private employers, organizations, insurance companies or pension plans?
- Legal reason of retirement remunerations: Is the legal reason of the retirement remuneration a former employment relationship? Or is the main reason for the payment the old-age protection or the protection against similar risks such as the permanent inability to work?
- Tax treatment of contributions to pension schemes: Did contributions or payments to the pension scheme being subject to a beneficial tax treatment? Such beneficial tax treatments are for example:
- deductibility of contributions for income tax purposes
- tax exemption of earnings of a pension plan
- tax exemption for contributions to a pension plan by an employer or
- Government subsidies.
US tax law provides respective tax beneficial schemes such as Qualified Retirement Plan (most important the 401k plan), Individual Retirement Account or Individual Retirement Annuity.
- Payment for government services: Is the pension paid for services for the federal government, a state or municipally or one of their official organizations?
Before mentioned factors are important to the question whether Germany or the US have the right to tax certain retirement remunerations (mainly based on the provisions of the DTC USA). However, this does not answer the question how the payments will be taxed. This will be determined only by domestic law. If Germany is allowed to tax US pensions or annuities by the DTC USA, it will calculate tax base and tax rate by its own tax regulations. Germany has a lot of different tax treatments depending on the character of the retirement remuneration.
2. Tax treatment of pensions and other retirement remunerations in Germany
a) Introduction
German tax law differentiate between lifelong pensions and annuities, pensions and annuities paid for a certain period of time and other payments such as one-time payments.
Another important issue is whether retirement remunerations are financed by the entitled person itself or paid by an employer as subsequent benefits from an employment relationship. The later requires that the retirement remuneration is granted as compensation for work rendered during active time. These are for example payments of the employer to pension plans. If the employee pays contributions or accepts a salary cut in order to finance a pension or annuity, the retirement remuneration is qualified as a self-financed annuity.
It is also of importance whether the payments are paid regularly with a before determined amount. A regular increase of payments is considered to be regular if it reflects the inflation. Payments are not deemed to be determined and regular, if they can be changed because of the economic situation of the contributor or beneficiary or if the amount depends on reference parameters such as benchmarks.
In German income taxation the term life annuity (Leibrente) is of significant importance. A life annuity requires the following:
- Regular and determined retirement remunerations
- Lifelong payments to the beneficiary
- Not financed by an employer for work rendered during active time
b) Basic retirement remunerations
Retirement remunerations of the following sources are considered to be as basic retirement remunerations:
- Social security pension
- Agricultural pension funds
- Occupational pension schemes for certain professions
- Qualified private annuities (Rürup-Rente)
Although it is not mentioned by German tax law, foreign retirement remunerations which cover the basic retirement care may also qualify as basic retirement remuneration. The US social security pension does so. The same may apply for pensions paid by other official or private bodies if these pensions fulfill the following criteria:
- A certain retirement age has to be reached (e.g. 62 for social security retirement benefits).
- By law the entitlement from the pension scheme cannot be transferred to another person or organization (sale, inheritance, lending) and cannot be capitalized.
- Contributions to the pension scheme must be obligatory by law.
If a US pension or annuity is qualified as a basic retirement remuneration there is a special tax regime applicable. Determining for the tax treatment is the year in which a person is entitled to the pension or annuity or the year the person receives a retirement remuneration for the first time. In the year 2005 only 50 % of the payment was subject to German income tax. This percentage increases up to 2020 by 2% per year and from then on by 1%. In the year 2040 the percentage will be 100%.
Example: A receives in the year 2018 his US social security pension for the first time. If A is tax resident in Germany 76% of his pension will be taxed. 24% will be tax-free.
c) Qualified company and private retirement remunerations
In Germany these are Pensionsfonds, Pensionskasse, Direktversicherung and so called Riester Rente. These schemes are subject to various tax benefits before retirement age (see section 1 - Tax treatment of contributions to pension schemes).
There are different tax treatments for parts of the retirement remunerations:
- If contributions to the plan have been subject to a tax benefit, pensions or annuities will be subject to the regular German income tax.
- If parts of the contributions have not been subject to a tax benefit, pensions or annuities will be subject to a special tax treatment (see section 2.d). This could be the case if the beneficiary was not entitled to a tax benefit or contributions exceeded maximum amounts.
- If parts of the contributions have not been subject to a tax benefit, one-time payments or certain other payments will be subject to another special tax treatment (see section 2.e).
If contributions have been both subject to tax benefits and no tax benefits they have to be split-up (calculated by an actuarial method). For German retirement products this split-up will be provided by the insurance company or organization who pays out the pension or annuity. Foreign insurance companies or pension plans will in general not provide this kind of information. In this case the split-up can be done by splitting-up respective contributions into a part which has been tax beneficial and a part which has not been. However, the split-up may cause practical problems.
German tax authorities see the following US products as qualified US pensions:
- section 401(k) plans,
- qualified plans under section 401(a) of the Internal Revenue Code,
- individual retirement plans (including individual retirement plans that are part of a simplified employee pension plan that satisfies section 408(k),
- individual retirement accounts, individual retirement annuities, and section 408(p) accounts,
- section 403(a) qualified annuity plans,
- section 403(b) plans, and
- section 457(b) governmental plans.
Roth IRAs under Section 408A are not considered to be qualified in this respect. In general they will allow a special tax treatment (see section 2.d or 2.e).
German tax authorities treat 401k plans as follows:
- Pensions will be taxed as regular income if contributions have be paid from 2008 on.
- Pension have to be split-up if contributions have be paid beforehand.
d) Other life annuities
These are life annuities (definition see section 2.a) and certain other payments as long as these payments are not subject to the tax treatment in section 2.e. Main types of relevant annuities are German state pensions and private pension insurances which are not basic retirement remunerations or qualified private pensions.
Pension insurances mentioned in these section are the ones who do not fulfill special requirements:
- No life-long retirement pension (e.g. disability pension benefit)
- Start of annuity before 62 (until 2011 before 60)
- Withdrawal of contributions (although these payments may fall under section 2.e)
In the year 2005 Germany changed its tax treatment of pension schemes fundamentally. Therefor pensions and annuities which started before 2005 are treated differently to those which started after 1 January 2005. Annuities which started before 2005 are tax free if the contractual duration lasted at least 12 years and other criteria were fulfilled (qualified old schemes).
For annuities which started from 1 January 2005 on or non-qualified old schemes the following tax treatment applies. The pension or annuity will be taxed with a certain percentage. This percentage depends on the completed year of life of the beneficiary.
Example: A is a US citizen and lives in Germany. He is 65 when he first receives a payment from his private pension insurance. 18% of the pension will be taxed. 82% of the pension will be tax-free.
There are special rules if the pension will not only be paid to the insured person but also to certain persons after his death (e.g. surviving spouse or children).
e) Pension insurance with the right to withdraw contributions
If the insured person has the right to withdraw its contributions at contractual maturity date, a special tax treatment applies if
- the contributions and deferred earning will be paid to the beneficiary,
- remunerations will be paid within a certain period of time in installments or
- the pension insurance policy will be repurchased by the insured person.
If a life-long retirement remuneration will be paid the tax treatment of section 2.d is applicable.
This section especially covers one-time payments of pension plans or insurances.
Taxed will be the difference between payments by the insurance company and the total amount of contributions. Only half of this amount will be taxed if the contractual period is at least 12 years.
Special rules apply for endowment insurances (life insurances with payment of the capital stock) and insurance products with special administration rights of the insured person.
Note: Other insurance products which do not grant a life annuity or do not fall under section 2.e will be treated as capital investments. Earnings will be taxed as normal capital income (dividends, interests, capital gains). The tax rate is 25% plus solidarity surplus charge of 5.5% of the tax (total flat rate: 26.375%).
f) Company pensions
All retirement remunerations described in previous sections are annuities and similar retirement payments which are either contribution-financed pension plans or capital-based pension plans. They are either obligatory (like social security benefits) or voluntary (like private pension plans). All of these retirement remunerations are not based on work rendered to a former employer.
