The Germany-US Tax Gap: What American Expats Are Getting Wrong on Their 2025 Returns

For many Americans in Germany, the local side of tax feels fairly settled. Salary tax is withheld, bank accounts are ordinary, and investing through a German platform does not feel especially exotic.
Then the US return arrives.
US citizens generally remain subject to US tax on worldwide income even while living abroad. That means a German salary, investment income, foreign accounts, and certain retirement interests can still matter on a 2025 US return filed in 2026. At that point, searching for top US expat tax experts in Germany is less about finding someone to type numbers into a form and more about finding someone who understands where the two systems stop matching.

One Financial Life, Two Very Different Rulebooks

A German financial product can be completely normal locally and still raise a separate US question.

German financial item	German perspective	US tax question
Salary	Tax is generally handled through German payroll	Is the income still reportable in the US?
German income tax	Local income tax has already been paid	Can a Foreign Tax Credit reduce US tax?
German bank accounts	Everyday current or savings accounts	Does FBAR or Form 8938 reporting apply?
German investment funds	Common way to invest locally	Could PFIC rules and Form 8621 apply?
Retirement arrangements	Built around German retirement rules	How does the US classify and report them?
German property	Home or investment asset	What happens if it is rented or later sold?

German Funds Can Get Complicated Fast

Investments are where a fairly ordinary setup can become awkward. A German domiciled fund is not automatically a PFIC simply because it is foreign. The US test looks at the foreign corporation itself. Broadly, a foreign corporation can be a PFIC if at least 75% of its gross income is passive income or at least 50% of its assets produce, or are held to produce, passive income.
When the rules apply, Form 8621 reporting may also come into play. For someone used to buying funds through a German broker with a few clicks, that can be an unpleasant surprise.

Paying German Tax Does Not End the US Conversation

Germany may already tax a large share of an American expat's income, but that does not make the US filing obligation disappear. The Foreign Tax Credit can allow qualifying foreign income taxes to offset US tax, subject to the credit rules and limitations.
The key word is coordination. Paying tax in Germany may reduce or eliminate additional US income tax on some income, yet the underlying income can still need to appear on the US return.

Even a Quiet Bank Account Can Make Some Noise

Foreign account reporting is another area where the tax bill is not the whole story. An FBAR is generally required when the aggregate maximum value of reportable foreign financial accounts exceeds US$10,000 at any point during the calendar year.
Form 8938 is separate. For qualifying taxpayers living abroad, the threshold is generally more than US$200,000 on the last day of the year or US$300,000 at any time for those not filing jointly. Joint filers have higher thresholds of US$400,000 and US$600,000 respectively.

Germany Is Not the Problem. The Overlap Is.

German accounts, investments, and retirement arrangements are designed around German rules. US law simply asks another set of questions about them. Even the US-Germany tax treaty does not erase every US obligation, since treaties commonly preserve the United States' right to tax its own citizens, subject to specified exceptions.

Before Your Next US Return Gets Messy

If your German finances have grown beyond a salary and one bank account, a second look can be worthwhile before filing. Expat Tax Online helps Americans in Germany work through US reporting for foreign income, accounts, investments, and other cross-border issues, so the 2025 return you file in 2026 reflects both sides of your financial life.