A Guide for Families to the German treatment of an IRA, a 401(k) and a Roth account: the treaty rule that gives Germany the taxing right; the 2025 change that made pre-tax accounts fully taxable; the unsettled Roth position; required distributions arriving with German tax attached; and the proof problem that outweighs the law.
Under the income treaty a pension is taxable only in the country of residence. A distribution from an American retirement account to a resident of Germany is therefore taxed by Germany, at German progressive rates, and not at the flat German investment rate.
A United States citizen remains taxable by the United States under the saving clause and relies on the foreign tax credit, so the account is within both systems while the primary charge has moved.
The mistake this page exists to prevent is carrying an American retirement plan into Germany on the assumption that its American labels travel with it. They do not. The rules changed with effect from 2025, the Roth position is unsettled, and a required minimum distribution arrives with a German charge attached whether or not the money is wanted.
The practical difficulty is not the statute but the proof: establishing decades of contribution history to the satisfaction of a German tax office, and apportioning an account that mixes pre-tax and after-tax money. That record is assembled far more easily before a move than afterwards.
(1) Article 18(1) of the income treaty assigns pensions to the country of residence, so Germany taxes distributions from American retirement accounts to its residents.
(2) Germany taxes them as other income under section 22 number 5 EStG at the ordinary progressive rate, which reaches 42 per cent at 69,879 euros and 45 per cent at 277,826 euros for 2026, and not at the flat 26.375 per cent investment rate.
(3) For payments before 1 January 2025 the Federal Fiscal Court held, in its decision of 25 June 2025, X R 23/22, that only the excess of the payment over the contributions is taxed, at half after age 60 or 62 and twelve years, and for plans begun before 2005 possibly nothing at all.
(4) From 2025 the Annual Tax Act 2024 amended section 22 number 5 EStG so that contributions relieved from tax abroad count as tax-favoured, with the result that a distribution from an account funded with pre-tax contributions is now fully taxable in Germany.
(5) The Roth position is unresolved: there is no decision of the Federal Fiscal Court, the mainstream view taxes only the earnings element, and tax offices are reported to treat Roth withdrawals like traditional ones.
(6) American social security is governed separately by Article 18(5) and is taxable only in Germany for a German resident, with no American tax even for a citizen.
Part I. Which country taxes, and at what rate
Article 18(1) assigns pensions and similar remuneration for past employment to the country of residence alone. Article 18A(1) defers taxation of income earned inside a plan in the other country until it is paid out, and does so even for United States citizens, which is what allows an American in Germany to leave an account invested without an annual German charge on its internal growth.
Germany then taxes the payment as other income at progressive rates, not at the flat investment rate. For a household with German employment income the distribution is stacked on top of that income, so the marginal rate on it is frequently 42 per cent.
A United States citizen remains taxable in the United States under the saving clause, and the double charge is relieved by the foreign tax credit. American social security is the exception: Article 18(5), as recast by the 2006 protocol, assigns it exclusively to the country of residence, and because that article is preserved from the saving clause the United States does not tax it even for a citizen.
| Receipt | Treaty article | Taxed by |
|---|---|---|
| Distribution from an IRA or 401(k) | Article 18(1) | Germany, as other income at progressive rates; the United States retains a citizen charge with credit |
| Internal growth inside the plan | Article 18A(1) | Neither, until paid out |
| American social security | Article 18(5) | Germany only, with no American tax even for a citizen |
| German statutory pension to an American resident | Article 18(5) | The United States only |
| Life annuity from after-tax contributions | Article 18(1) | Germany, on the age-based income portion under section 22 number 1 EStG |
Part II. How much is taxed, and what changed in 2025
Before 2025 the German treatment of a distribution from an American pre-tax account turned on whether the contributions had been relieved under German rules. Because they had not, the Federal Fiscal Court held that only the excess of the payment over the contributions was taxable, at half where the recipient had reached 60 or 62 and the plan had run twelve years, and that a plan begun before 2005 might produce no German charge at all.
The Annual Tax Act 2024 removed that result for payments from 2025 onwards by treating contributions relieved from tax abroad as tax-favoured. A distribution from an account funded with pre-tax contributions is now fully taxable in Germany. For anyone who moved to Germany with a traditional IRA or a 401(k), that is a material change to a plan made on the earlier basis.
