US stimulus checks were a one-time benefit (even though paid in increments) during the COVID pandemic during the years 2020-2022. Essentially the US government helicoptered checks to mostly every single American (with a few exceptions for the wealthy) who did not run for cover in time.
Due to the circumstances of the pandemic it was an immediate cash influx to mitigate the most immediate and urgent effects of it.
However, as it is with all other benefits the questions arises as to how to tax them. While the US made it very clear from an early stage on that this was not considered income to be taxed, not every other country had similar measures in place and places outside of the US are by no means tied to the US decision to not tax the income.
The tax treaty between Germany and the US would allocate the taxation right for this “other” income to Germany. However, just because Germany receives the right to tax, does not mean it also can or will tax to the full extent.
When looking at the most basic principles under German tax law and the definitions of “income” there are several aspects available, which support the notion that this “helicopter money” is actually not to be considered income. Hence it would not have any tax consequence at all. However, currently there is no directive or ruling out there supporting this notion, which means this is a great grey area which could lead to complications.
Regardless, we always advise Americans who have not filed on the German side for the years mentioned above to at least report the checks, but also provide a legal argument as to why the income does not warrant taxation. For those who have already filed for those years but may have forgotten to mention those checks, we recommend that you amend those years along with said legal opinion just to avoid potential fraud or avoidance charge down the road. We had quite the success arguing with the tax office that those checks are not income at all before.
Please let the taxperts know if this is an area where we could be of assistance.