In contrary to before mentioned plans, public and private employers often grant retirement entitlements for work being performed at active times. These pensions are directly connected to a former employment relationship.
Company pensions will be taxed in Germany when being paid-out. There is a special deduction which decreases every year. If the pension starts 2018 the following allowances are applicable: 19.2% of the pension, limited to a maximum amount of 1,440 Euro. In addition to that another 432 Euros can be deducted.
g) Taxation of retirement remunerations in Germany
Above mentioned taxable retirement remunerations will be taxed at the progressive income tax rate. The maximum tax rate is 45% plus solidarity surplus charge. However, tax burdens of retired persons are in general moderate if there are no other significant sources of income such as business or rental income. The reasons are:
- Most pensions and annuities will only be taxed by a fraction of paid amounts.
- There is a general tax allowance of 9.000 Euro for singles and 18,000 Euro for couples who choose joint tax assessment (2018).
- There is a special tax allowance for persons over 64 of 19.2% on other income which is not above mentioned retirement income. The maximum amount for 2018 is 912 Euro.
- Expenses connected to above mentioned retirement income can be deducted. The minimum allowance is 102 Euro.
A retired person (single) with a total income of 30,000 Euro will face an overall tax rate of about 19 % (2018). The overall tax rate for a married couple with the same income will be about 8% (joint tax assessment).
Note: If pensions or annuities will be subject to US income tax, US taxes may be credited against German income tax in some cases.
3. Double Taxation Convention
If a US citizen is resident in Germany, he or she always face a potential double taxation scenario. The reason for that is the fact that the USA tax their citizens regardless of their actual residence since Germany taxes individuals with their worldwide income if they are resident in Germany. Double taxation treaties and domestic law provide various measurements in order to avoid or minimize a double taxation. There are various methods to achieve this goal:
- One state taxes a particular income and this income is tax-excluded or tax-free in the other state (exemption method).
- Both states tax a particular income and one state credits the tax of the other state against its own income tax (tax credit method).
- Both states tax a particular income and one state allows the deduction of the foreign tax from its tax base (deduction method).
All above mentioned retirement remunerations (except payments for public services) may only be taxed in the state where a person has its (main) residence (Art. 18 and 21 DTC USA). Therefore US pensions, annuities and other remunerations paid to Germans and citizens of other nations will only be taxed in Germany if they are tax resident in Germany.
These provisions are not applicable to US citizen. The saving clause (Art. 1 (4) DTC USA) allows the USA to tax their own citizens regardless of the provisions of the DTC. This means that a US citizen who lives in Germany will be taxed in Germany because of tax residence and in the US because of citizenship. In most cases the US will credit the German tax against the US tax (Art. 23 (5) DTC USA). This treatment applies for pensions, annuities and similar remunerations such as Individual Retirement Accounts (IRA).
The saving clause is not applicable to social security benefits (Art. 1 (5a) DTC USA). Therefor US social security pension of US citizens living in Germany will only be taxed in Germany. These benefits will not be taxed in the US.
A special provision applies for pensions and other similar remunerations paid by the government, public subdivisions or local authorities in respect to services rendered to one of these official bodies (Art. 19 (2) DTC USA). These are pensions and other remunerations paid to civil servants, judges, military personal and other persons who are paid out of funds of the US government, public subdivisions or local authorities. Pensions and other remunerations will be taxed in the USA only. These payments are excluded from income tax in Germany. However, these payments have to be declared in the German income tax return since they have an effect on the progressive income tax rate.
Note: There may be no double taxation because retirement remunerations will either be tax excluded in one of the countries or the German income tax will be credited against US income tax. In case of a tax credit the higher tax level of both countries will be definite since the USA will credit the German tax on these remunerations only up to the level of the US tax.
4. Conclusion
Pensions, annuities and other retirement remunerations of US citizens who are resident in Germany will be taxed in Germany. An exception are pensions paid by the US government, states, municipalizes or other official organizations for services rendered to these official bodies.
US social security benefits will only be taxed in Germany and be tax excluded in the US. Other pensions, annuities and retirement remunerations will be taxed in both states if the recipient is a US citizen. The German income tax will be credited against the US income tax.
The difficult task will be the correct qualification of US pensions, annuities and other retirement remunerations for German tax purposes. There is a variety of types of retirement remunerations. The differentiation is of importance since the tax treatment of every type differs significantly. Another practical difficulty occurs if a remuneration has to be split-up.
Author: Peter Scheller, Steuerberater, Master of International Taxation, Fachberater für Zölle und Verbrauchsteuern
Bildquelle: www.fotalia.com
- Schlagwörter:
- Annuities
- German taxation
- Pensions
- retirement
- social security benefits
- USA
- Kategorien:
- Auswanderer / Expatriates
- Einkommensteuer / Income Tax
- USA
Kommentare
Kommentar von Regina Schuran-Castillo |
Lieber Herr Scheller,
Ist es moeglIch Sie anzuschreiben? Habe gerade Ihren Artikel gegoogelt. Ich kann Ihren Rat gut gebrauchen.
Mit freundlichem Gruss. Regina
Antwort von Peter Scheller
... senden Sie mir eine E-Mail.
Kommentar von Regina Schuran-Castillo |
Hallo, ich moechte gern wissen um wieviel sich meine Steuern unterscheiden, da ich moeglicherweise wieder zurueck nach Deutschland gehen moechte. Zahle seit 37 Jahren an die USA, bin 67 Jahre alt und wohne seit 5 Jahren in Mexiko. Mache einmal jaehrlich on line meine Federal Taxes, bin offiziell in Texas, also zahle keine Staatssteuern. Erhalte rund 3000 Dollar an Witwenrente und Pension, neuerlich auch 150 Euro a us Deutschland.
Etwaige vergleichende Zahlen wuerden meinen Entschluss sehr beeinflussen.
Fuer Ihre Unterstuetzung waere ich sehr dankbar.
Mit freundlichem Gruss. Regina Schuran-Castillo
Kommentar von Regina Schuran-Castillo |
Lieber Herr Scheller,
Ich beziehe Witwen SS und Lehrerpension aus USA, plus 150 Euro Rente a us Deutschland. Ich zahle nur Federal Steuern, da ich offiziell in Texas bin, lebe jedoch seit 5 Jahren in Mexiko.
Nun ueberlege ich nach 37 Jahren wieder nach Deutschland zurueck zu gehen und moechte gern wissen ob es ueberhaupt finanziell moeglich ist. Krankenkasse und Steuern koennten womoeglich zu teuer werden. Wuerden Sie mir ganz im Groben sagen koennen ob es sich lohnt.
Es sind hauptsaechlich emotional Gruende, die mich bewegen.
Lieben Dank fuer Ihr Zuhoeren. Ich freue mich auf eine Antwort.
Gruesse Ihre Regina
Kommentar von Regina L Schuran-Castillo |
Lieber Herr Scheller, ich habe leider noch keine Antwort auf meine Frage erhalten. Es geht darum, dass ich Sorge habe eine finanziel vernuenftige Entscheidung zu treffen. Ich habe einen Steuerechner gefunden, der mit dem Resultat herauskam, dass ich wenigstens 700 E monatlich von meinem Einkommen abrechnen muss. In USA zahle ich jaehrlich nur 100-200$ nach. Natuerlich habe ich mich hier in Mexiko freiwillig krankenversichert.
Ist da keine andere Moeglichkeit als in Deutschland Steuern zu zahlen, wenn mehr als 90% Einkommen von USA kommt.
Ich waere gern wieder im alten Land mit Familie und Freunden, aber ich moechte nicht unbedingt arm dabei sein.
