German rental income for US residents
Key facts
- Treaty
- US–Germany treaty of 29 Aug 1989, amended by the 2006 Protocol (in force 28 Dec 2007)
- Who taxes the rent first
- Germany — Art. 6, property-location rule
- US relief method
- Foreign tax credit — Art. 23(1), Form 1116, usually passive category
- US forms
- Form 1040 Schedule E (property abroad on line 1a), Form 1116; FBAR and Form 8938 for the German account above thresholds
- Depreciation at home
- ADS, 30 years straight-line for residential rental placed in service after 2017; German AfA does not carry over
- Tax years
- Both calendar years — the gap is timing of the German assessment
- US deadline
- 15 April; 15 October with Form 4868. The automatic June extension is only for people living abroad
File the German return first
Rent from a flat in Germany is German-source income under §49 Abs. 1 Nr. 6 EStG, whatever your nationality. As a resident of the United States you file the non-resident return: Hauptvordruck ESt 1 C with one Anlage V per property, through ELSTER, at the Finanzamt where the property is located.
- No Grundfreibetrag: §50 Abs. 1 EStG taxes the profit from the first euro.
- Deduct German Werbungskosten, mortgage interest and AfA under German rules.
- Deadline for a self-filed 2025 return: 31 July 2026. If you missed it, file now — the late-filing surcharge only becomes automatic 14 months after year-end, at the end of February 2027.
- Treatment as a German resident under §1 Abs. 3 EStG is open if at least 90 % of your worldwide income is German-taxable, or if your non-German income stays below the Grundfreibetrag (reduced for some countries of residence). With a salary at home, neither test is usually met — but a retiree with little foreign income may qualify.
- Living outside the EU/EEA, the Finanzamt may ask you to name an Empfangsbevollmächtigter in Germany. Letters posted abroad count as delivered one month after posting.
Report the rent on Schedule E under US rules
Citizens and green-card holders are taxed on worldwide income, so the German flat goes on Schedule E like a US rental, with the foreign address on line 1a. Translate income and expenses into dollars; the IRS publishes yearly average rates and accepts another posted rate if you use it consistently. The deductions are US deductions, not the Anlage V figures. The main difference is depreciation: property used predominantly outside the US must use the Alternative Depreciation System, 30 years straight-line for residential rental placed in service after 2017 (40 years before 2018), on the dollar cost at purchase and without bonus depreciation. German AfA at 2 % or 3 % on the euro building basis is a different number.
Claim the German tax on Form 1116
Article 23 of the treaty requires the US to credit German income tax on the rent, within US limits. Rents are usually passive-category income; they move to the general category if the German tax exceeds the highest US rate on that income (high-taxed income). The credit is limited to the share of your US tax that falls on the foreign income. Unused credit carries back one year and forward ten. Timing matters: a cash-basis filer claims the German tax in the year it is paid, which is usually the year after the rental year. Electing to claim taxes when accrued is possible on a timely original return and then binds future years. If the Finanzamt later changes or refunds the tax, that is a foreign tax redetermination you must report to the IRS.
Do not forget the account reporting
The German property itself is not reportable on Form 8938, but the German bank account that receives the rent can be. An FBAR (FinCEN 114) is due when your foreign accounts together exceed $10,000 at any time in the year. Form 8938 applies to a single US resident above $50,000 at year-end or $75,000 at any time, double for joint filers. Both follow the April deadline with an October extension for the FBAR.
Example: the same flat, taxed in Germany and the United States
Illustrative only. Every country page uses the same German flat so you can compare. German side: tax year 2025, non-resident return, no other German income.
| Rent received incl. operating-cost advances | €12,000 |
|---|---|
| Running costs | − €2,000 |
| Mortgage interest | − €3,000 |
| AfA, 2 % of €100,000 building basis | − €2,000 |
| German rental profit | €5,000 |
| German income tax (§50 EStG, no Grundfreibetrag)Soli: 0 | €933 |
Single filer living in the US, 24 % marginal bracket, €1 = $1.129 (IRS 2025 yearly average), building cost $110,000 at purchase, credit claimed on accrual basis for simplicity.
| Rent on Schedule E | $13,548 |
|---|---|
| Running costs and interest | − $5,645 |
| ADS depreciation ($110,000 ÷ 30)replaces German AfA | − $3,667 |
| US net rental income | $4,236 |
| US tax on it at 24 % | $1,017 |
| German tax as credit (€933)limited to $1,017 | $1,053 |
| Unused creditcarry back 1 year or forward 10 | $36 |
Here the credit covers all the US tax on the flat and a small excess remains. In a lower US bracket the excess grows; it only helps if other passive foreign income can absorb it within the carryover period.
Mistakes specific to US residents
Two depreciation schedules, two profits
Keep a German AfA schedule in euros and a US ADS schedule in dollars from the start. Reusing the German figure on Schedule E overstates or understates the US profit every year.
Claiming the credit before Germany has assessed
The German Steuerbescheid usually arrives months after the US deadline. Cash-basis filers claim the tax when paid; accrual filers must later report any change. Do not credit an estimate and forget it.
Missing the German return because the IRS has the full picture
Reporting the rent to the IRS does not discharge the German obligation. Germany requires its own return; without it there is also no German tax to credit.
Treating the June extension as yours
The automatic two-month extension applies to taxpayers living and working outside the US. A US-resident landlord files by 15 April or extends with Form 4868.
When this page is not for you
- US citizens living in Germany: you are a German tax resident and file as fully taxable, not with ESt 1 C.
- Property held through an LLC, a GmbH, a partnership or a trust.
- Holiday or short-term letting, and the year you sell the property.
In these cases, or when amounts are large, ask a Steuerberater and a tax adviser in your country of residence.
Common questions
How is German rental income taxed for US residents?
Germany taxes the rent first: you file the standard non-resident return (ESt 1 C with Anlage V) and pay German tax from the first euro of profit. The US then taxes the same rent on Schedule E, recomputed under US rules with 30-year ADS depreciation, and gives a foreign tax credit on Form 1116 for the German tax — capped at the US tax on that income, with unused credit carried back one year or forward ten.
Can I deduct German mortgage interest on Schedule E?
Yes. Interest on a loan used for the rental is deductible under US rules too, converted to dollars. Principal repayments are not deductible in either country.
Is the German Solidaritätszuschlag creditable?
The treaty covers German income tax including the solidarity surcharge. For a single flat the surcharge is usually zero because of its threshold, so the question rarely arises.
Last reviewed: by Yann Lephay.