You can get back thousands of euros in tax returns in Germany. Know the allowances and tax deductions in Germany.
Key takeaways
The income-related expenses are the most significant expenses that employees can use to recoup overpaid taxes.
Since 2022, long-distance commuters will benefit from the increased commuting allowance of 38 cents from the 21st kilometer traveled.
For the second home at the place of employment, you can deduct up to 1,000 € per month for rent, ancillary costs, and double home tax.
You must file the income tax return by 2 September 2024.
This is how you do it for your tax deductions.
There are a lot of ways available to save tax. These are often separated into personal and professional categories.
Remember to separate your company and personal finances by having a separate business account.
Keep the receipts of your expenses handy. You will need them to get the most out of your tax return.
Ensure you pay the taxes on time. The tax office may charge penalties and interest if you miss the tax payment deadline, i.e., 2 Sept 2024.
Table of contents
While filing an income tax return, you must consider
working from home,
buying work equipment,
fewer trips to work,
short-time work,
child bonuses,
flat-rate energy price,
and many other aspects.
You may pay up to 45% tax in Germany based on your income. But the good news is you can get a significant amount back when you file a tax return.
In this guide, you will find out what you need to pay particular attention to about income tax in Germany.
Gross Income vs. Taxable Income
Let's first understand the difference between your income and taxable income. Your income is the money you earned in a particular year. It's the gross amount you made.
We also refer to it as "Gross Income."
On the other hand, "taxable income" is the "gross income" minus your "expenses" to earn that "gross income."
What can be your possible tax deductions in Germany?
Income-related expenses are the most significant expenses employees can claim to recoup overpaid taxes.
The tax office deducts a flat rate of 1,200 € from employees' income. Hence, reducing your taxable income further.
Moreover, if your professional expenses exceed the default lump sum (1200 €), you can use them to reduce your tax liability.
Thus, collecting professional expense receipts from the beginning of the year is advisable.
Income-related expenses
Costs of travel to the office
If you are an employee who commutes to work daily, you may be eligible to deduct travel costs from your income.
The tax office calculates travel costs based on the distance flat rate of 30 cents per kilometer.
For example, if you drive 18 kilometers to work 230 days a year, your travel costs would be €1,242 (80 * 0.3 * 230 = 1242 €).
The German tax office accepts
220 to 230 days for the distance allowance (Entfernungspauschale in German) with a five-day working week
and 50 days more for a six-day working week.
You can find a state-specific working day calculator on this website (German).
Long-distance commuters enjoy increased travel allowance, i.e., 38 cents starting from 21 kilometers.
How do you claim costs?
When completing Appendix N, you must state the actual number of days you went to work.
Keeping a calendar of when you traveled to the office is the best way to keep track of your travel expenses.
If the tax office requests further information, you can submit your travel entries and an employer's certificate.
Good to know
You can deduct the commuter's flat rate for the working days you travel to the office. It's independent of how long you stay in the office.
For example, you went to the office to attend a meeting and worked from home for the rest of the day. You can also deduct the commuter's flat rate for this day.
NOTE: You cannot deduct the new home office's flat rate for days you claim the commuter's flat rate.
The distance allowance applies regardless of the means of transport you choose. You can travel on foot, by cycle, train, or bus.
If you use public transport, you can either claim the distance allowance up to a maximum of 4,500 € or the actual travel costs if they are higher.
But you must be able to provide proof to claim for higher travel costs.
Company Car users
You can reduce your tax burden via individual assessment (Einzelbewertung in German) if
you have a company car that you can use for private purposes
and drove the company car to work less frequently in 2023.
You can use one of the two methods for determining the tax benefits.
The logbook (Fahrtenbuch in German)
Or the flat 1 percent rule.
Under the method logbook, you must maintain the logs of your journies throughout the year. Later, you can submit the journey logs to the tax office as proof of your travel expenses.
You and your employer must decide which method to use at the beginning of the year.
The reason is the tax office does not accept the logbook if you create it at the end of the year. This is because the tax office believes the logbook is mostly manipulated in such cases.
Only employees have the option of an individual assessment.
Self-employed or tradespeople (BFH, judgment of June 12, 2018, Az. VIII R 14/15) cannot benefit from an individual assessment.
Business trip expenses
You can deduct the travel cost of business trips from your income if you haven't received reimbursement from your company.
You would get 14 € as additional meal expenses if you were on the road for more than eight hours on a business trip.