Entschuldigen Sie bitte mein langes Gequatsche, ich will nur meine Umstaende ein wenig erlaeutern.
Mit freundlichem Gruss Ihre Regina
Kommentar von Mr. Bloxxxxx |
after reading the above, I have the below questions, or may require some clarification,
I will be receiving the below retirements soon
- US Military [Disability]
- Social Security [USA]
- Social Security [German]
- Monthly payment [paid into private retirement fund]
What can I expect as an overall tax deduction in 6 year [ hopefully retiring 1 October 2026].
Looking forward to your response.
Thank you
Antwort von Peter Scheller
Supposingly you need a good German tax adviser.
Kommentar von Michael Doren |
I am a US citizen living in New York. I was born in Germany, 1954. All my known family lives there. I would like to move to Germany and spend the rest of my life there. I am retired, receive a pension from where I used to work, SS and I have a IRA which I funded over my course of my employment. My wife passed away so I am alone. That's why I would like to move. Is this doable in my circumstance? I speak German but reading is weak, English please.
Antwort von Peter Scheller
Off course it is doable. However, you need proper advice to avoid unnecessary tax risks.
Kommentar von Frank Funicello |
Dear Mr. Scheller:
I am an American citizen living in Germany for 20 years and retired for 10. Every year I am a Freiwilling member of Technikerkrasse. I have some German retirement (small) and social security from the United States, as well as a private health insurance. I can never figure out (and neither can the Krankenkasse) what is my monthly premium. For example, in 2018 I had approximately the same retirement income as I had in previous years but every year my premiums have gone up a lot. This year they want 20 Euros more even though my retirement was only a few Euros difference. This can't be all due to the cost of living. There is also the problem of the exchange rate which I think is different from the Finanzampt. Could you do some explaining to me? Of course, I will gladly pay your fees (if they are not too much!) Sincerely yours, Frank
Kommentar von Lory Keller |
Other pensions, annuities and retirement remunerations will be taxed in both states IF the recipient is a US citizen
Dear Mr. Scheller
What if one is a dual citizen - American and German -
My husband is dual citizen. He wants to go back and live in Germany in 2 yrs.
Most of our income will come from US Social Security, 401K retirement funds and very small German pension (est 300euro)
The question is will our 401K, 403B be tax? It says "IF"
Thank you for taking the time to shed some light and I will keep your name on file for services in the future.
Antwort von Peter Scheller
The payments out of mentioned pension plans will be taxed in Germany if the pensionaire is resident in Germany. They will also be taxed in the US if the person is a US citizen but the person can use the foreign tax credit.
Kommentar von Joe Schmo |
"US social security benefits will only be taxed in Germany"
However, US social security benefits are reduced by required payments (cumulatively 10%) to the Germans. All "foreign income" (INSURANCE benefits are classified as INCOME here) is subject to a "CONTRIBUTION" -- although not called a "tax" -- to the health insurance system.
If I could return to the USA the fact is I would get the hell out of this country.
Antwort von Peter Scheller
Social security benefits (US or German ones alike) will be taxed only in the state of residence at the time pf payment. Id a person is tax resident in the US any social security remunerations will only be taxed in the US. This also applies for pension payments out of the German social security system.
Kommentar von Isabel Valencia |
I live in Germany since 2014. In 2015, I converted some of my IRA to a Roth. Is it true that I now have to pay taxes on the dividends accrued in the ROTH? I am 65 and have not taken any funds out of the IRA nor the ROTH. I appreciate you advise.
Antwort von Peter Scheller
In general the earnings of an US pension plan are not taxed in Germany. You will be liable to German income tax if you take out funds.
However, there is another bad news. It might be that you roll over from the IRA into a Roth may be seen as a taxable even in Germany. You should consult a good tax adviser who is experienced with such roll overs.
Kommentar von Ray |
My wife and I (U.S. Citizens) plan to retire in Germany. Will my Federal Retirement and SS be taxed in Germany? I also have rental property in the US, will that be taxed in Germany?
Antwort von Peter Scheller
The pensions will be taxed in Germany, the rental income not (but has an impact on the German tax rate). You need professional support by a tax adviser.
Kommentar von thomas moran |
Hello sir:
We have things called self-directed 401k Roths in the USA. My grandson may work here (dual German/USA citizenship). The funds departing such an account after age 59 are not subject to taxation in the USA. Will it also NOT be subject to taxation in Germany?
Antwort von Peter Scheller
The payments from a Roth-Plan will be taxed in Germany (payments from the plan minus former contributions) if the recipient is tax resident in Germany.
Kommentar von thomas moran |
One more question - my dual citizen Grandson - is there anyway he can take say $10k and invest it in USA stocks - via a Roth IRA or Roth 401k - and it will grow tax free and EVEN when he takes it out in 50 years it will not be taxable in Germany ? Is there another way in Germany to replicate the "ROTH" quality we enjoy in USA?
Antwort von Peter Scheller
The earnings in the plan will not be taxed in Germany. Later payments from the plan will partially be taxed in Germany if been paid out. But who knows what will be in 50 years time?
Kommentar von Jutta |
Sehr geehrter Herr Scheller,
I am a 67 year old German citizen and have lived and worked in the USA on a permanent resident permit for a long time. I recently retired from my position with the University of California system and wish to return to Germany permanently. I also receive monthly SS benefits. If I understand correctly, SS tax would be taxed in Germany only, no US tax - is that right? Apparently, "U.S. Social Security benefits received by US citizens and green card holders residing in Germany are exempt from tax in the United States and are taxable only in Germany." But I am confused about the tax on my monthly pension that I receive from the University. How does a dual citizenship status affect my situation, if at all. Many thanks for providing this service and your precious time!!
Antwort von Peter Scheller
The University pension might be taxed in both countries (with tax credit). However, you need the help of a professional tax adviser to sort this out correctly. To analyse the situation correctly mor information is required.
Kommentar von Eric |
My wife (U.S. citizen) and I plan to retire in Germany. Will the rental property my wife owns then be taxed in Germany and the U.S.? Or is there a tax credit/deduction available on either side?
Antwort von Peter Scheller
It depends where the rental property is situated.
Rental property in the US: No taxation in Germany but impact on the German income tax rate.
Rental property in Germany: Taxation in both countries but tax credit in the US
Kommentar von Donald van Ochten |
Hello Mr Scheller,
I’m considering a move to Germany and have a municipal pension from a City in which I worked for 25 years.
I paid into the municipal (city) system and at retirement took out my Contributions (annuity).
This is a fixed pension amount, which does not increase or decrease and is paid for life.
What are the German tax implications for my pension and would I also have to pay the pension and health insurance tax as I’m not entitled to use collect or use them?
Thank you in advance,
Don
Antwort von Peter Scheller
Whether your municipal pension will be taxed in Germany depends on the fact f it is paid for
If you need more information you have to take Article 18 or 19 Double Taxation Convention Germany/USA into consideration.
If you are retired you will not be liable to Germany's social pension insurance. Whether you are liable to Germany's health insurance has to be checked. However, you need a health insurance cover anyway.
Kommentar von Al Penview |
Hello Mr Scheller,
I am a US Citizen living in Germany working for an American company that offers employees to participate in the company 401k program. The employer also contributes a small amount into the 401k program with disbursement of these monies starting at legal retirement age, in my case 2027. While considered Ordinarily Resident in Germany in terms of taxes on payroll income why are employer pre-taxed 401k contributions taxed as normal income in German. This goes against Article 18 of the US-German tax treaty and believe this is incorrect. Can you please clarify and Thank you for your time and assistance.
Antwort von Peter Scheller
I do not understand your comment. This article you posted the commentary on is only describing the taxation of pensions and other old age benefits.
Contributions to a 401k are not taxed if they do not exceed the German maximum amounts. The relevant provision is Article 18A DTC USA.
