German tax perspective · U.S. Individual Retirement Account
Traditional IRA with German tax residence
If you accumulated assets in a U.S. Traditional IRA and later move to Germany, the account requires a separate German tax analysis. The Germany–U.S. tax treaty expressly recognizes Individual Retirement Accounts as pension plans and generally protects tax deferral inside the plan. When distributions are made, however, German domestic tax law determines the taxable amount.
Treaty classification
Traditional IRAs are expressly listed as U.S. pension plans under the treaty
The protocol to the Germany–U.S. tax treaty expressly lists Individual Retirement Plans among the U.S. pension plans covered by Article 18A. This includes Individual Retirement Accounts and Individual Retirement Annuities under Section 408 of the Internal Revenue Code.
A Traditional IRA therefore differs fundamentally, for treaty purposes, from an ordinary U.S. brokerage account. Its pension-plan status remains relevant after the owner becomes tax resident in Germany.
Article 18A Germany–U.S. tax treaty
Income accruing inside a Traditional IRA is generally deferred for German tax purposes until distribution
Article 18A(1) protects tax deferral within a qualifying pension plan. If an individual resident in Germany is a participant in or beneficiary of a pension plan established in the United States, Germany generally may not tax the income accruing in that plan until it is distributed to the individual.
Interest, dividends and capital appreciation inside a qualifying Traditional IRA are therefore generally not taxed each year in Germany as current investment income.
- identify the Traditional IRA as a pension plan
- determine German treaty residence
- apply Article 18A
- generally no annual German taxation of plan earnings
- taxation generally deferred until distribution
- classify distributions under German domestic law
Contributions after moving
New IRA contributions while resident in Germany require a separate analysis
The treaty also contains rules for contributions to pension plans during cross-border employment or self-employment. An existing Traditional IRA may therefore fall within Article 18A even after the taxpayer moves to Germany.
However, the fact that the plan is treaty-recognized does not automatically make every new IRA contribution deductible in Germany. The specific plan, type of activity, prior participation, contribution amount and treaty time limits must be reviewed.
Distributions
Distributions received while resident in Germany are generally subject to German income tax
If a Traditional IRA distribution is received while the taxpayer is subject to unlimited German income taxation and is treaty-resident in Germany, the payment must be classified under German domestic tax law.
For a qualifying foreign retirement arrangement, Section 22 No. 5 of the German Income Tax Act may apply. The German taxable amount depends in particular on the contributions underlying the payment and whether those contributions received tax relief in Germany or abroad.
Lump-sum distribution
A full or partial lump-sum withdrawal can be taxable in Germany. The fact that the payment is made as a lump sum does not by itself make it tax-free.
Periodic withdrawals
Regular IRA distributions must likewise be classified under German tax law and the Germany–U.S. treaty.
Contributions and earnings
The German taxable amount may depend on original contributions, prior tax relief and investment growth inside the plan.
EUR conversion
Distributions and, where relevant, historical contribution amounts must be translated into euro for German tax purposes.
German law from 2025
Foreign tax benefits during the contribution phase are now expressly taken into account
Section 22 No. 5 of the German Income Tax Act was amended with effect from the 2025 tax year. The provision now expressly covers contributions to foreign pension arrangements where Germany or another country granted tax exemption or comparable tax relief for those contributions.
This is particularly relevant for Traditional IRAs. To the extent contributions were deductible or otherwise tax-advantaged in the United States, the corresponding benefits may be subject to downstream taxation in Germany.
Contribution history
For older IRAs, the source of the account balance can be critical
An IRA may have accumulated over decades. In addition to direct annual contributions, it may contain rollovers from former employer plans, amounts originating from SEP arrangements, or contributions that were not deductible for U.S. tax purposes.
For German tax purposes, it can therefore be important to reconstruct how the current account balance was created and how the individual contribution components were originally taxed.
