German tax perspective · Retirement between Germany and the U.S.
U.S. Retirees in Germany
People moving from the United States to Germany in retirement often have several types of retirement income: U.S. Social Security, a 401(k), a Traditional IRA, a Roth IRA or a private pension. These benefits cannot simply be combined or reported on a German return using their U.S. tax treatment. Each benefit requires a separate assessment of taxing rights under the Germany–U.S. treaty and its treatment under German domestic law.
Residence in Germany
German tax residence generally brings worldwide income into scope
Establishing a home or habitual abode in Germany can make you subject to German income tax on worldwide income. U.S. pension and retirement benefits then generally become relevant for German income tax purposes.
Cross-border pension income also requires an assessment under the Germany–U.S. treaty. The treaty first determines which country may tax each benefit. The German taxable amount is then calculated under German domestic income tax law.
A structured assessment
Three separate questions arise for U.S. retirement arrangements
The U.S. label attached to a benefit does not automatically determine its German tax treatment. First identify the arrangement, then apply the treaty, and finally calculate the German taxable amount.
When moving to Germany, contribution history, the original pension commencement date, rollovers and previously taxed contributions may remain relevant many years later.
- Identify the U.S. retirement arrangement
- Determine German domestic and treaty residence
- Establish taxing rights under the treaty
- Determine the German income category
- Calculate the taxable amount under German law
- Coordinate U.S. tax treatment separately
German pension taxation
The German taxable amount is not copied from the U.S. return
Social Security benefits must be assessed independently under German domestic law. The portion taxable in the United States is not automatically the amount taxable in Germany.
For Social Security retirement benefits classified as basic retirement provision, the taxable percentage under section 22 no. 1 sentence 3(a)(aa) of the German Income Tax Act (EStG) generally depends on the year the pension actually began. The percentage is 84% for a pension commencing in 2026. Moving to Germany later does not reset the commencement date.
The tax-free portion is generally fixed as a monetary amount by reference to the annual pension in the year following commencement. Regular pension increases do not cause that allowance to be recalculated. The initial taxable percentage therefore cannot simply be applied unchanged to every subsequent annual payment.
401(k)
A 401(k) generally retains treaty protection after a move to Germany
A qualifying 401(k) generally falls within Article 18A's pension-plan rules. Under Article 18A(1), income earned within the plan generally cannot be taxed to a German-resident participant until and to the extent it is paid to or for the benefit of that participant. The provision contains an exception for protected transfers to another U.S. pension plan.
A move to Germany therefore generally does not cause dividends, interest or investment growth within the 401(k) to become annually taxable German investment income.
401(k) distributions
Contribution type, distribution year and actual tax relief matter
Traditional 401(k) contributions typically received U.S. tax relief. Contributions to designated Roth 401(k) accounts, by contrast, are generally made from after-tax income.
From the 2025 assessment period, section 22 no. 5 EStG expressly takes account of contributions to foreign retirement arrangements for which comparable tax exemption or relief was granted in Germany or another country. To the extent a benefit derives from those contributions, it is generally fully taxable on distribution under section 22 no. 5 sentence 1 EStG.
Benefits attributable to contributions without comparable relief are taxed under section 22 no. 5 sentence 2 EStG according to the type of benefit. Where contributions have mixed tax histories, the corresponding benefit portions must be determined separately. The relevant relief must actually have been granted; merely being eligible for a deduction does not establish this.
The amendment affects distributions from 2025 even where the underlying contributions were made earlier. It is not limited to contributions made from 2025. The Federal Fiscal Court's judgment of June 25, 2025, X R 23/22, concerns the earlier rules for 401(k) payments before January 1, 2025 and cannot be applied unchanged to current distributions.
Traditional IRA
The treaty also expressly recognizes a Traditional IRA as a pension plan
Individual Retirement Accounts under section 408 IRC are expressly listed among U.S. pension plans in the treaty Protocol. Article 18A tax deferral during accumulation therefore generally also applies to a Traditional IRA.
A distribution first requires an assessment of the particular IRA and its benefits under German domestic law. Treaty status as a pension plan does not, by itself, establish the German income category or taxable amount.