The meal allowance increases to 28 € if your business trip lasts more than 24 hours.
The meal allowance increases further if you travel abroad. The increase depends on the country you travel to.
You can find a list of country-specific allowances in the Federal Ministry of Finance letter dated December 3, 2020.
There is also a flat rate for professional drivers who spend the night in their driver's cabins. They can deduct 8 € per day as a meal allowance.
Home office cost
You can deduct all your home office costs from your taxable income. The only requirement is to have a dedicated room you use for office work at home.
The tax office has strict rules to determine whether you have a dedicated home office space. You may even have to provide proof to back it.
Suppose your employer does not provide a working space. In such a situation, the tax office limited the deductible to 1,250 € (as of 2022) and 1,260 (as of 2023).
But in both cases, you must be able to determine and provide proof for the expenses related to the home office.
Home office flat rate (Homeoffice-Pauschale in German)
You can deduct up to 600 € (as of 2022) from your taxable income as a home office flat rate. But the tax office increased it to 1,260 € for 2023.
The home office flat rate benefits people who do not meet the strict requirements of a dedicated room for office work at home.
You can set 5 € (as of 2022) and 6 € (as of 2023) for each working day you work exclusively from home. The tax office limited the number of home office days to 120 (as of 2022) and 210 (as of 2023) for tax purposes.
Thus, the home office lump sum is limited to 600€ (as of 2022) and 1,260€ (as of 2023).
The tax office considers the home office flat rate as income-related expenses. Hence, they offset the "home office flat rate" against the "employee flat rate" of 1,230 €.
Thus, you will enjoy the additional tax benefits from the home office flat rate if your income-related expenses exceed the employee flat rate of 1,230 €.
Costs related to work equipment (Arbeitsmittel in German)
You can deduct the costs of the work equipment (e.g., office chair, printer, computer, etc.) you bought from your income tax.
Moreover, you can deduct the work equipment costs even if you don't have a dedicated space for a home office.
You can deduct the complete costs of the items you used at least 90% professionally.
Without proof, the tax office allows you to deduct 50% of the computer's cost from your taxable income.
But you can deduct 100% of your computer's cost if you use it at least 90% for office work. But, of course, in this situation, the tax office may ask for proof.
NOTE: Items that cost more than 800 € net or 952 € gross (including 19% VAT) must be depreciated over their normal useful life. It is called Geringwertigen Wirtschaftsguts (GWG) in German.
Corona masks
You can deduct the costs of the Corona masks you wore at work.
But as we also use masks privately, it isn't easy to differentiate between private and work use. Thus, the tax office may refuse you a tax deduction.
Nevertheless, you should include the cost of Corona masks in your income-related expenses. Primarily if you work a lot from the office and use public transport to get there.
Corona tests
You can deduct the costs of the Corona tests from your taxable income if you fulfill the following conditions.
Your employer requested the test
You paid for the test yourself
And you didn't get a reimbursement from your employer
While filing the tax return, you can put the Corona tests' costs under income-related expenses.
Other income-related expenses (Weitere Werbungskosten in German)
You can enter other expenses related to your work in Appendix N from line 47.
They may be
application costs
travel expenses for business trips not reimbursed by the employer
cost of books that you professionally need
Second home expenses at the place of employment (Zweitwohnung in German)
You can deduct the second home expenses up to 1,000 € per month from your taxable income.
The expenses could be
Rental costs
Ancillary costs
House tax on the second home
On top of the above expenses, you can also deduct the costs of furniture, lamps, curtains, etc.
The tax offices recognize up to 5,000€ as income-related expenses for furnishing and equipping the second home.
Moreover, you don't have to provide proof of furnishing expenses up to 5000€ (Federal Ministry of Finance letter dated November 25, 2020, text number 108).
You can also deduct work equipment, telephone, and internet costs. Of course, if your employer doesn't reimburse the expenses.
Celebration costs (Feierkosten in German)
You can deduct the cost of celebration with your colleagues in your company from the taxable income.
You can even claim entertainment expenses (Bewirtungskosten) under certain conditions.
The tax office recognizes account management fees of up to 16 € without proof.
Car accident on the way to work
If you have a car accident on the way to work, you can deduct all the non-reimbursed costs from your tax return.
These can be
car repair costs you bear yourself,
damage to clothing and objects,
medical expenses,
travel expenses to doctors and workshops,
legal, court, and expert costs,
expenses for rental cars as well as salvage and towing costs.
