Hi

I have a job offer in Munich and I am trying to determine my tax liability as a US citizen working in Germany. Assume that income is $150K. Now I know I can exclude, $100K (or something around that as it is foreign income). But for the rest I need to pay taxes and my tax bracket will be as if I made $150K not $50K. So far, I think my understanding it right.

Now, for the taxes on the remaining $50K, I will be paying taxes in Germany. To avoid paying taxes twice, I think I can also use Foreign tax credit in addition to the exclusion.

My question is, if German tax rate is at least as high as US, due to foreign tax credit my liability should come out to 0. right? I totally understand I have to file taxes no matter where I am but I am trying to understand how bad I could be hit by IRS due to these taxes. Am I missing anything? Really appreciate it.

More than likely, you can avoid the exclusion (Form 2555), because the German taxes ARE higher than U.S. taxes, and the Foreign Tax Credit (Form 1116) will likely completely offset any U.S. tax liability.

Send me via email what your German INCOME taxes are and I will do an estimate for you. My email address is in my profile.