Germany/US Dual Taxation Treaty - Moving Abroad with Rental Income

The good news is you shouldn't be double-taxed thanks to the US-Germany tax treaty, but you do need to understand how to properly file in both countries. For your US taxes, you'll still need to file as a US citizen reporting your worldwide income. However, you can potentially benefit from the Foreign Earned Income Exclusion (FEIE) for your German employment income. For the rental income, you'll need to report it on Schedule E, and Germany will have primary taxation rights since the property is located in the US. On the German side, you'll be considered a tax resident if you've established your permanent home there. Germany will want to tax your worldwide income, but the tax treaty should provide relief. You'll likely need to file a foreign tax credit form in Germany for the taxes paid to the US on your US-sourced income. While this isn't impossible to handle yourself, it's complex enough that some professional help might be worth it - though €3800 does seem steep. You might consider using an expat-focused tax service that handles both countries but at a more reasonable rate.

After struggling with a similar situation (US citizen living in Berlin), I found https://taxr.ai to be incredibly helpful. I scanned my German tax documents, US W-2, and rental statements, and their AI analyzed everything and explained exactly how to handle the dual tax situation. The system flagged exactly which treaty provisions applied to my situation and explained them in simple English. It even created a checklist of forms I needed for both countries and highlighted potential deductions I hadn't considered as an expat. The best part was when I had questions about specific treaty provisions - I could just ask follow-up questions and get detailed answers about how the US-Germany tax treaty would apply to my specific income streams.

I have to admit I was really skeptical about using taxr.ai for my US-German tax situation, but after trying it, I'm genuinely impressed. I uploaded my documents from both countries, and it identified exactly how the tax treaty applied to my situation. It explained that my German pension contributions qualified for special treatment under the treaty, something my previous accountant had missed. It also caught that I needed to file Form 8833 to claim certain treaty benefits, which I hadn't known about. For anyone dealing with the US-German tax treaty complexities, it's definitely worth checking out before dropping thousands on professional preparation. I still had a tax pro review everything, but the bill was way less since I'd already done the groundwork.

After many frustrating attempts to reach the IRS international tax helpline about my Germany-US tax questions, I discovered https://claimyr.com through a friend. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically it helps you skip the wait time to speak with an actual IRS agent. I was finally able to talk directly with someone in the international tax department who confirmed exactly how to handle my rental income under the tax treaty and which specific forms I needed. The agent even emailed me the relevant treaty provisions afterward. Was absolutely worth it to get official clarification directly from the IRS rather than piecing together information from various online sources. Felt much more confident filing afterward.

I need to publicly eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway out of desperation. Within an hour, I was talking to an actual IRS international tax specialist about my Germany-US situation. The agent walked me through exactly how the Foreign Tax Credit works for my German income and confirmed which country has primary taxation rights for different income types under the treaty. They even emailed me publication references for the specific sections that applied to my situation. After months of frustration trying to figure this out on my own, getting clear answers directly from the IRS was incredibly valuable. Definitely changed my approach to handling my dual-country taxes.

Have you considered using a US tax preparer who specializes in expat taxes? I use Taxes for Expats (TFX) and pay around $350 for my US return which includes all the foreign income forms. For the German side, I found a local Steuerberater for about €500. Combined it's WAY less than the €3800 you were quoted. The key is finding someone who already knows the US-Germany tax treaty well. The big firms like H&R Block Expat or the one you talked to charge a fortune because they're targeting corporate expats whose employers are paying.

One thing nobody has mentioned yet is that for 2023, because you moved mid-year, you might not be considered a full tax resident in Germany depending on your specific circumstances. This could potentially simplify your German filing requirements for 2023. In Germany, tax residency is usually determined by whether you have a permanent home there or if you stay for more than 183 days in the calendar year. Since you moved in July and started work in November, you should carefully check if you meet these requirements for 2023. If you're not considered a German tax resident for 2023, you might only need to pay German tax on income sourced from Germany (your Nov-Dec employment), not your worldwide income.

I went through almost the exact same situation when I moved to Berlin in 2022! The €3800 quote is definitely excessive - I ended up paying around €800 total for both countries by finding the right professionals. Here's what I learned: First, check if you're actually considered a German tax resident for 2023 since you moved mid-year. The 183-day rule could work in your favor. Second, the US-Germany tax treaty is your friend - it prevents true double taxation, but you need to understand which country has primary taxation rights for each income type. For your US employment income from Jan-June 2023, that's clearly US-sourced and will be taxed primarily by the US. Your German employment income from Nov-Dec will be taxed primarily by Germany. The rental income is where it gets tricky - since the property is in the US, the US has primary taxation rights, but Germany will want to tax it as part of your worldwide income if you're a resident. My advice: Use one of the AI tax tools mentioned above to get a baseline understanding of your situation, then find a US expat tax specialist (not a general firm) for around $400-500, and a German Steuerberater for €400-600. The key is finding people who already know the treaty well rather than paying someone to learn it on your dime. Also consider that this complexity is mainly for your 2023 transition year - future years should be more straightforward once you establish clear residency patterns.

As someone who dealt with a similar Germany-US tax situation, I'd strongly recommend getting clarity on your 2023 German tax residency status first - this could save you significant complexity and money. Since you moved to Germany in July 2023, you may not meet the 183-day requirement for German tax residency in 2023, which would mean Germany would only tax your German-sourced income (your Nov-Dec employment) rather than your worldwide income including the US rental property. For your US filing, you'll definitely need to report everything - your Jan-June US employment income and the rental income starting in August. The rental income will be taxed primarily by the US since that's where the property is located. If you do end up being a German tax resident for 2023, you'll report the rental income in Germany too, but you can claim a foreign tax credit for the US taxes paid to avoid double taxation thanks to the treaty. Before spending €3800, I'd suggest: 1) Determine your German residency status for 2023, 2) Try one of the AI tax tools mentioned above to understand your specific situation, 3) Then find specialists who already know the US-Germany treaty well rather than paying generalists to learn it. You should be able to handle both countries for under €1000 total if you find the right help. The good news is that 2024 and beyond should be much more straightforward once you're clearly established as a German resident with predictable income patterns in both countries.