Kommentar von K Runge |
Hello Mr. Scheller, I am planning to retire after 30 years working for the State as a probation Officer. I would then like to move to Germany. I was required by law to contribute a fixed percentage of my salary to the state public employee pension fund. It will be taxed in the US. Will it also be subject to German taxation? If so, at what percentage? Thank you.
Antwort von Peter Scheller
How the payments will be taxed in Germany depends on the pension plan. However, the German tax may be credited against the US tax. You need a professional tax adviser to help you through this.
Kommentar von Sam Johnson |
I am US citizen permanently residing in Germany. My only income is Rente from the DRV und a pension from the VBL. My only employer was Land NRW. What part of my income, if any, is taxable by the US?
Antwort von Peter Scheller
Probably both not. However, you have to consult a US tax expert.
Kommentar von Adam Smith |
Dear Mr. Scheller,
I am an American citizen resident in Germany for 40 years and file US and German tax returns. I have a standard (not Roth) US IRA account. It is my understanding that the interest and dividends from this account are taxable in Germany in the year they occur, even though they are not taxable in the US. In the US they are taxable (as normal income) when I make a withdrawal (distribution). Since these occur at different times it amounts to double taxation. Is it possible to apply for a foreign tax credit for this difference? Many thanks.
Antwort von Peter Scheller
In general the income within a US pension plan is not taxed in Germany (but later the withdrawals)
Kommentar von P. B |
Hello Peter,
I am a US citizen living in Germany on a freelancer visa. I have a Beneficiary IRA that I received from my grandfather in 2010. The Beneficiary IRA contains US stock that has appreciated in value over the past 10 years.
Is the IRA taxable in Germany in the year that the stock is sold? Or in the year that distributions take place? In USA, I would only be taxed in the year or years that distributions take place.
Specifically I am wondering if I were to sell the stocks in the Beneficiary IRA this year, but take the distributions over the next 5 years, when would I be taxed in Germany? Would it be this year (when i sold the stock), or steadily over the course of the next 5 years? Would it be possible to avoid double taxation?
Additionally, would this be taxed as inheritance tax, income, or capital gains in Germany?
Thank you in advance!
Antwort von Peter Scheller
This requires careful analysis.
Kommentar von Ingrid Cutler |
Dear Mr. Schneller,
I am a German born American citizen. I intend to return to Germany next year. I have both a traditional IRA and a Roth IRA account. After reading the information on your website, I come to the conclusion that I should keep my traditional IRA as is and continue to take my required minimum distributions and that I should sell all assets in my Roth IRA and convert it into a regular brokerage account.
Am I correct?
Thanks for any help.
Ingrid Cutler
Antwort von Peter Scheller
Whether the traditional IRA should be continued depends on the following: Is it a company or a private pension plan?
The Roth IRA should be paid out before you come to Germany. However, any earnings in your brokerage account (Dividends, interests, capital gains) will be taxed in Germany regardless where the account is held.
Kommentar von Darius |
Hello dear Mr. Scheller,
I am USA citizen living in Germany. How does Germany tax RMD from inherited traditional IRA ? It looks like USA take about 20% and Germany maybe 10% more ? Also does Germany put some capital gain tax on traditional IRA earnings ? Darius
Antwort von Peter Scheller
A part of the payment will be taxed in Germany with your individual income tax rate.
You should consult a German tax adviser in order to declare this income correctly.
Kommentar von Darius |
Hello dear Mr. Scheller ,
Thanks for your answer. So it looks like will be no capital gain tax on USA traditional IRA earnings ? One more time thanks for your answer. Darius
Kommentar von BillyBob |
Will a federal pension, I worked for the US Federal Government, with a lifelong annuity be taxed in Germany if I have an Aufenthaltserlaubnis to live in Germany for less than 180 days? Will my 401k distributions and eventually my social security be taxed in Germany? And, if I live part time in Italy will Italy try to tax me too?
Antwort von Peter Scheller
Your tax situation will depend on the fact whether you are tax resident in Germany (home or habitual abode in Germany).
If you are tax resident in Germany your 401k withdrawals and social security benefits will be taxed in Germany. The governmental annuity will not be taxed but has to be reported in your German income tax return.
You have to make sure that you are not paying too much taxes in the USA (tax credit or exclusion).
Kommentar von Danny |
Dear Mr. Scheller,
I am a US citizen living in Germany and wish to completely withdraw all funds from my 401k (which contains both traditional and Roth components). I am fully aware of how the US would tax it, and I know that the tax treaty with Germany states that both countries have the right to tax it (saving clause on Article 18 or Article 21, whichever applies), but the US has first right because of sourcing rules.
My two questions:
1) How does Germany tax this withdrawal? Is it deemed as a pension and taxed as regular income, or because I'm withdrawing the money early is it treated like an investment account and taxed as capital gains (Abgeltungssteuer)? Or neither of these two possibilities?
2) Can the taxes that I pay in the US (income tax + 10% early withdrawal penalty) be credited against by German taxes?
Many thanks in advance.
Antwort von Peter Scheller
The withdrawals will be taxed in Germany. How, is still pending before a tax ruling of the highest German Fiscal Court is still outstanding. The taxable amount will be taxed at your individual tax rate.
Kommentar von Thomas Moran |
Is there a German equivalent to a 401k plan that allows one to invest in securities? Are there self-directed choices?
Is there a German equivalent to a self-directed 401k that allows one to "self-direct" invest in real estate and securities?
Is it possible, if there is a German equivalent to a non-taxable account, for me to assign the benefits/when I die I assign my US 401k plan and assets to my German grandson or my daughter's German retirement (non-taxable I hope) plan?
Antwort von Peter Scheller
There are not equivalent pension plans and specially not self-directed plans (see also https://scheller-international.com/blog-beitraege/self-directed-individual-retirement-account.html).
Any assignments to other persons must be seen in the light of inheritance and gift tax.
Kommentar von Anna Swenson |
Sehr geehrter Herr Scheller,
nach Durchlesen Ihres Links (...German Income Taxation of US Pensions...) bin ich leider nicht fündig geworden bzgl. meiner folgenden Frage:
Ich bin deutsche Staatsbürgerin, habe 16 Jahre in der US auf Green Card gearbeitet. Zurück in Deutschland (nun ohne GreenCard) habe ich nun Anspruch auf Soc.Sec.Benefits und habe auch 401K + Pension Ansprüche von der letzten Firma, für die ich gearbeitet habe. Auf deren 401/Pension Website wird mir angezeigt, dass sie 30% meiner Rentenzahlung bei Auszahlung einbehalten werden, es sei denn, mein Aufenthaltsland hat eine Steuervereinbarung mit der US.
Muss ich diese 30% Steuer abziehen lassen, obwohl ich keine Steuererklärung in der US mehr mache?
Wissen Sie etwas bzgl. dieser Steuervereinbarung Deutschland - US?
Habe bei meinen Internet Recherchen auch hier nichts Aussagekräftiges gefunden.
Mit bestem Gruss,
A. Swenson
Antwort von Peter Scheller
Alle Zahlungen sind in Deutschland zu versteuern.
In den USA sind diese nicht zu besteuern, Wahrscheinlich benötigen Sie ein W-8BEN umd den Steuerabzug zu verhindern (ansosnten Abgabe ein US-Steuererklärung).
Kommentar von Kay |
Dear Mr. Scheller,
I am a US citizen, married to a German citizen, not working, living permanently in Germany. This year I will begin receiving my social security payments my German bank account.
As a US citizen I file and pay my US Federal and State tax returns. As a permanent resistent of Germany, I am also liable for German taxes. I am confused with what I need to report and how to prevent paying double taxes. I have zero income in Germany, but receive withdrawals from my IRA (rolled over 401K) / Annuity....all of which is reported on my US tax return.
