StephenGermany

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About StephenGermany

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  1. Where to get basic information on Taxes

    Congratulations!
  2. Inheritance Tax for US citizens - 10 year domicile law

    Thank you! Very, very useful information.
  3. Inheritance Tax for US citizens - 10 year domicile law

    I'm sorry if I'm being dense. I'm hoping a short example post will clear this up for me.   A US citizen (but doesn't matter), contributes $80K to an IRA while living in the US over several years. Bobby moves to Germany and let's the IRA grow via stock appreciation and dividends. When he retires, in Germany, he takes the money out all at once, and it's worth $200K. Are you saying he only needs to pay taxes on $120K of the distribution to Germany? Whereas he is taxed on $200K of the money in the US (given he's a citizen, ignoring FTC for now)?   That's what I tried to say in my first response. That would be great, given tax rates in the US are lower... and given the FTC accrual that could be used from past years in the capital gains & passive income buckets to offset the US taxes due.   Sorry if I still don't get it. =)   Thanks.
  4. Inheritance Tax for US citizens - 10 year domicile law

    Thanks, @Straightpoop. I think I originally read your post incorrectly. I thought you were saying that contributions that were made while living in the US (i.e. nothing to do with Germany) would be Germany tax free for distributions (the principal portion of the distribution) made while living in Germany. That's why my formula made a distinction between contributions made in the US vs Germany. But what you really said, is that if you contributed post-tax money to a retirement account, i.e. taxed by Germany already, then these funds can be taken out tax-free, which of course is logical. But that should apply to funds already taxed by the US as well, right? So for a Roth (let's ignore for now whether Germany recognizes Roth accounts as retirement accounts, or treats them as brokerage accounts, and assume they are retirement accounts), or an IRA that was funded in the US with post-tax money, when distributions are made from that account, Germany would also not tax the portion of the distribution which is principal, if it were previously taxed by the US, right? So it's basically the same in Germany as in the US. When you take money out of a retirement account, you only pay income taxes on the portion of the distribution which was not previously taxed. Right? Of course distributions are always considered to be part principal, part gain/profit, matching the state of the IRA at the time of the distribution. Thank you!
  5. Inheritance Tax for US citizens - 10 year domicile law

    Hi @straightpoop, hope you are well.   > The next step is figuring out the income taxation of distributions. > This will require you to figure out how IRA distributions would be income taxed from your own IRA as opposed to an inherited IRA. > > According to the most recent  (9 Aug 2018) court decision (FG Köln 11 K 2738/14) which is currently pending on appeal to the German Supreme Financial Court (BFH > Bundesfinanzhof, X R 29/18), the general rule will be that a ratable portion of contributions made to the IRA that did not enjoy GERMAN (as opposed to US) tax relief in the year > made will be treated as tax-free when distributed in a form other than as a "Leibrente".  (§ 22 Nr. 5 Satz 2 c read in conjunction with § 20 Abs. 1 Nr. 6)    So, just so I'm clear... when you say "contributions made to the IRA that did not enjoy German tax relief"... so are you saying that if you contributed pretax dollars to an IRA for 20 years in the US... move to Germany... contribute more while a resident of Germany (with US/German tax relief)... that when the money is distributed for the first time, if you are still a resident of Germany, you calculate how much tax in Germany to pay based on:   D - contributions while living in Germany, free of US/Germany taxation at the time U - contributions while living in the US, free of US/Germany taxation at the time T - Total account value when taking first distribution G - gain (T - D - U)   Distribution X ((D+G)/T) = investment income to be taxed in Germany that year?   Thanks.
  6. Inheritance Tax for US citizens - 10 year domicile law

    Hi @Calendar21. Great question... looking forward to hearing the answers. This is of course a complicated topic. I'm not a pro, so hopefully my mini-answers don't get too shredded. =)   You (US citizen resident in Germany for 11 years) are subject to German inheritance tax. So first you have to deal with the topic of whether Germany will tax the full amount, when you file the German inheritance tax return that you are supposed to file. I suspect the opinion will be yes... assuming of course the amount is high enough to tax, depending on the relationship you had with the deceased. (child, grandchild, etc.)   https://www.expatica.com/de/finance/taxes/a-guide-to-german-inheritance-tax-inheritance-law-and-writing-a-german-will-108115/   In the US, the money is taxed like income when you take it out... all of it, assuming the money invested in the IRA was pretax, which isn't always the case. The US citizen can take the money out (other than RMD's), whenever you want, which doesn't align well with similar German accounts. So that always causes discussion here. You won't pay inheritance tax in the US, unless this is a ridiculously enormous IRA, or the IRA is part of an estate large enough to be taxed. You will not be double taxed for -income- tax, because what you pay the Germans when you take distributions, you get as a FTC on your US return. But since you almost certainly pay the US nothing for inheritance tax, there's no possibility of double taxation with Germany... Germany gets what they ask for. How do you pay Germany the inheritance tax, without taking the money out of the IRA and having to pay income tax on it? Good question. I would think if you don't have other funds to use, you would need to take out enough, so that after German income tax, you can still pay the German inheritance tax. Not fun. Would love to hear I'm wrong on that one.   Anyway, hopefully this is answered by the pros that you referenced... and I didn't screw up very much. =)