Skip to content

us expat tax guide – germany

When do I need to file Form 8858?

Form 8858 is required to report income non-US self-employment income and rental income from a property outside of the United States.

Failing to file Form 8858 correctly can lead to penalties, highlighting the need for accurate reporting.

It’s recommended to get support from a tax professional, as they will be able to help you avoid penalties as well as support you with finding tax strategies that are beneficial for your specific situation.

How do I report self-employment income from Germany on my US tax return?

In general, there are two forms you will need to use: Schedule C and Form 8858.

For US citizens or green card holders residing in Germany, the process of reporting self-employment income to the IRS involves specific forms and careful documentation.

You will need to detail your gross revenue and expenses on Schedule C. You’ll have to list your business’s total income and deduct allowable expenses to calculate your net profit or loss.

You will also need to determine your net income; this figure is essential for assessing your tax obligations and potential deductions on your overall tax return.

How do I report rental property income from Germany on my US tax return?

Reporting rental property income from Germany on your US tax return involves treating the property as a business entity under IRS guidelines. This means you must declare all rental income received, alongside any associated expenses incurred in maintaining, managing, and operating the property.

These expenses can include repairs, property management fees, mortgage interest, property taxes, and depreciation.

The net amount—your rental income minus allowable expenses—constitutes your taxable income or profit from the property. Should you pay taxes in Germany on this rental income, the US tax system allows you to utilize the Foreign Tax Credit (FTC). This credit is designed to prevent double taxation, enabling you to offset the taxes paid in Germany against your US tax liability on the same income.

To accurately report this income, you’ll use Schedule E (Supplemental Income and Loss) attached to your Form 1040. This form details your rental income, expenses, and the resulting net profit or loss.

It’s advisable to consult with a tax professional experienced in international taxation to ensure compliance and optimize your tax benefits, especially given the complexities of tax treaties and the potential for tax planning strategies to minimize your overall tax liability.

What are the penalties for not filing Form 8858 in 2024?

If you fail to file Form 8858, the IRS imposes a penalty of US$10,000 for each tax year for which the form was not filed.

Beyond the initial penalty for non-filing, if the failure to file Form 8858 leads to an underpayment of tax due to inaccurate reporting, an additional penalty may apply. This penalty is typically 20% of the underpayment amount attributable to the accuracy-related issue.

Table of contents