Do I have to report this on my German return as well? If so, then I would be taxed first by the US, then secondly from Germany. I thought I can only be taxed once. Or do I file/pay Germany first, and then provide some German form with my US return showing taxes paid....like a credit taken off any US taxes owed?
Your advice will be greatly appreciated,
Kay
Antwort von Peter Scheller
Your income will be taxed in Germany. Probably you have a tax credit in the US.
You should consult a tax expert.
Kommentar von Cathy |
My husband is a German citizen and we reside in Germany with a German employer, but he has an old 401k from when he worked in the US (I'm US citizen so we do both taxes).
We are thinking of rolling the 401k over to an IRA in its entirety (not taking anything out) - this will allow us to have it at brokerage where we also have savings and other accounts (since he no longer works for the company).
In the US, this wouldn't be considered a taxable event since it's going into an IRA, but my husband is worried that the German IRS may considered it as such and somehow make us pay taxes. How does the German tax system view a rollover event?
Thank you very much!
Antwort von Peter Scheller
Very good question and no final answer.
So far neither German tax authorities published a statement on this topic nor are there any rulings of German fiscal courts. There are arguments for and against a taxable event in Germany.
If you want to be on the absolute safe side you should not roll it over.
Kommentar von Marion |
Hallo, ich wäre dankbar über eine Einschätzung zukünfitg zu erwarteten Steuerlast und wo diese anfällt. . Folgender Fall: Deutsche. wohnhft in Deutschland. At full retirement age Social Security Survivor Benefits sowie military pension survivor benefits und Federal Employee Ret. System survivor Annuity. Wird das alles in Deutshcland versteuert? Angenommen das wären $3.700, plus circa 350 Euro deutsche Rente.
Antwort von Peter Scheller
Sie brauchen den rat eines in solchen Angelegenheit versierten Beraters.
Kommentar von Ulrich Dr Tillmann |
Hallo Herr Scheller,
ich habe während meiner Auslandstätigkeit in USA in ein normales IRA eingezahlt. Einer Iniative von President Clinton habe ich das Standard IRA in ein Roth IRA umgewandelt und über einen Zeitraum von 4 Jahren das unversteuerte Einkommen nachversteuert. Nach Abgeltung aller Steuern bekam mein Konto den Status Roth IRA. Ich lebe und arbeite seit 2006 wieder in Deutschland. Welche Regeln greifen bei der Besteuerung von Auszahlungen aus diesem 'Rentenkonto'? Nach US Recht fallen keine Steuern auf den Zugewinn an und ich kann frei bestimmen, wann und in welcher Höhe ich Beträge an mich auszahle. Das DBA zwischen den USA und der BRD scheint hier keine Hilfe oder werden Roth IRAs unter einer anderen Kategorie subsumiert? Vielen Dank für einen Fingerzeig! Mfg, Ulrich Tillmann
Antwort von Peter Scheller
Sie haben keine so gute Entscheidung getroffen. Auszahlungen aus einem Roth-Plan unterliegen in Deutschland der Besteuerung (trotz der Nichtbesteuerung in den USA). Versteuert wird die Differenz zwischen Auszahlung und den darauf entfallenden geleisteten Beiträge (Arbeitnehmer und Arbeitgeber). Es ist also Historieforschung angesagt.
Kommentar von Kenny |
Dear Mr. Scheller,
I am a U.S. citizen, retired military and living in Germany as a ordinary resident. My only income is my military and civilian pensions which are exempt from German taxation. I have zero income in Germany. This year I plan to withdraw all the entire amount in my U.S. government Thrift Savings Plan (TSP). I think this is considered a traditional 401K tax plan but I'm not certain. I am confused with what I need to report and how to prevent paying double taxes. . I assume that the U.S. will take taxes as soon as I withdraw it. If the Germans also want to tax it, how do I recover taxes taken by the U.S..
Antwort von Peter Scheller
The withdrawal will be taxed in Germany. It is not clear whether the full amount or only the difference between withdrawal and attributable contributions (or only half of the difference) will be taxed. There is still a case pending at the Federal Fiscal Court in regard to 401(k) plans.
The German tax can be credited against the US tax.
Kommentar von Ulrich Dr Tillmann |
Hallo Herr Scheller,
vielen Dank für Ihre Auskunft.
Ich kann anhand der Kontoauszüge des Investmentfonds alle auschliesslich von mir geleisteten Beiträge belegen und mit historischen Wechselkursen die Basis in € ermitteln. Zu versteuern wäre dann die Differenz (Kapitalertrag) zum augenblicklichen Wert eines Fondsanteils. Sehe ich das richtig? Der größte Aufwand besteht dann darin, vom deutschen Fiskus die Basis für dieses Investment anerkannt zu bekommen: Diese 'Historienforschung' ist zwar lästig, erscheint mir aber durchaus machbar.
Mit freundlichen Grüßen,
Ulrich Tillmann
Antwort von Peter Scheller
Sie versteuern nur die Hälfte der Differenz, wenn Sie bei erster Auszahlung 60 Jahre alt sind und der Vertrag 12 Jahre bestanden hat.
Kommentar von Chandra |
Hello Herr. Scheller,
I am Indian citizen resident of Germany. I received provident fund which is a retirement benefit fund to which both my indian employer and I contributed as part of my past employment in india. This is tax free in india. However, I moved to Germany and withdrawn this fund. Is this money taxable in Germany? If yes, is it considered as progressive tariff?
Antwort von Peter Scheller
I cannot tell without research. That withdrawals are tax-free in India does not mean that they are tax-free in Germany if you are tax resident in Germany.
Kommentar von Alma S. |
Dear Mr. Scheller,
Thank you for the informative post. I do have one clarification question:
Suppose a US citizen has both social security and a public employee pension retirement. The latter is tax exempt in the US, but 50% of the former is taxed because the total income from both sources is above a specified threshold amount.
If understand correctly, if that person moves to Germany, then the public pension will be exempt in both countries (since only the US can tax it but choses not to) but the social security funds will be taxable in Germany under the general retirement taxation rules in Germany. What I am not sure I understand is the issue of the entirety of the income being used to determine her progressive tax rate.
I am a little confused how that is possible if the pension is not considered taxable income in Germany and the tax rate is progressive (i.e. tied to the taxable income). Does this mean that the entire income will be used to determine the a sort of effective overall tax rate, but that rate will be applied only to the taxable income, i.e. the social security payment?
Antwort von Peter Scheller
Tax-free under the rules of a Double Taxation Treaty agreed by Germany means in most cases that the tax-free amount has an effect on the German income tax rate. So your last statement is correct.
Kommentar von Ralph Rosinbum |
I’m looking for someone to help me submit a German tax return. Please recommend some one. I’m 71 and a US citizen with residency in Trier, Germany.
Thank you
Antwort von Peter Scheller
This is no topic for a open forum. So please send me an e-mail.
Kommentar von Darius |
Hello dear Mr. Scheller !
I am a USA citizen living in Germany. I did inherit a traditional IRA pension plan from a friend who lived in USA. I did lots of research on it and it looks like USA-German tax treaty does not answer this situation very cleary. There are some articles that say , that Germany does not put inheritence tax on USA pension plans if they are somehow similar to German pension plans. It kind of leaves people like me in a grey zone .
Antwort von Peter Scheller
This topic need some professional research.
Kommentar von Mathieu Edward |
Ich bin Deutscher Staatsbürger und lebe permanent in Deutschland. Für 20 Jahre - bis 2000 - habe ich in den USA also Beamter an einer öffentlichen Universität gearbeitet. In 2000 bin ich wieder nach Deutschland und habe meine Greencard abgegeben. Nun bin ich in Rente. Ich beziehe SSA income und auch eine Annuity (durch TIAA-CREFF) von der U.S. Universität. Das SSA income und die Annuity habe ich in den USA versteuert mit einer Form 1040-NR, und das Einkommen nicht in der Deutschen Steuererklärung angegeben. Nun habe ich festgestellt dass ich das Einkommen doch hätte angeben müssen. Kann ich diesen Fehler in Deutschland korrigieren, auch nachträglich? Kennen Sie sich mit dieser Sache aus, falls ich mich an sie wende?
