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'It led to divorce': How US tax rules burden Americans in Germany

Michael Stuchbery
Michael Stuchbery - [email protected]
'It led to divorce': How US tax rules burden Americans in Germany
Yearly tax returns in both the US and Germany, and onerous reporting requirements are causing Americans in Germany stress. Photo: Pixabay

While everyone who moves to Germany faces their own particular challenges, Americans living and working in the country are increasingly reporting anxiety and financial headaches due to US tax rules.


Responsible for these worries are the taxation requirements imposed by the US government on American citizens living abroad including Germany, and the legislation that compels them - and their banks - to report their assets.

Alongside Eritrea, the US is the only country in the world basing their taxation system on citizenship rather than residency.

The burden and anxiety this causes is a major factor that is contributing to increasing numbers of Americans across Europe renouncing their citizenship

But it also harms the lives of Americans living Germany as many who responded to a survey attested to.

The dismay and anger that many Americans in Germany feel was highlighted in a report by advocacy group SEAT (Stop Extraterritorial American Taxation). 

READ ALSO: Why are more and more Americans in Europe renouncing US citizenship

One said the tax burden and stress that came with was partly to blame for their divorce whilst others spoke of difficulties saving or money or the huge costs they face because they need to pay for specialist financial advice.

"I would love to invest in my life in Germany but am too scared to do so," said one respondent.


Twice the tax returns and onerous reporting requirements

While the United States and Germany have had a treaty in effect since 1990, that endeavours to prevent 'double taxation' on the same income and assets, Americans are still compelled to file a tax return each year, detailing any US-based assets each year, regardless of where they reside.

Failure to do so risks severe fines from the IRS (Internal Revenue Service). This can also impact the thousands of so called 'Accidental Americans' - often those who were born in the US to foreign parents but have no real link to the country.

Additionally, Americans are subject to two requirements when filing, that can cause substantial problems. 

Since 2010, the Foreign Account Tax Compliance Act (FATCA) has required foreign banks who provide accounts to American citizens to report these to the US government. Developed in an attempt to halt international money laundering, FATCA has caused many German banks to either refuse or impose restrictions on American customers, citing significant costs with zero practical return. 


This adds to the existing stress caused by the requirement, since 1970, for American citizens abroad to file an FBAR (Foreign Bank and Financial Accounts Report) alongside their tax return each year.  An FBAR contains the details of any foreign bank accounts an American holds that contains more than 10,000 USD - something that impacts many mortgage and investments. This has raised significant privacy concerns in both the US and Europe for decades. 

READ MORE: Why are Americans being turned away from German banks?

'This is bull****'

The dismay and anger that many Americans in Germany feel has been highlighted in a report by advocacy group SEAT (Stop Extraterritorial American Taxation). 

Nearly all respondents found the requirement to report unfair and onerous, with one summing up the feelings of many saying: "This is bulls***." 

However, others went into more detail as to how the obligation to file a yearly tax return in the US was proving a costly burden. 

One American resident of Germany, originally from New York told SEAT: "I've lived abroad for over 30 years and have never earned a great deal of money but have had to pay thousands each year to get my US taxes prepared by a professional so I don't get in trouble, even though I don't owe tax. This is hugely stressful (and) time consuming."


Another resident from South Dakota was unable to save for his daughter's future, saying: "I also have had to shut down my daughters savings account - she is a US citizen - to which I am naturally a signatory. The interest accruing there was making it more difficult to do my (tax) returns. Now I store cash at home as a savings which I despise." 

The obligation to file yearly returns has also intensified conflicts, leaving some at a loss. A Germany-based American from West Virginia lamented: "I am going through a divorce and am severely disadvantaged by the fact that all assets are held in my husband's name due to complications of US taxation... I feel anxiety."

A New Hampshire respondent was blunt, telling SEAT that they would not seek the citizenship their children would have a birthright to: "When I have children, I am strongly considering not passing on US citizenship... because of the tax obligations."


'I am toxic'

While many respondents were furious at having to file a tax return in both Germany and the United States, they were far more angry at how the FATCA and FBAR requirements have impacted them. 

"Since 2013, my wife and I have had to struggle with the fact that I am toxic. I am tired. There is no future for Americans abroad. We will one day be forced to come back just to live normal lives", responded one former Kentucky resident. 

Another Californian highlighted the privacy concerns that the FATCA and FBAR requirements raise for their spouses, telling SEAT: "My foreign spouse gives up his privacy on my tax declaration to a country we don't reside in."

One American in Germany blamed the FATCA and FBAR requirements for contributing to the ending of their marriage: "FATCA is just a pain. It is illegal to ask for your spouse's information if they are not a US citizen. My ex-husband hated this - refused to comply - and that is one of the reasons we divorced!" 

These requirements also extend to dual-citizens, and particularly so-called 'accidental Americans'.

One expressed shock at discovering their tax obligations and reporting requirements later in life: "Both parents are German. I have no family in the states, nothing. Since 1963 I have lived in Germany, My English is bad, I heard about FATCA in 2016, one year after my husband passed away. I was so shocked, I could not believe this, and I am still scared."

The same respondent was later asked by Commerzbank to close her share portfolio, due to her US citizenship. 

A dual citizen responded: "I am angry that although I am a German citizen, that I am treated as a 'foreigner' when it comes to opening and maintaining a simple bank account here in Germany."


'I would love to invest in my life in Germany but am too scared to do so'

One theme is repeated throughout the survey's respondents based in Germany: These taxation requirements are preventing them from fully settling in the country that some even hold citizenship in. 

"I would love to invest in my life in Germany but am too scared to do so. I'm scared to buy a house, or invest in stocks - not even possible, it is hard for me to get a bank account, I have no idea what will happen when if I receive some kind of inheritance from the United States", responded one South Dakotan. 

Another respondent from Michigan echoed these sentiments: "Can’t save properly for retirement. Can’t be co-signer on my wife’s business so she ends up with a higher interest rate and additional life insurance requirement. Can’t save properly for my daughter’s education."

A response from a former Georgia resident put it succinctly: "When I fill out forms at banks, and they ask where I was born, the minute I put the US - that's the end of it. I can't do anything."



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