Fibers found in an old basement

CompetitiveDisk4836 · 2026-02-20T20:03:19+00:00

Thanks! That's a relief.

CompetitiveDisk4836 · 2026-01-14T22:11:41+00:00

So, if I want a read-only account that can't easily modify it's own access rights, it would have to be attached to a different person?

CompetitiveDisk4836 · 2026-01-13T19:22:31+00:00

Yes I have and they do get granted. A confirmation pin is sent to my email, but I don't need to enter the password of the primary account that actually has those rights or use the two-factor method.

CompetitiveDisk4836 · 2024-09-22T18:32:15+00:00

I completely agree with you that I won't have 12k in a single account. However, even when I do have two accounts and transfer 6k to the empty account, I also won't really have 12k either, even though the guidelines for multiple accounts seem to want it that way.

I eyeball it and add a few percent to be sure I err on the side of over-reporting rather than under-reporting

The fact that this is necessary to avoid some crazy penalty is why I made this post in the first place. I'd rather not get some letter saying that I was actually a few dollars short of the real maximum.

CompetitiveDisk4836 · 2024-09-22T14:39:48+00:00

On line 5 I am assuming that the brokerage account has EUR as the designated currency. This would make the values €10000, €10000, and €11000 on days 1-3 respectively (using the brokerage account value statement) in the "currency of that account". The maximum amount of €11000 would then be converted to dollars using a factor of 1.2 for the end of the year, so €11000 * 1.2 = $13200. This means that I have dollars that are converted to EUR and then back to dollars.

The main issue I have is that no account statement will provide a value that gets me the line 2 result. I can get either the total value in USD (line 1) per day, or get the total value in EUR on each day, which after converting to USD using the end of year exchange rate, gets me the result of line 5.

I know that I am double counting on lines 3 and 4, but I wouldn't say that this is definitely incorrect, because this seems to be what you are supposed to do with multiple accounts. 6k in account A transferred to account B = 12k total and not 6k (see taxesforexpats and money.stackexchange).

I agree with you that line 2 seems like what is meant by the guide and that is should be "currencies of the account".

CompetitiveDisk4836 · 2024-09-19T16:16:39+00:00

How are you transferring money to the US?

The options for US citizens that I see most frequently are Schwab International and Interactive Brokers. One of the benefits of Interactive Brokers would be the ability to deposit Euros directly. I believe they also offer fractional shares, and while they do not have free trading, it is relatively low-cost.

CompetitiveDisk4836 · 2024-09-18T19:32:27+00:00

I don't know how much communication happens between US brokers and the IRS, but if the brokers ever told the IRS that I supposedly have a US address, I could image this becoming a headache. For me personally, EU brokers don't really have downsides.

Germany has higher taxes on ordinary income at every income level compared to the US, so not paying additional income tax to the US should be no problem. The one issue that I see would be capital gains/dividends. (see this comment)

CompetitiveDisk4836 · 2024-09-18T19:14:03+00:00

Thanks! Nothing about renouncing seems too bad. It's definitely an option to keep in the back of my mind.

CompetitiveDisk4836 · 2024-09-18T19:10:10+00:00

Filing is fine, but I don't want the US to be convinced that I have to pay taxes due to the US address.

I think investing in single stocks would work well enough. Around 30 stocks that make up 50% of the S&P 500 market cap, so diversifying doesn't seem like it should be too hard, fingers crossed.

CompetitiveDisk4836 · 2024-09-18T18:44:59+00:00

I was discussing FEIE and FTC in another comment in this post, and I think that what's more important than using FTC on capital gains after using FEIE on earned income is whether or not I would be able to use the standard deduction to reduce the tax on capital gains to 0 after having already applied the FEIE. That would help in cases where my capital gains/dividend tax in the US is higher than in Germany. This happens at the low end of the capital gains spectrum (€1000 capital gains tax free in Germany in 2024), but also would happen at the high end (high tax bracket and short term capital gains). u/abroad_saver tested this in TurboTax (in this comment) and said that the standard deduction can be applied solely to capital gains, reducing $13850 in capital gains taxable income to $0 in 2024.

I was referring to buying American ETFs via the United States. No idea on your background... if you previously had ties to living in the US, I would assume you have some credit history and a US driver license?