401(k) → IRA
A rollover from a 401(k) to an IRA should be carefully documented before moving to Germany
Many U.S. employees transfer their 401(k) balance to a Rollover IRA after leaving an employer. For German tax purposes, the historical source of the assets does not disappear merely because the account label changes.
The treaty also distinguishes between a distribution to the participant and a transfer from one qualifying pension plan to another. Certain plan-to-plan transfers can therefore remain protected from immediate taxation.
Direct rollover
A direct transfer between qualifying U.S. pension plans should be distinguished from an actual distribution to the participant.
Preserve 401(k) records
Contribution histories and former plan statements should be retained even after the assets have been rolled into an IRA.
Multiple IRAs
With several accounts, the allocation of contributions, rollovers and already-taxed amounts can become complex.
Conversion to Roth
A Traditional-to-Roth conversion is not an ordinary rollover and requires a separate German and U.S. tax analysis.
Germany–U.S. tax treaty
Traditional IRAs receive broader treaty recognition than Roth IRAs in certain respects
The treaty protocol refers to both Traditional and Roth IRAs as pension plans for relevant Article 18A purposes. However, when determining correspondence with German occupational pension arrangements, the protocol expressly treats Roth IRAs differently.
This distinction is important because Traditional IRA contributions may have received tax relief during the contribution phase, whereas Roth IRA contributions generally did not. The German tax analysis should therefore separate the two account types.
Moving to Germany
Preserve your IRA records and tax history before moving
Anyone bringing an existing IRA into the German tax system should ideally gather the relevant records before the first distribution occurs. Useful documents can include account statements, Forms 5498, Forms 8606 and records of earlier rollovers or conversions.
Particular attention should be paid to the distinction between deductible Traditional IRA contributions, nondeductible contributions and amounts that originated in a 401(k) or another pension plan.
U.S. tax perspective
The U.S. tax treatment of IRAs is covered separately on taxrep.us
On the U.S. side, relevant issues can include distribution rules, Required Minimum Distributions, withholding, Form 1099-R, Form 8606, rollovers and Roth conversions.
U.S. citizens and Green Card holders may continue to have U.S. filing obligations after moving to Germany. The German and U.S. treatment therefore needs to be coordinated where both systems apply.
- Traditional IRA distributions
- Required Minimum Distributions
- Form 1099-R
- Form 8606
- rollovers
- Roth conversions
Common mistakes
Common mistakes with a Traditional IRA after moving to Germany
Treating the IRA as a brokerage account
Article 18A generally protects tax deferral within a qualifying pension plan. Investment income inside the IRA should therefore not automatically be treated like income from a private taxable account.
Treating Traditional and Roth IRAs the same
The contribution tax treatment and treaty classification differ. Each account type requires a separate German tax analysis.
Looking only at the current account value
The historical source of the IRA balance may be important when determining the German taxable amount.
Losing rollover records
After a 401(k) rollover, records showing the source and tax history of the transferred assets should be retained.
Importing the U.S. tax result
The U.S. taxable amount shown on a distribution does not automatically determine the German taxable amount.
Ignoring the 2025 law change
Foreign tax relief for pension contributions has been expressly taken into account under Section 22 No. 5 EStG since 2025.
Related guidance
Related topics
Frequently asked questions
Traditional IRA with German tax residence
Is a Traditional IRA recognized in Germany?
Does Germany tax income inside my IRA every year?
Are IRA distributions taxable in Germany?
What changed in 2025?
Is a Traditional IRA the same as a Roth IRA for German tax purposes?
What happens if my 401(k) was rolled into an IRA?
Is a direct IRA rollover immediately taxable in Germany?
Which records should I keep after moving to Germany?
Germany–U.S. tax advice
Do you have a Traditional IRA and now live in Germany?
We review the treaty classification, tax deferral during the accumulation phase, contribution and rollover history, and the German taxation of planned or completed IRA distributions, and coordinate the German treatment with the U.S. tax side.
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