Antwort von Peter Scheller
Sie können sich gerne an mich wenden.
Kommentar von Alex Schuster |
I have been retired and receiving social security since 2008. I became a resident in Germany 2015. In calculating (Ertragsanteil) the social security tax, do I have to include all the years since 2005 or since 2015? What is the role of the Ertragsanteil?
Antwort von Peter Scheller
This has to be calculated correctly and depends on various factors.
Kommentar von Norman Wasson |
I am helping a friend in Germany. She is a German national no green card and her husband was retired military. He recently passed away and his social security payment was switched to his wife. Does she need to notify Germans of the change amount of her previous social security amount to the amount she is receiving now for her deceased spouse?
Antwort von Peter Scheller
Ist this a tax or a legal question. If it is a legal question I cannot give any statement on it.
She has to pay taxes on the ss benefits in Germany
Kommentar von Ulrich Dr Tillmann |
Dear Mr Scheller,
I worked in the US from 1992 - 2005 and paid social security tax on my US earned income. Today I live in Germany ( I only have German citizenship, gave up my green card). By next April I will qualify to receive social security payments, disbursed by the German Retirement Administration.Will US social security be subject to the same split between taxes and tax-free amounts as set by the German retirement system? The reason I ask the question is this: social security is taken out of gross income and is not déductible under US tax code ( except of course for the employer). The rationale for increasing the taxable portion of retirement payments from 50 to 100% in Germany is based on the deductibility of the employee‘s portion of retirement contributions so that in the end untaxed money will be taxed at payout. If my social security would then be taxed according to the German schedule, this would mean I would have to pay taxes again on fully taxed contributions ( except for the employer contributions) Thank you very much in advance for sharing your thoughts.. Best regards, UT
Antwort von Peter Scheller
Interesting question.
Position of the German tax authorities: Foreign social security payments to pensioners resident in Germany will be taxed as German SS benefits.
As far as I know, this is in line with US tax law. SS benefits exceeding certain levels have to be taxed with 85% of the income.
Kommentar von Dr Ulrich Tillmann |
Dear Mr Scheller,
I am to receive my first payment out of the German retirment system (Deutsche Rentenversicherung) in January 2022. I qualify for payments of social security in May 2022. The German pension administration requests these projected social security payments under the US German social security agreement. They recently sent me a note that my US social security may be subject to a 'Windfall Elimination Provision'(WEP) that may reduce the benefits I earned in the US by 50 %. Can you commnet? Thank you very much in advance. Kind regards, Dr. U Tillmann
Antwort von Peter Scheller
You have to ask a US tax expert. If required I will get you in touch with one.
Kommentar von Paul |
Dear Mr. Scheller,
Is rebalancing of 401k account (e.g. changing % allocation from stock ETF to bond ETF), while realizing capital gains and not paying out any distributions (no money leaves the 401k account), considered a taxable event by German tax authorities? It is not a taxable event in the US and I wonder if the German authorities see it the same way.
Thanks for your kind answer,
Paul
Antwort von Peter Scheller
No taxable amount.
Kommentar von Madeleine Butler |
I was born in Germany and live in the US(citizen) I will receive a small monthly . retirement benefit from Germany. Will I have to pay taxes in the US, Germany or in both countries? I turn 66 in 2022. Thanks much
Antwort von Peter Scheller
It depends what kind of benefit it is (social security, company pension or private pension plan).
Kommentar von Hermann Eisele |
An annuity (non-qualified) owned by deceased U.S. citizen residing in Germany was inherited by nephew, who is a German resident & citizen. Annuity is payable as a lump-sum by U.S. insurance company. Beneficiary now has ITIN and I am helping complete claim form that asks about tax withholding. Is it correct based on Art. 18 or 21 DST, that there should be no tax withheld because annuity is taxable only in Germany since beneficiary is a resident of Germany?
Thank you
Antwort von Peter Scheller
I do not know the full case but I suppose so.
However, you also should investigate the situation in regard to inheritance tax also.
Kommentar von Herr Mittag |
Dear Mr. Sheller, I have worked from 1992 till 1995 at my companys headquaters. During thar time I have paid some money for a 401k plan. Now I have retired in april this year How can I avoid to pay 30 % withholding tax.Of cause I will pay taxes in Germany, but that should not be 30% since the plan was made before 2005. I still have an US bank account….Best regards and thanks for your answer
Antwort von Peter Scheller
Whether you have to pay taxes in the US depends on the following citeria:
- Are you a US citizen?
- Do you have you residence in the US or in Germany?
If you are no US citizen with tax residence in Germany you may not pay any US taxes. To avoid the withholding tax you have to hand in a specual form: See also https://www.irs.gov/retirement-plans/plan-distributions-to-foreign-persons-require-withholding
Kommentar von Patricia |
Dear Dr. Scheller!
I am an Austrian citizen, U.S. permanent resident and am about to receive a private company pension from a German company that I earned while working mainly abroad (10 out of 15 years of employment outside of Germany). The pension will be paid in 12 annual installments. I do not have a residence nor a financial footprint in Germany. Do I owe taxes in Germany or do the annual payments get taxed exclusively in the U.S.? Many thanks
Antwort von Peter Scheller
Your case requires more information and anlysis.
Kommentar von Doreen Paradeis Lopes |
Thank you for your service and this helpful article online. I am a dual citizen of USA and Portugal, as are my minor children. We are currently USA residents, ready to travel to EU. If we stay in Germany for more than 6 months, what will our German tax obligations be on my children's USA SSA Survivor's Benefits (death of their father/my husband) and on my USA SSA Social Security Disability Benefits? In USA, these benefits are all tax-free due to eligible deductions/limits. Thank you.
Antwort von Peter Scheller
That requires a careful analysis and a little bit of working time. You have to seek for professional advice.
Kommentar von David |
Dear Herr Scheller: Thank you for posting this wonderful information. Technical question: on which line of the German tax declaration should contributions to a qualified US scheme (401k, IRA etc.) be entered in order to claim the corresponding German tax deduction? My Steuerberater did not know where to enter these and could do no better than to raise the point "offline" in the context of an Einspruch, which took substantially more time and effort.
Antwort von Peter Scheller
It depends on a lot of issues:
- Form of payment (life-long annuity, annuity for a certain period, other witdrawals)
- Company or private pension plan
On-time withdrawals for a 401(k) plan should be declared in Anlage R AUS line 39 to 41. (Note: Declaration of withdrawal minus attributable contributions)
Annuities from private plans shall be declared in Anlage R Aus line 14 to 20.
A problem are withdrawals (no annuities) from private plans. There are no lines for these kind of payments in Anlage R AUS. I would declare withdrawals minus attributable contributions in Anlage KAP line 28 or if you are entitled to the special treatment of § 20 (1) No. 6 Sentence 2 EStG in line 30.
Kommentar von Roxanne |
Dear Herr Scheller:
If I am a dual citizen of both the US and Germany and retire before 59 1/2 years old while living in Germany, how are my retirement accounts taxed in both the US and Germany?
I have a traditional IRA which has a penalty tax in the USA of 10% if withdrawn early
I also have a 403(b) account... virtually identical to a 401(k) account with also has the 10% penalty if withdrawn early.
And lastly I have a 457(b) account which does not have any penalty if withdrawn early.
Would I have to pay the penalty to withdraw the money? Or can I use 72(t) or another method to avoid the tax? If I have to pay the 10% penalty tax, could I use it to offset the taxes I pay in Germany?
Antwort von Peter Scheller
Regarding the US side you should ask a US tax adviser.
About the taxation of withdrawals of US pensions plans you may find a lot of information in this blog.