The Roth account is the open question. The mainstream view is that because Roth contributions were not relieved from tax, the new rule does not apply and only the earnings element is taxed. The argument for complete exemption rests on the contributions having come from taxed income and the account not being a German favoured retirement contract. There is no decision of the Federal Fiscal Court, and practitioners report German tax offices treating Roth withdrawals like traditional ones. A conversion carried out in contemplation of a move should therefore be modelled on both outcomes, because if a tax office treats the account as traditional the American tax paid on the conversion will have bought nothing.
A further question, whether contributions to a traditional account remain deductible after a move from the United States, is pending before the Federal Fiscal Court as I R 66/23, with no decision expected before 2027.
Part III. Required distributions, and the proof problem
Withdrawals must begin from traditional accounts once the holder reaches the applicable age, which is 73 in 2026 and rises to 75 for those born in 1960 or later, first operative in 2033. The position of those born in 1959 remains unsettled, the final regulations having reserved the point and only a proposed rule stating that the age is 73.
For a resident of Germany each required distribution arrives with a German charge attached whether or not the money is needed, and where the account is large the forced timing can push German income into the 42 or 45 per cent bands in years the taxpayer would not have chosen. That is an argument for shaping the withdrawal pattern well before the required age, and for considering whether some of it should happen while the holder is still an American resident.
The difficulty that dominates in practice is evidential. A German tax office asked to apply any of these rules needs the contribution history, the division between pre-tax and after-tax money, and the dates. Plan administrators do not hold that record indefinitely, employers change hands, and accounts are consolidated. The record is far easier to assemble while the holder is still in the United States with access to the administrators.
Part IV. Practical steps
- Assemble the contribution history before moving. The division between pre-tax and after-tax money determines the German charge, and the German tax office will ask the holder to prove it.
- Model a Roth conversion on both German outcomes. The position is unsettled. If a tax office treats the account as traditional, the American tax paid on conversion will have bought nothing.
- Shape the withdrawal pattern before the required age. Required distributions arrive on a timetable fixed by American law and are taxed at German progressive rates on arrival.
- Keep social security separate in the analysis. Article 18(5) gives Germany the exclusive right to tax it, and the exemption with progression does not apply to it.
- Review plans made before 2025. The Annual Tax Act 2024 changed the German treatment of pre-tax accounts for payments from that year.
Conclusion
The treaty moves the taxing right over an American retirement account to Germany and the German rate is progressive rather than flat. Since 2025 a distribution from a pre-tax account is fully taxable there, the Roth position is unresolved, and required distributions arrive on an American timetable with a German charge attached. What decides the outcome in practice is the contribution record, which is assembled before the move or not at all.
Convention between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation with respect to Taxes on Income and Capital of 29 August 1989, as amended by the protocol of 1 June 2006, Articles 1(5)(a), 18(1), 18(5), 18A and 23; sections 22 number 1, 22 number 5 and 32b of the Income Tax Act (EStG); the Annual Tax Act 2024 (JStG 2024), amending section 22 number 5 EStG with effect from 2025; Bundesfinanzhof, decision of 25 June 2025, X R 23/22; Bundesfinanzhof, pending case I R 66/23; sections 401(a)(9) and 408A of the Internal Revenue Code and the SECURE 2.0 Act. Figures and statuses are stated as of September 2026.
- 13 October 2026: page created.
Contact
An American moving to Germany with a retirement account has decisions that close on departure. Ashford International Law PC advises families and their advisers on the German treatment of IRA, 401(k) and Roth distributions after a move; assembling and presenting the contribution history to a German tax office; modelling a Roth conversion against both German outcomes; shaping withdrawals ahead of the required distribution age; the treaty position on pensions and on American social security, alongside the family’s existing advisers or leading the United States side end to end.
The firm is led by attorney Caroline Esche Ashford, PhD, JD. A graduate of Columbia University Law School, her practice focuses on international estate planning and the cross-border taxation and administration of estates and trusts, including the German taxation of American retirement accounts. Dr. Ashford is also licensed to practice law in Germany. She advises in French and German as well as English.
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This guide is intended for general educational purposes and does not constitute legal or tax advice, nor does it create an attorney-client relationship. The matters described, Article 18 of the income treaty, section 22 number 5 EStG as amended for 2025, the unresolved German treatment of Roth accounts and the timing of required minimum distributions, depend on the specific facts, assets, countries and states concerned and on the law in effect at the relevant time, and they change. Statuses and figures are stated as of September 2026 and must be confirmed before any decision. Nothing here is advice on any particular estate or transaction. A family in this situation should obtain advice from qualified counsel in each relevant country promptly, and before a move to Germany rather than after it.
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