German Tax Perspective · Outbound Move
Moving to the U.S. While Keeping German Real Estate
Leaving Germany for the United States generally ends unlimited German income-tax liability once German residence and habitual abode are given up. A property located in Germany, however, remains anchored in the German tax system. Rental income and a later sale can continue to be taxable in Germany while the United States also taxes under its own rules.
End of Unlimited German Tax Liability
Leaving Germany Does Not End German Taxation of the Property
If the taxpayer gives up German residence and no longer has a habitual abode in Germany, unlimited German income-tax liability can end.
German real estate has its own German-source connection. Germany may therefore continue to tax income from the property even after the owner has moved to the United States.
What Should Be Clarified Before the Move
Tax Status and the Property History Should Be Documented Before Departure
Giving Up German Residence
Document when the German residence was actually abandoned and when unlimited German tax liability ends.
Depreciation History
Maintain the German building depreciation history and the separation between building and land.
Rental Documentation
Lease agreements, rent receipts, loan interest, management costs, repairs and other deductible expenses.
Limited German Tax Liability
German Rental Income Generally Remains Taxable After the Move
A person who no longer has a German residence can still be subject to limited German income-tax liability on income from German real estate.
The income continues to be calculated under German law. Section 21 EStG, German deductible-expense rules and Section 7 EStG for depreciation remain particularly important.
- continue reporting German rental income
- calculate deductible expenses under German law
- continue German depreciation
- review limited German tax liability
- apply treaty allocation
- coordinate the U.S. return separately
Rental After Departure
The German Rental-Income Calculation Generally Continues
After the move to the United States, income from the German rental property continues to be calculated under German rules as the surplus of income over deductible expenses.
Rental Income
Ongoing rental income from the German property remains relevant for German tax purposes.
Loan Interest
Financing interest can continue to be deductible where economically attributable to the rental activity.
Repairs & Management
Maintenance, property management and other property-related expenses remain subject to German tax rules.
Depreciation
German depreciation generally continues using the existing German tax values.
Germany–U.S. Tax Treaty
Germany Remains the Situs State With the Primary Taxing Right
Under Article 6 of the Germany–U.S. tax treaty, income from immovable property may be taxed in the country where the property is located. For German rental property, Germany therefore remains the situs state after the owner moves to the United States.
The United States can also tax the income based on U.S. residence or, for U.S. persons, worldwide taxation. Double taxation is then coordinated on the U.S. side.
U.S. Tax Side
After the Move, the German Property Also Becomes Relevant in the United States
A person who becomes tax-resident in the United States generally has to report German rental income on the U.S. tax return as well. U.S. citizens remain subject to U.S. worldwide taxation in any event.
The U.S. calculation uses its own rules for depreciation, basis, expenses and currency conversion. The U.S. rental result will therefore often differ from the German result.
- foreign rental income
- separate U.S. depreciation
- separate U.S. basis
- foreign tax credit
- Form 1116 where applicable
- possible state tax
Foreign Tax Credit
German Tax Is Typically Credited on the U.S. Side
Because Germany taxes the German property as the situs state, double taxation is typically coordinated on the U.S. side through foreign tax credits.
The U.S. credit is determined under U.S. rules and does not automatically equal the full amount of German tax. Income category, limitation rules and timing can create differences.
The U.S. tax treatment is covered in detail on taxrep.us.
Later Sale
A Sale Can Still Be Taxable in Germany After Departure
If the German property is sold after the move to the United States, Germany generally continues to have a taxing right as the situs state.
For privately held real estate, Section 23 EStG is particularly important. A taxable private disposal can arise within the ten-year period unless an exception applies.
Section 23 EStG
The Ten-Year Period Does Not Restart When You Leave Germany
Moving to the United States does not restart the German holding period for privately held real estate. The original acquisition and sale dates remain relevant.
The German owner-occupancy exception can also matter depending on the property's use history. A later sale should therefore be reviewed using the original German property history.
Year of the Move
Rental Income and Other Events Must Be Allocated by Period
If the departure takes place during the calendar year, part of the year can still fall within unlimited German tax liability and the remaining part within limited German tax liability.
A sale shortly before or after departure can also produce different German and U.S. consequences. Timing should therefore be reviewed before implementation.
Entity Ownership
A GmbH, Partnership or Other Structure Adds Additional Rules
The treatment described above primarily concerns directly held real estate. If the German property is held through a GmbH, partnership or another entity, both the German income attribution and the U.S. consequences can change significantly.
For a U.S. person holding a German corporation, additional U.S. information-reporting and CFC rules can become relevant.
Related Guidance
Related Topics
Frequently Asked Questions
Moving to the U.S. With German Real Estate
Do I still pay German tax on rent after moving to the United States?
Does German depreciation continue after the move?
Do I also have to report the rental income in the United States?
What happens if I later sell the property?
Does the ten-year holding period restart when I leave Germany?
Can the sale be tax-free in Germany but taxable in the United States?
Germany–U.S. Tax Advice
Are You Moving to the United States and Keeping Real Estate in Germany?
We review the abandonment of German residence, limited German tax liability, German rental income, depreciation, treaty allocation, a later sale and coordination with the U.S. foreign-tax-credit framework.
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