Whether the 10%-penalty is tax deductible in Germany is unsettled although German tax authorities deny it.
Kommentar von Katja Schuttenbach |
Hallo Herr Scheller,
Ich habe obige Kommentare mit grossem Interesse gelesen. Auch ich bin daran interessiert herauszufinden, ob mein TSP Retirement Plan (U.S. fed govt Beschaeftigung) nach US oder deutschem Recht versteuert wuerde (20%), sollte ich wenn es zu regelmaessigen Auszahlungen kommt, nur in Deutschland leben. Sie erwaehnten ein noch anhaengiges Gerichtsverfahren 401(k)s betreffend, hat es da mittlerweile eine Entscheidung gegeben? Herzlichen Dank!
Antwort von Peter Scheller
Das Urteil ist ergangen: https://scheller-international.com/blog-beitraege/401k-plans-and-german-taxation.html
Kommentar von Colin |
Sehr geehrter Herr Scheller,
ich bin 30, doppelter US- und Deutscher-Staatsbürger, lebe in Deutschland und überlege in den USA einen Roth IRA zu starten. Wenn ich später mir das Geld auszahlen lasse und immer noch in Deutschland lebe, zu welchem Steuersatz werden die Auszahlungen in Deutschland versteuert?
Vielen Dank und Schöne Grüße
Antwort von Peter Scheller
Das hängt von u.a. Ihrem Gesamteinkommen zu dem Zeitpunkt der Auszahlung ab. Die Auszahlung minus Beiträgen wird als normales Einkommen besteuert und unterliegt ihrem in dem Jahr gültigen Steuersatz.
Roth IRA machen aus deutscher Sicht wenig Sinn, weil die Steuerfreiheit in den USA bei Ansässigkeit in Deutschland "verloren" geht.
Kommentar von christopher ferguson |
Does the retirement get treated differently if based on disabilities? Medical retirement military and SSDI at age 49. 100% disabled can no longer work. Wife wants to return to Germany. Thanks.
Antwort von Peter Scheller
To answer your questions requires more information and a prfessional advice.
Kommentar von Claudia Fenney |
Guten Tag, ich bin Deutsche, mein Mann ist US Amerikaner und beantragt jetzt die deutsche Aufenthalts Erlaubnis, er hat eine Rente der US Armee, Social security disability und Schwerbehindertenrente des VA, er ist 48 Jahre alt. Was muss er alles versteuern in Deutschland?danke. Und muss ich meine Steuerklasse ändern?
Antwort von Peter Scheller
Im Ergebnis stehen viele der Antworten schon in diesem Artikel. Ansonsten muss man tiefer einsteigen und das kostet natürlich Geld. Wenn Ihr Mann das will, kann er sich gerne melden.
Kommentar von Markus Schmid |
Hallo Herr Scheller.
Ich habe gerade mein Arbeitsverhältnis in den USA begonnen und plane spätestens zur Rente wieder nach Deutschland zu gehen. Nun kann ich mich bei meinem Arbeitgeber für all die unterschiedlichen 401k Rentenprogramme einschreiben. Was würden Sie mir hinsichtlich der zukünftig anstehenden Besteuerung empfehlen? Die klassische 401k Variante oder den Roth IRA oder etwas anderes?
Zusätzlich würde ich freiwillige Beiträge in die deutsche Rentenversicherung zahlen
Besten Dank!
Antwort von Peter Scheller
Da kann man so nicht sagen. Das erfordert eine genaue Analyse und Planung.
Kommentar von Carolyn |
I would like to know more about the sentence in 4. Conclusion "An exception are pensions paid by the US government, states, municipalizes or other official organizations for services rendered to these official bodies." Is a pension from the UN - an official body - included within this exception and if so what is the related tax law?
Antwort von Administrator
The UN is not an official body of the USA. However, there are special regulations for UN pensions.
Kommentar von Mrs. Fuchs |
Dear Mr. Scheller,
my husband is an american citizen and I am both a german and an american citizen.
He has been receiving his disabilty from the US army since 2007, as lifelong payments that arent taxable in the US. He has no income in Germany.
When doing our taxes together, do thise payments have to be taxed in Germany?
Kindly,
Mrs. Fuchs
Antwort von Peter Scheller
My opinion is that disability payments of the US forces are tax free but have an effect on the German income tax rate. If you use joint assessment you have to declare this as tax.free income.
Kommentar von Karin Schaefer Vanattia |
Hello Mr. Scheller,
It says that US social security benefits will only be taxed in Germany and be tax excluded in the US.
I have the dual citizenship. Is it then different?
Thanks for your help.
Kindly
Karin Vanattia
Antwort von Administrator
No, exactly the same if you are tax resident in Germany in the moment of payment.
Kommentar von JK |
Hello Mr. Scheller,
Thank you so much for this website - it is full of interesting information.
Can you confirm if there are any german income tax advantages of any qualifying contributions made to a 401K or SEP IRA for a US Citizen but tax resident in Germany? US Taxes are offset by claiming Foreign Tax Credit.
Will it be no more or less than what is allowed for contributions to equivalent German plans?
I can't seem to find a clear answer for this. Thank you!
Antwort von Peter Scheller
In general, contributions to qualified US plans can be deducted up to the same amount a German tax resident can deduct contributions to German plans.
Kommentar von JK |
Dear Mr. Scheller, Thank you for the response to the question about deductions of contributions to pension plans. If a contribution to a 401K/SEP IRA is claimed on the US tax return, is it allowed to also be claimed on the German tax return? Just curious if the deduction can only be applied one country, so for example, forgo claiming a deduction in the US in order to claim the deduction in Germany, as tax burden in Germany is higher. Thank you!
Antwort von Peter Scheller
If you are tax resident in Germany you are able to deduct the contributions up to certain maximum amounts. Please contact a tax adviser for more information.
Kommentar von Isabelle |
If, as a German resident, I have retirement savings in an Individual Taxable Account in the US that earn dividends or capital gains, is that subject to tax in Germany in a year I do not withdraw?
Antwort von Administrator
Is it a capital investment or a qualified retirmenet account?
Kommentar von Tunar |
I am a U.S. citizen who worked in the U.S. from 1 January to 15 May. I arrived in Germany on 7 June and started to work here in September. My question is will I need to include my U.S. income on my German tax return for last year, 2022? I know will have to Submit a U.S. tax return on this income, but If I did not register here in Germany until 1 September, it that matters. Please advise. Thank you.
Antwort von Administrator
You have to declare your US income. It will be tax exempt but ahs an influence of you German tax rates.
Kommentar von Robert |
US Social Security benefit, despite harmlessly described as "not taxable", is actually double-taxed by Germany:
(1) German healthcare premiums "tax" this retirement benefit at 13%. Assuming German healthcare is already legitimized by the German retirement (Rente), there is no additional benefit, only an additional cost (1st "tax").
(2) German tax liability increases based on this benefit. For example, if minimum German tax liability threshold is not met without including US Social Security benefits, but is met with them, after tax net is impacted (2nd "tax").
A tax by any other name is still a tax.
If on the other hand a German-American resides in America, he receives 100% of German social security and there is no premium applied for healthcare.
Correct me if I am wrong, thanks.
Kommentar von Douglas |
Another question regarding: "An exception are pensions paid by the US government, states, municipalizes or other official organizations for services rendered to these official bodies."
I receive a pension from a school district, having been employed on a teacher contract my entire career there (Madison Metropolitan School District). Is my pension subject to taxation in Germany? Thanks for your great help.
Antwort von Peter Scheller
I do not think so but you should talk to your tax adviser.
