Most German-speaking entrepreneurs spend months—or even years—preparing for a move to the United States.
The visa is prepared. The business plan is written. A business structure is selected. Homes are viewed, schools compared, and bank accounts opened.
Yet one subject is often overlooked during precisely this phase:
Tax planning before the move.
In our work with German-speaking entrepreneurs in the United States, many of the most expensive mistakes do not occur after the relocation. They occur before it.
The reason is straightforward: once you become a U.S. tax resident, the rules change. Assets, ownership interests, accounts, investments, and transactions that previously seemed routine may become relevant for U.S. income-tax or information-reporting purposes.
Some decisions can be corrected later. Others become difficult, expensive, or impossible to reverse.
When do you become subject to U.S. taxation?
One of the most common misconceptions is:
“I become a U.S. taxpayer when my visa is approved.”
It is not that simple. Immigration status and tax residency are related in some situations, but they are governed by different rules.
Two tests are particularly important for many individuals moving to the United States:
The Green Card Test
A lawful permanent resident generally becomes a U.S. resident for federal income-tax purposes under the Green Card Test, subject to the detailed starting- and termination-date rules.
The Substantial Presence Test
An individual may also become a U.S. tax resident without a Green Card. The Substantial Presence Test generally looks at U.S. days during the current year and a weighted portion of days from the two preceding years. Exceptions and treaty positions can materially change the result.
Many entrepreneurs assume tax residency begins only after the final physical move. In reality, it may begin earlier—or, in some circumstances, later than expected.
Transition years therefore require a precise review. The residency starting date can affect which income is reportable, which international forms are required, and how particular transactions are treated.
Why the timing of the move may matter
Before U.S. tax residency begins, the United States generally treats an individual as a foreign person, although U.S.-source income and U.S. business activities may still create filing obligations.
After U.S. tax residency begins, the individual is generally subject to U.S. income tax on worldwide income and may become responsible for additional international information reporting.
That can bring the following into the U.S. tax framework:
- Worldwide income
- Foreign bank and financial accounts
- Foreign companies and partnership interests
- Foreign investments and funds
- International information returns
- Foreign gifts and inheritances
Entrepreneurs often focus first on forming an LLC or obtaining a visa. A more important preliminary question may be:
Which assets and ownership interests do I already hold before I become a U.S. tax resident?
German real estate before and after U.S. tax residency
Consider an individual who owns real estate in Germany. It may be a rental property, a vacation home, inherited real estate, or a multi-unit investment property.
Before U.S. tax residency begins, a future sale may be primarily a German tax matter, although the complete facts always need to be reviewed.
Once the owner becomes a U.S. tax resident, the United States generally also considers the rental income and a later disposition. That does not automatically mean the same income is taxed twice. It does mean two tax systems, currency conversion, basis, depreciation, and foreign-tax-credit rules may need to be coordinated.
If a sale is already contemplated, the possible consequences of selling before or after the residency starting date should be analyzed before the move—not shortly before closing.
Inherited property is frequently misunderstood
A common assumption is: “I inherited the property, so a later sale cannot create a tax problem.”
Unfortunately, the analysis is not that simple. Relevant factors may include:
- The date of inheritance
- The property’s value at the relevant valuation date
- The German tax basis
- The basis recognized for U.S. tax purposes
- Rental use and depreciation
- The timing of a later sale
Property inherited many years before a move can present difficult documentation and basis questions. Those facts should be assembled while records and valuations are still available.
German GmbHs and other business interests
Many entrepreneurs moving from Germany own a GmbH, a holding company, an interest in a family business, or a minority investment in another company.
Those interests may appear unremarkable while the owner remains outside the U.S. tax system. After U.S. tax residency begins, the same ownership can trigger classification and information-reporting questions.
Depending on ownership percentages, control, transactions, and entity classification, forms such as Form 5471, Form 8865, or Form 8858 may become relevant. These information returns can be extensive, and late or incomplete filing may carry substantial penalties even where little or no additional U.S. income tax is due.
