German rates are high enough that the credit almost always beats the exclusion.
There is a US–Germany income tax treaty and a totalization agreement. Income tax reaches 45%, with a solidarity surcharge and, if you are registered with a church, church tax on top. That effective rate usually makes the foreign tax credit the better route and keeps your income counted as compensation for retirement purposes.
Tax snapshot — Germany
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Sources: IRS Publication 54; IRS Publication 514; IRS Form 1116 instructions; US–Germany income tax treaty and totalization agreement; German church tax and solidarity surcharge rules; IRC §219 on compensation for IRA purposes; Rev. Proc. 2025-32; 31 CFR 1010.350. Checked 22 September 2026.
What that means on your return
Church tax is assessed as a percentage of your income tax, which generally makes it creditable as an income tax rather than a donation. It is routinely left off Form 1116 by people who think of it as a church contribution, and it is worth claiming.
German pension products defer German tax; they do not automatically defer US tax. Riester, Rürup and company arrangements each have to be characterised before you can say what the US does with the contributions and the growth inside them.
The totalization agreement generally assigns your social security coverage to one country. Where German coverage applies, the 15.3% US self-employment charge falls away — again, on a certificate of coverage.
The solidarity surcharge is computed on income tax, which makes it creditable on the same basis as church tax. It was scaled back for most taxpayers from 2021 and still applies at higher incomes, so whether there is any to claim depends on the year and the income.
Income excluded under §911 is not compensation for IRA purposes, so a year run wholly through the exclusion can leave you unable to contribute to a retirement account at all. At German rates the credit is usually better anyway; this is the second reason it is better.
If you are in Germany as a…
Questions I get about Germany
Is German church tax creditable on my US return?
Generally yes. It is assessed as a percentage of your income tax, which makes it an income tax rather than a charitable gift, so it belongs on Form 1116.
Does my German pension grow tax-free for US purposes?
Not automatically. German deferral is not US deferral. The answer depends on how the arrangement is characterised, and getting that wrong can create annual reporting you did not know you had.
Should I use the credit or the exclusion in Germany?
Almost always the credit. German effective rates sit above US rates, so Form 1116 removes the liability and leaves credits to carry forward — and unlike the exclusion it keeps your income counted as compensation for IRA purposes.
Is the solidarity surcharge creditable too?
On the same basis as church tax: it is computed on income tax, so it is creditable as an income tax. It was scaled back for most taxpayers from 2021 and still applies at higher incomes.
I already pay high tax in Germany. Do I still file a US return?
Yes, every year. Citizenship-based taxation does not care what you pay locally. The foreign tax credit usually removes the US liability, but the filing obligation stands, and FBAR and FATCA reporting stand with it.
When is my return due?
15 June, under the automatic extension for filers living abroad. Form 4868 moves it to 15 October, and I file the extension free.
Do I have to file an FBAR for my German bank account?
If your foreign accounts together passed $10,000 at any point in the year, yes. You can file it free through FinCEN's own system. The non-willful penalty for not filing is $16,536.
I have not filed for several years. What now?
The Streamlined Foreign Offshore Procedures: three returns, six FBARs and Form 14653 certifying non-willfulness. Penalties are waived. Note that the IRS terminated the separate Delinquent FBAR Submission Procedures around 1 July 2026.
Filing from Germany this year?
Fifteen minutes with the Enrolled Agent who will prepare and sign it. Complete return, $599.
An IRS Enrolled Agent working only on US tax for Americans living abroad. I prepare and sign every return myself — 14 years in practice, 11 of them as an Enrolled Agent.