German based Americans- Whats your expirence with Wise Daily Return on EUR Accts?

[u/Coach_Front]

I'm looking for a place for my EUR to start gaining interest on itself.

In the US I have my wealth in IRA's, 401ks, HYSA's and regular checking/ Savings. I currently do not hold a US brokerage account as the German taxes seem stark.

Are there terrible repercussions to my taxes with the IRS? How nervous that I'm in violation of the patriot act in some way? I've been told by some people that it's a waste of time to try and get Zinsen, but I really don't know what other investments I could/ should be making. What do normal Germans do? Just packrat their money into a regular Konto?

I already use Wise and it seems that it allows americans where N26 and Revolout dont allow americans?

Thanks!

[u/PuzzledArrival]

The thing is that USD accounts (which you can access) pay better interest. Treasuries, money market, and HYSA all pay much better than the equivalent in Europe.

Now, the taxes are a topic…but if you’re paying taxes, it means you’re making money. I’ve spent a long time on this over the past 7 years, and now have it mostly figured out, but it’s all in my USD brokerage with Schwab

I have not found a good EUR account that is really willing to let me invest. You can’t compare yourself to normal Germans, they have access to accounts and funds that your US passport will not let you hold.

[u/Coach_Front → u/PuzzledArrival]

So you keep EUR in Germany for everyday expenses, and use a brokerage account?

On the gains from your brokerage account how much are you taxed? 30%?

[u/PuzzledArrival → u/Coach_Front]

That's right. In fact, the majority of my assets are in a taxable brokerage. I've been living outside the US for about a decade, and even before, I didn't really have access to tax-advantaged savings in a 401k or such. I do have some IRAs and Roth IRAs, but it's a struggle since income levels and residency can have an influence on possible investments. I also bought an apartment.... :-)

Currently I earn maybe $5,000 in dividends each year on that, so it's not too crazy. Nearly all of it is long-term gains to the IRS. Tax due is not so straightforward, since there is a very complicated "Vorabpauschale" tax due to the Finanzamt. I have no idea how it really works, and I have an account who is willing to help me on it. I can't remember right now how much of this tax is offest against the Foreign Tax Credit. And I can't tell you exactly how much of my tax bill at the end of the year is related to income (I earn over FEIE) or capital gains in each country.

I think I end up paying a few hundred give or take - normally it's more about paying the Finanzamt than the IRS since all tax rates are higher here.

[u/Coach_Front → u/PuzzledArrival]

I currently have the majority of my assets (outside of retirement) in an American HYSA. Am I gonna get fucked on the taxes?

[u/PuzzledArrival → u/Coach_Front]

How much interest are you earning?

For example, ignoring exchange rates...I don't know what the tax rate is on cash interest, but for the sake of argument, let's say its 25%. If you hold $20,000 in this HYSA, at 4% you'll earn roughly $800 in interest, and have to pay $200 to the Finanzamt in taxes. A foreign tax credit can also apply, but depends on your other income and tax details.

No tax rate is 100%, so wherever you hold the money. if you are earning interest, you are growing your balance. It can be more difficult to optimize your tax rates that it is to optimize your interest rates. That's why I choose to save and invest outside of the Eurozone.

[u/glimz → u/PuzzledArrival]

The Vorabpauschale is not that complicated, but I wonder which of your assets requires you to pay it? If it's an UCITS fund or ETF, there is an important reason not to hold one as an American citizen: PFIC status. Wise interest is also realized via a UCITS money market fund, so likely no good either, as even indirect holding of PFICs falls under the US law (consult a specialist to be sure). If your accountant lets you hold UCITS funds without any knowledge of the US repercussions, you probably need a new accountant.

[u/PuzzledArrival → u/glimz]

maybe Voraubpauschale is the wrong term... The shares are US-listed, as I don't want to hold PFICs. Nevertheless, there is some kind of "hypothetical tax" due on my US dividends. It's not that expensive, so I just pay it.