Kommentar von Richard |
Hello,
I’m a U.S. citizen, permanent resident of Germany since 2001 and retired since 2022. My sole sources of income for 2022 were Social Security, German Social Security (Rente), and a small company pension, one I did not pay into and which is paid monthly by my former employer. It is my understanding that these sources of income are only taxed in my place of residence, Germany. I have been unable to figure out how to correctly report these sources of income on my U.S. tax return, which forms to complete, etc. I‘m grateful for any guidance. Rich
Antwort von Administrator
In Germany you have to declare you entire income.
In the US the US social security benefits are not taxed. Make sure you have a W-8BEN. In regard to the other sources you may claim for a Foreign tax credit.
However, you should consult a tax adviser in Germany and the US.
Kommentar von Ken |
I receive my US Social Security here in Germany, and will be taxed accordingly in Germany. How do I avoid double taxation? Do I just omit SS income on my 1040 , fill out a form and attach ? I file Married Filing Separately due to NRA spouse . This fling status causes 85% of my SS earnings to be taxed . I keep getting different answers. I also take distributions which put my income higher as well .
Thanks
Ken
Antwort von Administrator
Please note that your US-SS will only be taxed in Germany!
Kommentar von Karin Vanattia |
I will receive my US Social Security here in Germany, and and because of the tax treaty I will be taxed accordingly in Germany. Do I only have to do German tax return for it? Can I omit it on the American tax return or it there a form I have at least to mention it?
Many thanks for your help.
Karin
Antwort von Administrator
You have to file a German tax return and need a W-8BEN in the US.
Kommentar von scott Hoffmann |
Ich wohn im Germany mit aufenhalt zeit 1993 mit Military rente.German und USA SSrente zeit 2020. Muss ich meine military rente melden,alles was ich lesen DBA, und articles ,§32b, und andere das nicht melden muss(Kassenstadtprinzip)
MFG hoffmann Danke im voraus
Antwort von Administrator
Yes, you have declare it in you German income tax return.
Kommentar von Robert Graham |
US Military Pension is handled in Germany differently from Military Compensation for service connected disability. Be sure you know which type of benefit you mean, compensation or pension.
Kommentar von Al Martin |
Good afternoon, In calculating the portion of my Roth IRA that would be taxable in Germany (Account Balance minus contributions) will the 'taxed' Roth conversions that I have made in the past also count as toward the 'contributions' since they are after tax contributions?
Thank you,
Antwort von Peter Scheller
Very good question!
There are no statements of Germany's tax authorities or rulings of fiscal courts in this respect.
My opinion is that the value of the old plan in the moment of conversion is a one-time contribution into the Roth plan. However, tax authorities might see this differently.
Kommentar von Gerald |
Der Blog Beitrag und die beantworteten Fragen haben mir sehr weitergeholfen!
Ich bin 58 Jahre alter Deutscher und arbeite seit 21 Jahren in den USA. Meine Frau ist Thailändisch-Amerikanische Doppelstaatlerin. Wir überlegen irgendwann wenn ich zwischen 60 bis 65 Jahre alt bin nach Deutschland zurückzukehren. Das Sozialversicherungsrecht und Steuerrecht in Deutschland - speziell mit Bezug zu den USA wird immer komplizierter. Ich erwarte Einkommen bzw. habe Vermögen in Form eines Hauses in den USA, einen US-Pensionsplan (wohl einen section 403(b) plan), und Rentenanwartschaften in den USA und (geringe) in Deutschland.
Nachdem ich mir nun das Urteil des BFH vom 28.10.2020 - X R 29/18 und die Reaktion des deutschen Gesetzgebers darauf durchgelesen habe, scheint es mir dass der 403(b) Plan möglichst schnell weg muss und in normales Vermögen umgewandelt werden sollte. Nicht nur werden alle Entnahmen hieraus später mit dem deutlich höheren deutschen Steuersatz versteuert, sondern es würden auch noch ca. 20% Kranken+Pflegeversichungsbeiträge in der freiwilligen Krankenversicherung der Rentner anfallen. (Es gab drei unbeantworte Fragen deswegen - ich nehme an diese blieben unbeantwortet weil keine Steuerfrage.) Den 403(b) Plan kann ich mir (ohne Strafsteuer) auszahlen lassen wenn ich 59,5 Jahre alt werde und meinem jetzigen Arbeitgeber kündige.
Meine jetzige Idee ist mit 60 zu kündigen. Dann für einige Jahre nach Thailand zu ziehen. Da meine Frau US-Bürgerin ist können wir über mehrere Jahre uns das Geld aus dem Pensionsfont auf ein amerikanisches Konto auszahlen lassen. Die US-Steuerbehörde veranlagt uns aber immer noch gemeinsam wie in den USA, da meine Frau US-Bürgerin ist und die Steuer dort wäre nur 0%-10%. Die Lebenshaltungskosten in Thailand (inklusive Krankenversicherung) sind niedriger, so dass Geld übrig bleibt. Die Thailänder versteuern aber - noch - nur das Geld als Einkommen das nach Thailand transferiert wird. Wenn der 403(b) Plan aufgebraucht bzw. in Vermögen umgewandelt wurde dann können wir endlich nach Deutschland und dort die US und deutsche Rente beziehen. Das Renteintrittsalter ist für beide Länder variabel (ab 62 bzw. 63 Jahren) und eine Optimierungsaufgabe. Vermögen in den USA, einschließlich des dort steuerfrei verkauften Hauses, kann ich dann steuerfrei nach Deutschland transferieren.
Nun zu meiner Frage: Habe ich etwas offensichtliches übersehen? In den USA ohne Arbeit zu bleiben geht nicht, da die Krankenversicherungsbeiträge und Lebenshaltungskosten zu hoch sind (bis 65 Jahre). Wenn ich arbeite komme ich aber an den 403 (b) Plan nicht ran. Deutschland geht wegen Steuer- und Sozialabgaben auch nicht. Irgendwelche Alternativen (ausser bis 65 weiterzuarbeiten und die zusätzlichen Einkünfte größtenteils an den Deutschen Fiskus zu verschenken)?
Antwort von Administrator
Wir glauben, dass sie hierzu eine professionelle Beratung benötigen, um das richtige Vorgehen zu finden.
Kommentar von Markus Johnson |
I am moving to Germany in October 2025 to Rhineland-Palatinate. I will have a pension from the state of Virginia. I am retiring from being a Police Officer after 20 years. I am a German and US citizen ( Dual Citizenship). I was born Germany to a German mother. I will be 50 years old and not married when I move to Germany. My Pension will be $3157.00 usd a month. US taxes deducted will be approximately $378.00. If I live on just my pension in Germany, will I have to pay 14.6 percent for Health Insurance? Approximately what will my netto be in Euro or tax rate? Will Germany give me a tax credit for the US taxes deducted?
Antwort von Administrator
you need a professional tax adviser.
Kommentar von Gerald |
Ein kleiner Nachtrag zu meinem Kommentar vom 30.10.2024 und auch zum Kommentar von Markus Johnson vom 8.11.2024
Indeed, professional tax advise may be necessary. German laws seems getting way too complicated even for non business related personal income questions. In my 20 years in the US, I was able to fill out the Tax paper forms by myself (without any software).
Rhineland-Palatinate borders to France. When moving to France the situation suddenly may look different. If I understand the tax agreement between France and USA correctly, taxation for US-citizens and their spouse living in France would the still be the responsibility of the US. Health insurance in France although also computed on the worldwide income would only be around 10% instead of 20% for Germany (including Pflegeversicherung). Germany seems to ask for full social security tax on income for which social security Tax was already paid in the US! It may be difficult to find another country which likes to do this. I guess I have to skip any plans to return to Germany before my US-pension plan is mostly paid out.
Kommentar von Robert |
Once I have done my German Tax Return, what document will I receive to show proof of taxes paid so that I can file U.S. tax for FTC. I am paying social security taxes in the states. Do I need to stop my voluntary tax deductions?
Antwort von Administrator
You will receive a income tax assessment notification (Einkommensteuerbescheid):
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