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TaxNY · Jan 7, 2010, 05:40 PM

The Technical Explanation of the Protocol of 2006 (www.irs.gov/pub/irs-trty/germanyte07.pdf) says that "if the two-year period beginning from the date of his arrival is exceeded, the exemption will apply, but only for the first two years and only if the visit is temporary”. However, there is no definition of "temporary".

AtlantaTaxExpert · Jan 9, 2010, 05:40 PM

Temporary means if the person does NOT become a green card holder.

yhee098 · Sep 7, 2010, 04:31 PM

This thread is old but still: thank you!
I was about to claim the tax treaty between Germany and USA since I was under the impression that my US income (no scholarship) would be tax free, no taxes in USA and no taxes in Germany. At lot of people are under the same impression it seems. This forum helped a LOT to clarify the situation, thank you. I haven't calculated it but I assume that as a single I should better pay taxes in USA than in Germany.

AtlantaTaxExpert · Sep 8, 2010, 08:33 AM

Yes, that is probably true.

maylikesun · Aug 9, 2012, 07:33 AM

New question,

If I come back to Germany after 2 years and half. Do I need to pay taxes retroactively to Germany tax department? Or I am free for both US and Germany taxes for the first 2 years?

AtlantaTaxExpert · Aug 9, 2012, 08:08 AM

Sorry, but this forum deals ONLY with U.S. taxes.

However, most European countries do NOT tax income earned OUTSIDE of the borders.

ililis · Dec 5, 2012, 07:24 PM

Hello,
What can happen if I get married with a US citizen before my 2 years tax exemption finish? Do I have to pay taxes to IRS for the two years I was on my J1 visa?
Thanks in advance?
Iliana

AtlantaTaxExpert · Dec 6, 2012, 08:00 AM

No, that should not matter, UNLESS you choose to file jointly.

joela · Feb 20, 2013, 07:51 AM

Thanks to everyone in this forum, this is so helpful!

AltantaTaxExpert, could you elaborate on the filing jointly comment?

I'm a J1 PhD student and claimed the Germany-US Treaty for the first four years of my program. First of all, I am unsure whether the retroactive clause was also deleted for my case (and I'm only thinking about the 9000 Dollar exemption on my teaching salary, because my stipend/fellowship, if I understand 20(3) correctly, will be exempt indefinitely as a J1/non-resident/temporary, right?). I see the word retroactive nowhere in the article 20.

2012 is year 5 for me, in which I also got married to a US citizen (green card process not yet started, but will have to this year), and I was under the impression you could file jointly and still invoke the savings clause for my stipend/fellowship portion (which, as far as I could find it in the treaty includes students). Or, but I am not sure I got this right, my husband could file as head of household because his income is higher, which - I think - would enable me to stay a non-resident for tax purposes (and I could invoke the treaty for the fellowship).

And to think even further: Next year, I would be a dual status alien, or a resident for tax purposes because of filing jointly this year, right? Could I invoke the treaty until my J1 status changes to the green card or would I get in trouble with the definition of "temporary"?

Thanks so much to you -- my university is very tentative in giving advice on these issues, but I don't trust my understanding of these matters quite yet.

joela · Feb 20, 2013, 08:10 AM

Oh, PS: Can I even claim 20(3) of the tax treaty without claiming 20(4), or to ask in reverse: how could I have ever not have claimed (4) (in those first four years, potentially not rightfully so in a five year PhD contract), when my university's withholding policy always assumed that I would claim 20(3)? Oh, I don't know if I'm even making sense anymore... sorry!

AtlantaTaxExpert · Feb 20, 2013, 08:12 AM

Your timing for posting this question is not good because, to answer properly requires research, and at this time of the year, I cannot do that research due to my busy schedule.

Off-hand, with no research, I would say you CANNOT claim the $9,000 exemption because the treaty clearly says for four years only

AtlantaTaxExpert · Feb 20, 2013, 08:14 AM

I do not think a retroactive clause applies.

It would probably be best for you tax-wise just to file jointly wuth your husband.

joela · Feb 20, 2013, 08:17 AM

Of course, I understand. Thank you for your quick response! Thanks for your advise!

AtlantaTaxExpert · Feb 20, 2013, 11:29 AM

Sorry I could not give you a definite answer!

andtie · Nov 3, 2015, 11:51 AM

Dear AtlantaTaxExpert and others:

First things first: Many thanks for your discussion. This has been extremely helpful. I'm currently trying to decide whether I can and should claim tax exemption on US federal taxes.

My background:
- PhD in the US, at the beginning of my 2nd year, on a J-1 (German national), married to a French national (here as well, on a J-2) - I've paid the 14% federal tax so far but I know that I may file an amendment
- As any J-1 has to, I do have an address back home (i.e. in Germany)
- My income is from the US, from my university's scholarship. I may get additional pay if I take a job as a research assistant and I'm aware that I'd have to pay taxes on that - my question is about the scholarship. My scholarship is for years 1, 2 and 5 of my PhD
- I was on an H1B before, for about 1 year - I filed (and paid) all my corresponding taxes. My change to a J1 was not a "change of status". I left the US and came back on my J1

Could you give any recommendation as to whether I can and should claim the tax treaty?

Many thanks!

AtlantaTaxExpert · Nov 3, 2015, 12:12 PM

It appears that you ARE eligible for total tax exemption on your scholarship per Article 20(3) of the U.S.-Germany Tax treaty. You will need to file an amendment if you paid taxes on your scholarship.

The J-1 visa also makes you exempt from FICA (Social Security and Medicare) taxes for the first two calendar years of your J-1 visa, so if you start working as a graduate assistant in those first two years, be sure to claim that exemption.

andtie · Nov 3, 2015, 03:50 PM

Thank you very much - this is very helpful! I saw a lot of German replies on this thread - do you (or any of the others) have any idea about whether I would have to pay taxes there instead?

AtlantaTaxExpert · Nov 3, 2015, 04:32 PM

Sorry, I am NOT an expert on German taxes, so I cannot say for sure.

Logically, though, I do not think so.

andtie · Nov 3, 2015, 06:40 PM

Thanks a lot for your answer - of course, I understand. However, what made you think that, "logically", I wouldn't have to pay taxes there? Isn't the treaty just a mechanism to make sure I pay taxes in one -- at least one -- of the two countries? Could you elaborate on this a bit more?

AtlantaTaxExpert · Nov 3, 2015, 06:47 PM

Most countries do NOT tax scholarships unless they represents payments beyond the normal tuition, fees and living costs.

Example: Someone who gets several different scholarships that they receive in cash to pay for their costs, and the total of the scholarships exceed the tuition, fees and boarding costs at the university. In that case, the excess is taxable income.