Moving costs (Umzugkosten in German)
Professional reasons
Moved to a new city or changed residence within the same city?
You can claim the moving costs as income-related expenses for tax purposes. But the move should be for professional reasons.
For example,
move to work as a young professional,
changed jobs
were transferred by the employer or
your daily commute to work has been shortened by at least one hour due to the move.
You can submit the following travel costs for tax deductions.
Cost of apartment viewings,
brokerage costs,
shipping costs,
double rent, etc.
The tax office puts no limit on moving expenses. You can deduct all the costs during tax declaration as long as you have the proof.
You can apply for a flat-rate relocation fee in your tax return if you don't have proof of expenses.
The relocation lump sum differs from January to March and April to December. Thus, the date when you moved is important.
Moreover, you can apply for a tuition fee lump sum in your tax return if your child needs private tuition because of moving to another federal state.
Private reasons
You can deduct 20% of the labor and travel costs if you move for personal reasons.
In this case, the relocation expenses come under the "household-related service" (haushaltsnahe Dienstleistung in German) category.
If you must move for health reasons, you can submit the expenses as an "extraordinary burden" (außergewöhnliche Belastung in German).
Household related expenses
Renovation costs for landlords/homeowners
When filing a tax return, you can deduct an apartment's renovation, repair, and assembly costs from your income.
You can enter labor expenses (Handwerkerarbeiten in German) in your tax return.
You get back 20% of the labor and travel costs as a tax rebate. The tax office limited the labor and travel lump sum to 1,200 € per year. Thus, you can state labor and travel invoices up to 6,000 € (20% of 6k = 1200 €).
The craftsman's equipment costs are also tax deductible but not material expenses.
NOTE: You must have invoices for all the costs incurred. And you pay the invoice via bank transfer instead of cash.
Other tax-deductible repair costs for house owners
According to a letter from the Federal Ministry of Finance (Bundesfinanzministeriums (BMF) in German) dated November 9, 2016, tax officials must also recognize the following items:
Drain pipe cleaning
Certain expenses for an expert, for example, for measurements on a stove, a gas boiler, or oil heating
Leak test on sewage pipes
Legionella test
Complete chimney sweep costs
TÜV control at the elevator
Checking a lightning protection system
Maintenance of the heating system
On page 25, the BMF letter lists which costs are eligible for a tax deduction. The letter also mentions which expenses fall into the category of craftsmen's or household-related services.
Tenants may also deduct costs for household-related services
Tenants can enter all the labor costs for house repair or household-related services in their tax returns.
Usually, landlords transfer some of the house repair costs to the tenants. The landlords put such expenses in the utility bill. And you can enter these expenses in your tax return.
The household-related expenses could be
expenses for the building's caretaker (Hausmeister Service in German),
stairway cleaning,
the gardener,
the chimney sweep,
maintenance work or winter service, etc.
For the 2023 tax return, you can use the 2022 "service charge statement" (Nebenkostenabrechnung in German) that you received in 2023.
Caregiver, cleaning help, pet care expenses
You can deduct the following costs during your tax return.
Caregiver expenses
Cleaning help costs
Costs related to the care of your cat or other pet
According to current case law, the costs for a dog walk service can also be included
You must have the invoices for the costs incurred.
You can get back 20% of the total costs incurred. But the tax office put a limit of 20,000 € on such expenses. Thus, you can get a maximum of 4,000 € (20% of 20k) in a tax refund.
On top of it, you can get a tax refund of up to 510 € if you employ the household help as a mini-jobber.
Thus, you can get up to 4510 € (4000 € + 510 €) via the tax return.
Insurance costs
Deduct social security contributions, insurance, and pension schemes
You deduct the following insurance contributions during tax declaration.
pension insurance (Rentenversicherung in German)
health insurance (Krankenversicherung in German),
long-term care insurance (Pflegeversicherung in German),
unemployment insurance (Arbeitslosenversicherung in German)
You can fully deduct the contributions to the statutory health insurance (without optional supplementary benefits).
Similarly, you can deduct contributions to private health insurance. However, the tax office accepts contributions to basic coverage only.
If you paid for your child's health and nursing care insurance, you can deduct it from your income tax.
