As a US expat in Germany, is my worldwide income taxed in Germany?

If you are a US expat and you are considered tax resident in Germany, the default rule is that Germany taxes your worldwide income, not just your German salary.  That means the German tax office can look at income from Germany and from abroad once you become a German tax resident.

What “worldwide income” means for US expats

As a German tax resident, worldwide income typically includes:

- German salary from a German employer  

- US salary earned after you have moved to Germany  

- US rental income from property in the United States  

- US dividends, interest and capital gains from brokerage and bank accounts  

This surprises many Americans in Germany, especially those who still have US investments or rental property and assumed these would only be taxed in the US.

How the US–Germany tax treaty fits in

The fact that Germany taxes worldwide income does not automatically mean every euro is taxed twice.  The US–Germany income tax treaty allocates taxing rights between the two countries for different types of income (for example, employment income, dividends, interest, capital gains, pensions and rental income).

Depending on the income type, the treaty can:

- Give primary taxing rights to Germany or to the US  

- Require the other country to exempt that income from tax, or  

- Allow the other country to tax it but then grant a foreign tax credit for tax already paid abroad  

In practice, this is how double taxation is usually avoided for US expats in Germany.  However, it often still means that foreign income, such as US rental profits or dividends, must be disclosed on the German tax return even if Germany ultimately exempts it or only uses it to calculate your tax rate.

Why reporting matters even if tax is reduced

Even when the treaty says that a certain income (for example, US rental income) is taxable mainly in the US, Germany may still require you to report it so that it can be taken into account under the progression rule when calculating your German tax rate.  This can increase the rate applied to your German‑taxable income, even if the foreign income itself is not taxed again in Germany.

Because the interaction between worldwide taxation, the treaty, and foreign tax credits can be quite technical, many US expats in Germany work with both a German tax advisor and a US expat tax specialist to coordinate the two returns and avoid gaps or unintended double taxation.