US - Germany Double Taxation Treaty on Capital Gains

[Traktorherr]

Hi,

I am a U.S. Citizen living and working in Germany; I pay income taxes in Germany on my German source income.  I had LTCG income sourced in the U.S. in 2020 and now the Germany Finanzamt is asking me to prove that I paid 15% tax on those gains.  I didn't; I paid 22.35% tax on those gains as calculated by TurboTax so I paid too much according to the treaty.  So if the DBA treaty limits the LTCG the U.S. can assess on the gains, how do I  apply this rate to my U.S. LTCG taxes within TurboTax?  Or did I miss the point of the treaty?

Thanks you!

[Critter-3]

You have it backwards ... the limit is on foreign investments not US ones.   You were properly taxed at 20% cap gain + the NIT tax of 3.8%.   Review the CGQDTW and the form 8960 for the information you seek. 

So basically they will allow you a credit on the gain at a rate of no more than 15% ... since you paid more you can show them.   If you had paid at a lower rate then they would reduce/limit their credit... does that make sense ?

[Mike9241]

the treaty in no way affects the taxes you pay in the US on the gain.   under the treaty, I believe if you are a  resident of Germany (under their tax laws) and sold real estate (like your home) in the US then Germany grants a foreign tax credit under the treaty.  under the treaty and German tax laws, there may be a limit to the credit granted. if you want more info you need to seek advice from someone who knows the treaty and German tax laws.  I would also say DIY software is probably not appropriate for ex-pats.  they don't ask the right questions. for example if you were to receive retirement benefits from Germany, they are also affected by the treaty as to where taxable and I'll bet TT nor any other DIY app will ask questions to determine where it's taxable.   as a matter of fact, even pro software doesn't ask questions but is dependent on the preparer's knowledge of the tax laws and treaties.