US Tax Guide for Military & Contractors Living in Germany

Germany hosts a large number of American military personnel and defense contractors. Military members and contractors face unique US tax situations, including combat zone exclusions, foreign earned income exclusions, and state tax considerations. FileAbroad helps Americans in Germany navigate these cross-border questions.

Key Tax Issues for Military & Contractors in Germany

• Combat zone exclusion: If you serve in a designated combat zone, your military pay may be excluded from US income. Germany is not a combat zone, but deployments from Germany to combat zones may qualify.
• FEIE for contractors: Defense contractors can claim FEIE on foreign earned income if they have a foreign tax home and meet the physical presence or bona fide residence test.
• State tax: Many military members maintain state residency in no-tax states (Texas, Florida). State tax rules for military are complex.
• Totalization agreement: US-Germany totalization agreement prevents double social security taxation for contractors.
• German tax: If you are a German tax resident, Germany taxes your worldwide income. FTC may be available.

FEIE vs FTC for Military & Contractors in Germany

FEIE is generally better for contractors with income below the FEIE limit. FTC is generally better for those with income above the limit or in high-tax situations.

Military members with combat zone exclusions may have different considerations.

FBAR & Reporting for Military & Contractors in Germany

German bank accounts (Deutsche Bank, Commerzbank, Sparkasse) are reportable on FBAR. Military members and contractors often hold accounts in both the US and Germany.

Common Mistakes Military & Contractors Make in Germany

1. Not claiming combat zone exclusion — If you deployed to a combat zone, your pay may be excluded.
2. Not claiming FEIE — Contractors can claim FEIE on foreign earned income.
3. Not reporting German bank accounts on FBAR — All foreign accounts are reportable.
4. Not understanding state tax rules — Military state residency rules are complex.

When to Get Professional Help

You should consider professional help if you have foreign accounts exceeding $10,000, combat zone questions, self-employment income, or complex income situations.

FileAbroad reviews each engagement personally.

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FileAbroad explains U.S. federal tax and U.S. international information-reporting consequences of documented foreign facts. It does not provide foreign-country legal or tax representation, valuation opinions, banking or remittance advice, or advice on what a foreign authority will accept.

Scope statement reviewed 2026-08-30 · FileAbroad product/content owner