Where section 22 no. 5 EStG applies, a key issue is which contributions actually received comparable tax exemption or relief. Nondeductible contributions and amounts originating from former 401(k) rollovers must be traced separately. The statutory rules applicable from 2025 must be considered.
Rollover IRA
A rollover does not automatically erase the funds' tax history
Many U.S. retirees have transferred former 401(k) accounts to a rollover IRA. The original source of those amounts and the tax treatment of the underlying contributions remain relevant for German taxation.
Keep the former employer plan's records after the rollover.
Roth IRA
U.S. tax exemption does not automatically mean German tax exemption
Roth IRAs under section 408A IRC are expressly listed as pension plans in Protocol paragraph 16(a). Income earned within them therefore generally benefits from tax deferral under Article 18A(1). A move does not, by itself, make that income annually taxable in Germany.
The Roth exception in Protocol paragraph 16(b) concerns specific rules for contribution relief and recognition of corresponding retirement arrangements under Article 18A(3)(b) and (5)(d). It does not generally remove the protection under Article 18A(1).
Regular Roth contributions are generally made from after-tax income. Their contribution basis must be distinguished from subsequent earnings and any Roth conversions.
Roth conversions
Assess a conversion from the German perspective before proceeding
If you convert a Traditional IRA to a Roth IRA after moving to Germany, the U.S. consequences are only part of the analysis. U.S. taxation of a conversion does not automatically determine its German treatment. Relevant issues include how the transfer is executed, Article 18A(1), and the effect on subsequent German taxation.
Document and review the source plan, contribution basis, conversion amount and German tax residence before carrying out the conversion.
Government-service pensions
Government pensions follow separate treaty rules
Pensions for past services to the United States or its governmental bodies, such as certain military or civil-service pensions, require a separate assessment. For benefits covered by Article 19(2), taxing rights generally belong to the paying state.
Article 19(2)(b) contains exceptions, particularly where the recipient is both a resident and a national of the other state. The saving clause must additionally be considered for U.S. citizens. Transitional protection for individuals already employed by the United States or a covered governmental body on August 29, 1989 may also be relevant. The benefit, former employer, residence, nationality and applicable treaty version therefore matter.
Moving to Germany
The start of German tax liability is particularly important in the year of arrival
If a U.S. retiree moves to Germany during the calendar year, establish when a German home or habitual abode was created and when Germany became the country of residence for treaty purposes.
Payments received before and after arrival may consequently fall under different taxing rules. The timing can be particularly important for large IRA or 401(k) distributions.
Foreign income arising before German worldwide-income tax liability begins may be subject to progression under section 32b(1) sentence 1 no. 2 EStG in the year of arrival. Such income is generally not itself taxed in Germany, but it can increase the rate applied to income taxable there.
Income used for this progression calculation must be determined under German tax law. A distribution before arrival is therefore not automatically irrelevant to the year's German tax liability. Planning should cover income and distributions throughout the calendar year.
Establishing a German home
Document the move-in date, availability of accommodation and actual use.
Treaty residence
Where ties to the United States continue, the treaty tie-breaker rules may need to be applied.
Payment dates
Allocate Social Security, pension distributions and other income to the appropriate periods based on actual receipt.
Large distributions
Coordinate planned 401(k) or IRA withdrawals in advance, taking account of the entire arrival year and potential German tax progression.
German tax return
Report U.S. retirement benefits in euros under German tax rules
Relevant U.S. amounts must be converted into euros for German income tax. Depending on the benefit, this may require conversion of annual totals, individual distributions or historical contributions.
A U.S. statement such as SSA-1099 or Form 1099-R provides important information but does not replace the German tax calculation.
Other income
Retirement often involves more than pension income
U.S. retirees frequently also hold brokerage accounts, interest-bearing deposits, dividend investments, real estate or other assets. German worldwide-income tax liability can bring income from those assets into scope as well.
U.S. investment accounts should therefore be assessed separately from treaty-protected pension plans.
Brokerage accounts
Stocks, ETFs and funds held outside a pension plan generally follow the ordinary German rules for investments.
U.S. bank accounts
Interest may be taxable investment income in Germany even if the account remains in the United States.
U.S. real estate
Rental income from U.S. real estate follows separate treaty rules and should be distinguished from pension income.
