Taxes when you move between Germany and the US

The two systems do not meet in the middle. A move does not prorate your tax or hand you whichever bill is lower. Each country applies its own rules to the same income, the results stack, and a credit mechanism decides how much of the overlap you pay twice. That mechanism runs in two currencies, on two calendars, and it is fragile in the year you cross.

How the two systems overlap

Germany taxes residents on worldwide income and non-residents on German-source income. The United States taxes citizens and green-card holders on worldwide income wherever they live, for as long as they hold the passport or the card. One salary can be fully taxable on both sides in the same year.

The overlap is not symmetrical. A German who spends four years in Texas and goes home stops being a US taxpayer the day she leaves; a US citizen who does the same in reverse never stops.

For a single filer the two tariffs diverge early and stay apart. At 20,000 the German bill is about 1,640 and the US federal bill about 2,162. At 40,000 it is 7,321 against 4,562. At 60,000 it is 14,415 against 8,114. At 80,000 it is 22,688 against 12,514. Each pair is the same taxable income in either currency; the point is the shape of the two tariffs, not an exchange rate.

That German lead is not the problem. It is usually the solution. Where the German bill is higher, the excess becomes a foreign tax credit that removes the US liability on the same income, dollar for dollar, up to the US amount. What the credit will not do is refund the difference.

The day count and the tie-breaker

183 days is the usual bright line in both countries, and the least reliable part of the answer. A year split evenly between Munich and New York is not a compromise. It produces two countries that can each claim you under their own domestic rules.

The tie-breaker then runs in a fixed order: permanent home, centre of vital interests, habitual abode, nationality. Where you sleep is the weakest of those tests. Where your spouse and children live, where the bank accounts are, and which employer the work belongs to carry more weight. The day count opens the argument; it does not close it.

The tie-breaker produces a residence state and a source state; it does not stop the country you left from taxing you.

Put a US citizen in Munich on a 120,000 salary. US federal tax on 120,000 of taxable income is roughly 21,647 before relief. German tax on the same taxable income is roughly 39,488. The German bill on that income is the larger one, which makes the US return cheap and easy to get wrong.

The order is not optional. Compute the US tax first, at US rates, then translate the German tax into dollars at a defensible rate and credit it against that figure. Had the German tax been smaller, the result would be a residual US payment, not a refund.

This is also where doing it yourself stops being sensible, for some people. One salary, one bank account, no investments, no property: the first dual year is manageable with software. Add a house, a non-working spouse or a brokerage account on the other side and the return becomes a project.

What you file even when you owe nothing

A zero at the bottom does not switch the obligation off.

A US person whose foreign financial accounts total more than 10,000 at any point in the year files FinCEN Form 114, the FBAR. It goes to FinCEN, not the IRS, and is due on 15 April with an automatic extension to 15 October. Form 8938 sits on top for a US person abroad: 200,000 on the last day of the year or 300,000 at any point, single; 400,000 or 600,000 married filing jointly.

On the income side there are two routes and they do not combine. The foreign earned income exclusion takes 130,000 of earned income out of US taxable income for 2025, with a housing exclusion on top. The foreign tax credit instead sets foreign tax against the US liability, and it also covers investment income the exclusion never touches. For a salary high enough to be interesting, the credit usually wins.

The US return is due 15 April, with an automatic two-month extension to 15 June for citizens abroad and a further extension to 15 October. German deadlines do not move for you.