The critical problem is that many taxpayers learn about these duties only years later. By then, reconstructing historic financial statements, transactions, and ownership records is usually more difficult and expensive.
German investment funds may create PFIC exposure
German mutual funds and ETFs are standard investments in Germany. Their U.S. tax treatment can be dramatically different.
Many non-U.S. pooled investment vehicles may fall within the Passive Foreign Investment Company rules. PFIC taxation and Form 8621 reporting are among the more complex areas of international tax compliance.
The first challenge is often simply identifying that an investment may be a PFIC. Before a move, review:
- Which mutual funds and ETFs are held
- Which brokerage and custody accounts exist
- Whether fund-level information will be available
- Whether a disposition, restructuring, or alternative investment approach should be evaluated before residency begins
No action should be taken solely from a general article. The appropriate choice depends on basis, unrealized gain, expected holding period, residency timing, German tax consequences, and the available U.S. elections.
German statutory health-insurance continuity
Individuals leaving Germany often ask whether they should preserve a right to return to the German statutory health-insurance system through an Anwartschaft or another continuity arrangement.
There is no universal answer. Relevant considerations include age, family planning, expected duration abroad, the likelihood of returning to Germany, current insurance history, and personal health circumstances.
For some families, preserving continuity may be valuable. For others, it produces ongoing cost with limited practical benefit. The important point is to make the decision intentionally and coordinate it with the U.S. coverage strategy.
German pension and retirement planning
Similar questions arise with the German statutory pension system and other retirement arrangements:
- How many contribution years have already been accumulated?
- Is a future return to Germany likely?
- Will the family’s long-term center of life remain in the United States?
- Which U.S. retirement and investment strategies are planned?
- How will the particular German arrangement be classified and reported in the United States?
A retirement decision should be part of the cross-border strategy—not an isolated administrative afterthought.
Why forming the LLC may not be the first step
Many entrepreneurs begin their U.S. plan in this order:
- Form an LLC
- Apply for an EIN
- Open a bank account
- Build the website
Only afterward do they ask about tax.
Strategically, the order should often begin with different questions:
- When will U.S. tax residency begin?
- Which assets and business interests already exist?
- Which foreign investments and accounts are held?
- Which reporting obligations may arise?
- Who will own the U.S. entity?
- What are the business, immigration, and long-term family objectives?
Only then should the legal entity and tax classification be selected in coordination with qualified legal and immigration counsel where necessary.
An LLC is a tool. It is not a strategy.
A pre-move checklist for entrepreneurs
Before moving to the United States, you should be able to address at least the following questions:
- When is my expected U.S. tax-residency starting date?
- Do I own German real estate?
- Am I considering a sale within the next several years?
- Do I own inherited assets, and is basis documentation available?
- Do I own an interest in a GmbH, holding company, partnership, or family business?
- Do I hold German mutual funds or ETFs?
- Which bank, brokerage, pension, and custody accounts exist?
- Are substantial gifts or inheritances expected?
- Should German health-insurance continuity be preserved?
- How should German and U.S. retirement planning be coordinated?
- Does the proposed U.S. business structure match the complete facts?
Conclusion: the costliest mistakes often precede the first U.S. return
Entrepreneurs devote significant attention to the visa, business plan, and physical relocation. The tax consequences are often reviewed only when the first U.S. return becomes due.
By then, important choices may already be closed.
The best time for strategic tax planning is often not after the move. It is before it.
Early planning creates a stronger foundation: a deliberate business structure, better records, fewer reporting surprises, and decisions that reflect both tax systems.
Complimentary German-language Blueprint
Would you like a structured overview of the core areas German-speaking entrepreneurs should consider when building a professional U.S. business?
The OAK LEAF Blueprint covers Entity Planning, Accounting Setup, Risk Management, Tax Filing, Advisory, Bookkeeping, and IRS Protection. The current edition is available in German.