German income
German pensions, rental income and other income also enter the German income tax assessment under the applicable rules.
U.S. tax perspective
U.S. citizens generally remain within the U.S. tax system after moving
For U.S. citizens, moving to Germany generally does not end U.S. tax liability. German and U.S. taxation may therefore both be relevant. Whether a U.S. return must be filed depends on the applicable filing requirements.
U.S. Social Security is an important exception for German treaty residents: Article 1(5)(a), together with Article 18(5), preserves Germany's exclusive taxing right even for U.S. citizens. Citizenship alone does not create additional U.S. taxation of those benefits.
For other income, the saving clause, relevant treaty provisions and double-tax relief must be considered together. A U.S. tax payment is not automatically creditable in Germany. Further information on the U.S. tax position is available on taxrep.us.
- Form 1040
- Saving clause
- Foreign Tax Credit
- Social Security: exception to the saving clause
- 401(k) and IRA distributions
- U.S. reporting
Common mistakes
Frequent mistakes after a U.S. retiree moves to Germany
Combining all U.S. retirement benefits
Social Security, 401(k), Traditional IRA and Roth IRA benefits are distinct for tax purposes.
Copying the U.S. taxable amount
The amount taxable on a U.S. return or Form 1099-R does not automatically determine German tax.
Treating a 401(k) as an ordinary brokerage account
Article 18A generally protects tax deferral within a qualifying pension plan.
Assuming a Roth IRA is automatically tax-free
Germany does not automatically recognize the U.S. tax exemption for a qualified distribution.
Ignoring the year of arrival
In addition to the start of German domestic and treaty residence, consider the rate effect of income received before arrival.
Discarding historical records
Contribution basis, rollover history and former plan documents may still be needed for German tax calculations years later.
Further reading
Individual U.S. retirement arrangements in detail
Frequently asked questions
U.S. Retirees in Germany
Do I have to pay German tax on my U.S. retirement benefits?
Where is U.S. Social Security taxed?
Do I have to pay German tax on investment gains inside my 401(k) every year?
Does this also apply to my Traditional IRA?
Is my Roth IRA tax-free in Germany?
What matters most in the year I move to Germany?
Does the 84% taxable percentage apply to everyone moving in 2026?
What changed for 401(k) distributions from 2025?
Are U.S. military or civil-service pensions taxed like Social Security?
Which documents should I preserve before moving?
Must I continue filing a U.S. return as a U.S. citizen?
Legal framework
Relevant provisions and case law
- Protocol amending the Germany–U.S. treaty, signed June 1, 2006 (IRS, PDF) : in particular Article 1(5), Article 18(5), Article 18A, Article 19(2), Article 23 and paragraph 16 of the treaty Protocol; transitional government-service rules in Article XVII(3) of the amending Protocol.
- Section 22 EStG : taxable pension percentages, the tax-free pension portion and benefits from retirement arrangements.
- Section 32b EStG : tax progression, particularly where German worldwide-income tax liability applies for only part of the arrival year.
- Federal Fiscal Court (BFH), judgment of June 25, 2025 – X R 23/22 : taxation of 401(k) payments before January 1, 2025 and the distinction from the amended rules applicable from 2025.
Germany–U.S. tax advice
Are you planning retirement in Germany or have you already moved?
We assess U.S. Social Security, 401(k), Traditional IRA, Roth IRA and other retirement benefits under German law and the treaty, determine the relevant periods in the arrival year, and coordinate the German return with the U.S. tax position.
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U.S. Social Security
U.S. Social Security is taxable exclusively in Germany for German treaty residents
Article 18(5) of the Germany–U.S. treaty contains a special rule for social security benefits. Where the U.S. Social Security Administration pays benefits to a German treaty resident, Germany has the exclusive right to tax them.
The treaty also requires Germany to treat those U.S. benefits as though they were paid under Germany's own social security system. German classification therefore generally follows the rules for comparable German pensions.
This also applies to U.S. citizens: Article 1(5)(a) expressly exempts the social security provision from the saving clause. Retaining U.S. citizenship therefore does not give the United States an additional right to tax these Social Security benefits while the recipient is a German treaty resident.