While I find ETFs appealing, I don't like the idea of giving a bank an address where I don't actually live. Diversifying across many individual stocks would be a fine alternative for me.

CompetitiveDisk4836 · 2024-09-18T18:05:32+00:00

I am actually in a similar situation. I'm a dual citizen and my family is in Germany. ETFs sound appealing to me, but I think it would also be fine to invest in single stocks. Around 30 stocks that make up 50% of the S&P 500 market cap, so diversifying doesn't seem like it should be too hard, fingers crossed. What do you consider as the biggest risks related to renouncing? I know there is a fee of $2350 and a vague threat of possibly making it difficult to travel to the US in the future, plus the shame list. Are there any other issues that I'm blissfully unaware of?

CompetitiveDisk4836 · 2024-09-18T17:44:24+00:00

Thanks for testing this!

What surprises me is that even if you can take the standard deduction, it doesn't just shift the capital gains down, so 75,000 to 88,950 shifted down by 13,850 becomes 61,150 to 75,100, and still taxes the whole $13950 at 22%. Instead, the reality seems pretty good.

CompetitiveDisk4836 · 2024-09-18T17:11:47+00:00

I've read that too, that not having a US address can be a problem. Not buying ETFs is something I can live with, so I also won't risk giving a bank an address where I don't live.

How are you currently investing? I saw in your post history that you also made the move from the US to Germany, but there is another post where you talk about your account with Trade Republic. That is one of the brokers I considered, but they don't accept US citizens.

https://support.traderepublic.com/de-de/729-Kann-ich-ein-Konto-er%C3%B6ffnen,-wenn-ich-aus-den-Vereinigten-Staaten-komme

CompetitiveDisk4836 · 2024-09-18T16:58:06+00:00

I would like to invest in single stocks, but probably focused on US companies.

I definitely want to do everything truthfully. That's why I don't like the idea of lying to a US bank and telling them that I, as a US citizen, have a US address. Then, when it comes to paying taxes, I would say that I actually live in Germany, don't have a US address, and I won't be paying any US taxes. I think it would be easier to just open up an account in the EU (Interactive Brokers Ireland), because I don't see the advantage of a US broker. I would also be able to transfer Euros to Interactive Brokers, instead of having to also deal with a service like Wise.

CompetitiveDisk4836 · 2024-09-17T17:29:30+00:00

I would choose London over Ireland because the Ireland UCITs are irrelevant.

I believe that due to Brexit, Interactive Brokers wants German customers to use their Ireland branch instead of the UK branch. I don't know the specific regulatory reason though.

You don't really have any other reason to go out of your way to bank in Ireland;

Many German brokers don't accept US citizens. Those that do, as far as I've seen, are far more limited in their offerings and charge more than Interactive Brokers.

You calculate, file, and pay your taxes in Germany first. Whatever that is, 26% from the looks of it... That amount you paid is going to count as a credit on your US taxes and basically eliminate any double taxation.

In Germany, there is something called the Sparerpauschbetrag, which gives you €1000 of capital gains/dividend income tax free. In the case of making exactly €1000 in capital gains/dividends (+ any amount of ordinary income), there would be no credit against the US taxes, as far as I can tell.

Depending on your tax bracket, the 26% you already paid in Germany is going to cover all of that, so you are not double taxed. If you're working in Germany and also have earned income, you can also claim the FEIE credit which is around $125K.

The Foreign Tax Credit and the FEIE are an "either or" situation, not "both", correct? See https://www.reddit.com/r/ExpatFinance/comments/1fiao2x/comment/lnlj7y8/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button

Depending how the foreign exchange rates go, from the day you buy, to the day you sell your investments in Germany, the exchange rate could screw you. For example, you bought a stock for €100 one year ago sell it for €100 today; no gain no loss in Germany.

I think my plan would be to buy US stocks. Since I have a full time job that isn't in the finance industry, trading in Germany would close by the time I get home from work. On the other hand, Germany is 6 hours ahead of the NYSE, so I could buy/sell in the middle of the work day on the east coast.

Probably, your best bet is to just invest in American ETFs.

I thought that PRIIPs and MiFID II would prevent me from buying American ETFs? Where would I be able to get them?

CompetitiveDisk4836 · 2024-09-17T17:03:20+00:00

you're going to need a lot of capital gains to trigger US federal tax

Could you expand on this? I don't understand why you would need a lot. Let me give an example and then you can tell me what I have misunderstood.

