How are German pensions and social security taxed for US citizens?

The U.S.–Germany tax treaty helps determine which country has the primary right to tax your German pension and social security income and is designed to prevent double taxation.

General rule:
These benefits are typically taxed in the country where you live when you receive them.

‍How it works in practice

• If you live in Germany:
  Germany generally taxes your German pension and social security benefits.
  As a U.S. taxpayer, you must still report this income on your U.S. tax return, but you can often claim a Foreign Tax Credit (FTC) for the German taxes paid.
• If you live in the United States:
  The U.S. usually taxes this income similarly to U.S. Social Security benefits (often partially taxable depending on your total income).
  In most cases, Germany does not tax these payments again when you are U.S.-resident.

Important point to note

German pension and social security benefits are not considered “earned income” for U.S. tax purposes. This means:

• They do not qualify for the Foreign Earned Income Exclusion (FEIE)
• Instead, any double taxation relief is generally achieved through the Foreign Tax Credit (FTC) mechanism

This distinction is important, as many taxpayers assume all foreign income can be excluded — which is not the case for pension or social security-type income.

Key takeaway

Even if the treaty assigns taxing rights to one country, you must still report this income annually on your U.S. tax return. Proper use of treaty provisions and foreign tax credits ensures you are not taxed twice while remaining compliant.