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go1209
Returning Member

German fellowship with dual citizenship

Hello everybody,

 

I am having trouble understanding what tax regulations apply in this certain scenario:

 

I have a dual citizenship (German and US) and temporarily moved from Germany to the US for a Postdoc position, which I started 10/23 at a US university. The postdoc is planned for 24 months, for which I receive a German Fellowship, which by definition is tax-free in Germany. My previous job in Germany is only paused, and we plan to go back to Germany after 24 months. 
To meet the minimum requirements for postdoc salaries at my institution I am supplemented a certain amount of money by my department in the US.

I guess as I have the US citizenship I am considered a US resident for tax purposes.

 

My question now is whether the German fellowship money is also considered tax-free in the US. According to the US-German tax treaty the fellowship should be exempt from US tax. However, I am not sure whether the tax treaty applies due to my dual citizenship. 
The money supplemented by the institution in the US should be subject to state and federal tax. The question is just whether the fellowship money from Germany can be considered tax-free or not. 

help on this would be greatly appreciated as the regulations on this scenario are about confusing for me..

 

Thank you! 

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1 Reply
SusanY1
Expert Alumni

German fellowship with dual citizenship

With a cursory read of the treaty terms around visiting students and teachers (Article 20), it appears that the type of income that you describe likely remains tax-free while in the US.   There could be factors in your overall tax picture, however, that require additional consideration.

As a US citizen, you're required to report your worldwide income every year, regardless of where you live and whether or not the income is taxable in your resident country.

The terms of the tax treaty are then used to determine the taxability of the various types of income reported on your tax return. 

As a US citizen, you will always be a resident for tax filing purposes, and you will always file Form 1040 (never form 1040NR, even when you reside outside of the US.)  

 

However, the definition of resident in the tax treaty is different, and your citizenship doesn't alter it.  In the tax treaty, in general, "resident state" refers to where you are living when the income is received (in this case your "resident state" is the US, even though you are always considered a "tax resident" as a citizen.)

 


TurboTax doesn't directly support tax treaty positions reported on Form 8833, but it would be possible to make manual adjustments to the income in our download products and attach the form for filing by mail.

 

It is best to consult with someone with expertise in the tax treaty between the US and Germany to determine the taxability of your fellowship in the US prior to filing your return. 


 

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