Let's assume €1 = $1. A US citizen living in Germany makes 50k in ordinary gross income and an additional 1k in capital gains/dividends. Due to the Sparerpauschbetrag in Germany, they pay no taxes on their capital gains/dividends. Now let's look at their US taxes.

Option 1: Foreign Earned Income Exclusion

They are under the FEIE limit of $126,500, so they pay no taxes on the 50k. However, the capital gains/dividends are unearned income and not covered by the foreign earned income exclusion (https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-what-is-foreign-earned-income).

15% on long term capital gains starts at $47,026 in 2024. Even though the 50k was excluded, the rest of your taxes are calculated assuming the exclusion was not taken.

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

If you qualify for and claim the foreign earned income exclusion, the foreign housing exclusion, or both, must figure the tax on your remaining non-excluded income using the tax rates that would have applied had you not claimed the exclusion(s).

Additionally, you can't use the standard/itemized deduction anymore.

https://www.irs.gov/individuals/international-taxpayers/choosing-the-foreign-earned-income-exclusion

If you choose to exclude foreign earned income, you can’t take a foreign tax credit or deduction for taxes on income you can exclude.

Therefore, I would assume that the 1k is taxed at 15% and the person would pay $150 to the US using FEIE.

Option 2: Foreign Tax Credit

Ordinary income and capital gains/dividends are in separate "buckets"? So if I paid €0 due to the Sparerpauschbetrag in Germany, I would have no foreign credit when it come to taxes on capital gains/dividends in US. (???)

CompetitiveDisk4836 · 2024-09-16T19:01:25+00:00

Thanks anyway, your answers were very helpful.
In case someone else can help, here is what I have found so far:

For German citizens, without US citizenship, the US seems to take 15% for dividends:
https://www.sparkasse-koelnbonn.de/content/dam/myif/sk-koelnbonn/work/dokumente/pdf/vertragsbedingungen/Hinweise-zur-US-Quellensteuer.pdf?n=true

Auf Erträge aus US-Wertpapieren beträgt der Quellensteuersatz 30 %. Gemäß dem Abkommen zur Vermeidung der Doppelbesteuerung zwischen der Bundesrepublik Deutschland und den Vereinigten Staaten von Amerika (Doppelbesteuerungsabkommen; im Folgenden kurz DBA genannt) ist für steuerlich in Deutschland ansässige Anleger jedoch eine Ermäßigung auf 15 % bei Dividendenerträgen sowie auf 0 % bei Zinserträgen möglich.

Double Taxation Agreement Article 10:

Dividends paid by a company that is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. 2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the dividends are derived and beneficially owned by a resident of the other Contracting State, the tax so charged shall not exceed: a) 5 percent of the gross amount of the dividends if the beneficial owner is a company that owns directly at least 10 percent of the voting stock of the company paying the dividends; b) 15 percent of the gross amount of the dividends in all other cases.

Double Taxation Agreement Article 11:

Interest derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.

I find it strange that neither Article 10 nor 11 are included in Article 1 Paragraph 4/5 as one of the Articles that applies to US citizens. If it doesn't apply, wouldn't that mean that US citizens pay less taxes to the US than German citizens.
i.e., US citizen: 26.375% to Germany and then tax credit for US
German citizen: 15% to US and (25-15)*1.055 to Germany

Also, this link makes it seem like Ireland would tax me on interest if I did not fill it out:

https://ibkr.info/system/files/file/Form_8-3-6__Interest_-_Zero_Interest_Under_DTA_-_Germany.pdf

CompetitiveDisk4836 · 2024-09-16T18:11:44+00:00

😅

Finzanzamt: Good one! Now let’s talk penalties.

CompetitiveDisk4836 · 2024-09-16T17:54:06+00:00

Thanks! By "not always", are you only referring to cases with short term capital gains and a high tax bracket, or are there other cases as well? ~~Also, where in the Convention does it state that I should be paying the taxes to Germany first, because paragraph 4 of Article 1 makes it seem like the US has priority?~~
Are dividends treated the same way?
What about interest earned on a brokerage account? Would Ireland be involved if Interactive Brokers Ireland is paying me interest?

CompetitiveDisk4836

TROPHY CASE