Most expats in Germany leave their home tax system behind when they board the plane. Americans do not. The United States is one of the only countries on earth that taxes its citizens on worldwide income regardless of where they live, which means an American in Berlin files a US tax return every single year, on top of the German one. Add a banking law called FATCA that makes some German banks nervous about taking you as a customer, and the American expat experience comes with a paperwork tail nobody else carries.
The reassuring part: filing twice almost never means paying twice. A set of treaty mechanisms is designed precisely to prevent double taxation. But "almost never pay twice" requires filing correctly in both systems, and the US side is unforgiving of mistakes. Here is how it actually works for Americans in Germany.
Why Americans file twice
The root of everything: the US taxes based on citizenship, not residence. Almost every other country taxes you only if you live there; the US taxes its citizens on worldwide income wherever they live.
So an American in Germany has two filing obligations:
- A German tax return (like any resident, see the German return guide), because you live and earn here
- A US federal tax return every year, because you are a US citizen
This dual filing is the defining feature of American expat life. It is not optional and does not stop because you moved abroad, the US filing obligation follows the passport, not the address. Your German tax setup proceeds exactly as for any resident; the US return sits on top of it.
FATCA and your bank account
FATCA (the Foreign Account Tax Compliance Act) is the law that makes American expats feel watched, because it effectively is.
FATCA does two things relevant to you:
- It requires foreign banks to report accounts held by US persons to US authorities.
- It requires US citizens to report their foreign accounts (and there is a separate FBAR foreign-bank-account report).
The practical fallout: because of the reporting burden FATCA imposes, some German banks are reluctant to take US-citizen customers, and a few decline them outright. So account opening can be harder for Americans, you may find some banks say no, and you should expect to disclose your US-person status. Among the German account options, some are more US-friendly than others, so ask before assuming any bank will take you.
You file twice, but rarely pay twice
Here is the relief: filing in both countries does not mean paying tax in both. Three mechanisms prevent actual double taxation:
- Foreign Earned Income Exclusion (FEIE): lets qualifying Americans abroad exclude a large amount of foreign-earned income from US tax.
- Foreign Tax Credit (FTC): credits the German tax you already paid against any US tax owed on the same income.
- The US-Germany tax treaty: allocates taxing rights between the two countries to prevent overlap.
Because German income tax rates are generally higher than US rates, the Foreign Tax Credit alone often wipes out any US tax due on your German salary, you have already paid more to Germany than the US would charge. Combined with the FEIE, most Americans in Germany file a US return showing little or no US tax owed on their German employment income.
So the burden is the filing and compliance, not usually the actual payment. You do the paperwork in both systems; the tools zero out the double charge.
Where it gets genuinely complicated: investing
The one area where US rules really bite is investing. American tax law treats many foreign investment vehicles harshly, in particular foreign mutual funds and many non-US ETFs can fall under punitive PFIC (passive foreign investment company) rules with brutal US tax treatment and reporting.
This means the straightforward German ETF Sparplan that works beautifully for everyone else can be a US tax trap for Americans, because a typical European-domiciled ETF may be a PFIC. Americans abroad often have to invest differently (US-domiciled funds, or carefully chosen structures) to avoid the PFIC mess.
This is the single biggest reason to get professional advice: an innocent investment choice that is optimal for a German colleague can create a US tax nightmare for you. Do not assume German investment products are safe for an American without checking the US treatment first.
Get a specialist
For most American expats, the honest recommendation is to use a tax professional experienced in US expat taxation, at least to set things up correctly.
Why it is worth it:
- Dual filing (US + German) is complex and the systems do not align
- FATCA and FBAR reporting have strict rules and severe penalties for getting them wrong
- Investment complications (PFIC) can be costly if mishandled
- Deadlines differ (Americans abroad get an automatic filing extension, but it has conditions)
The US system is unusually punitive about reporting errors, large penalties can apply even when no tax is owed, simply for failing to report an account. A specialist who lives in this niche prevents the expensive mistakes. Many Americans abroad treat the annual specialist fee as the cost of compliance peace of mind.
None of this should deter you from living in Germany, hundreds of thousands of Americans do it happily. It just means budgeting for the extra paperwork and getting the US side handled by someone who knows it, especially before you invest. Other nationalities have their own quirks (see the post-Brexit situation for UK citizens), but the US citizenship-based system is uniquely persistent.
What to do this week
- Accept that you will file both a US federal return and a German return every year, and that the US obligation follows your citizenship, not your address.
- When opening a German bank account, disclose your US-person status and ask the bank whether it accepts US citizens, since FATCA makes some decline.
- Before investing in any German fund or ETF, check its US tax treatment (PFIC risk), and seriously consider a US-expat-tax specialist to set up filing and reporting correctly.