Other tax-deductible insurances
The following insurances are also tax deductible if you took them before 2005.
unemployment insurance (Arbeitslosenversicherung in German),
disability insurance (Berufsunfähigkeitsversicherung in German),
liability insurance (Haftpflichtversicherung in German),
accident insurance (Unfallversicherung in German),
and classic private life insurance (Privat Lebensversicherung in German).
If you took any insurance because of your job or business, you could deduct the contributions as income-related or operating expenses (for the self-employed).
For example, professional liability or accident insurance if you travel frequently for your company.
Deduct contributions to pension plans (Altersvorsorgeaufwendungen in German)
You can also deduct the contributions to professional pension schemes or Rürup contracts.
In 2023, you can deduct 100% of your paid contributions while filing tax returns.
In 2023, the maximum annual amount you can contribute to your Rürup pension is
26,528 € for a single person, and
53,056 € for a married couple filing jointly.
And you can deduct all of it from your income tax return.
NOTE: The tax office deducts the tax-free employer's contribution from the pension contributions while calculating the tax returns.
Riester savers
Do you have a Riester contract? If yes, you can enjoy both; the Riester allowances and the tax benefits.
For those who don't know what Riester is - it's one of the many pension plans you can opt for in Germany.
The German government gives allowances to the people to support the Riester plan. These allowances are deducted before you make a Riester contribution.
For example, your annual contribution is 2100 €. You are eligible for a basic allowance, i.e., 175 €. Thus, your annual contribution amount reduces to 2100 - 175 = 1925 €.
On top of it, the tax office allows you to deduct the Riester contributions from your tax returns.
Annual allowances from the German government
You will get the following annual allowances from the German government.
Basic allowance of 175 € per annum
If you have kids, you get an allowance of 300 € (kids born after 2008) or 185 € (kids born before 2008) per kid per annum.
Minimum contribution amount
To be eligible for the allowances by the government, your annual Riester contribution should be at least 4% of your gross annual income.
For example, you earned 70,000 € gross last year. Then you must pay 4% of 70k, i.e., 2,800 € into your Riester account in the new year.
The insurance company automatically deducts the state allowances you are eligible for from your contribution. Hence, you only pay the remaining amount yourself.
Tax deductions
You can deduct the Riester contributions you made while filing your tax return.
The tax office limited the Riester contribution amount you can deduct during the tax return to 2100 €.
Thus, if your Riester contribution was 2800 €, you can deduct 2,100 € only.
On top of it, the tax office subtracts the allowances from your Riester contribution amount while calculating the taxes.
So, if you received only the basic allowance of 175 €, the tax office would deduct it from 2100 € for tax calculation purposes.
In other words, you save tax on the amount you actually contributed.
Different scenarios based on your situation
Gross Income | 40,000 € | 40,000 € | 40,000 € |
|---|---|---|---|
Nr of Children | 0 | 1 | 2 |
Minimum contribution per annum (4% of gross income) | 1600 € | 1600 € | 1600 € |
Max tax-deductible contribution | 2100 € | 2100 € | 2100 € |
Allowances Basic: 175 € Per child: 300 € | 175 € | 175 + 300 = 475 € | 175 + 300 + 300 = 775 € |
Minimum own contribution | 1600 - 175 = 1425 € | 1125 € | 825 € |
Maximum own contribution | 2100 - 175 = 1925 € | 1625 € | 1325 € |
Special expenses
The tax office considers special expenses up to 36 € (72 € for married couples or registered life partners who file tax returns jointly).
The special expenses include
Church tax
Donations
Professional training expenses
Maintenance payments to the ex-partner ("Unterhaltszahlungen an den Ex-Partner" in German).
Save tax as a student
While filing the tax return, you can deduct your tuition fee as a special expense. The prerequisite is that you start studying immediately after high school.
However, the tax office limited the amount you can deduct to 6,000 € per year.
You can also deduct the costs of further studies (e.g., master's degree) as anticipated income-related expenses.
You also have the option to carry forward the study costs to later years. Hence enjoying the tax benefits in the future.
Deduct maintenance payments
You can deduct the maintenance payments you paid to your ex-partner. The tax office allows you to deduct up to 13,805 € as a special expense.
You can also claim the health and nursing care insurance costs (at least the basic protection) you paid for your ex to save taxes.
You enter the payment amount in the attachment, "special expenses" (Anlage Sonderausgaben in German), and in attachment U in section A.
In section B of attachment U, you need the payee's (your ex's) signature and tax identification number. This procedure is called Realsplitting in German.
If your ex refuses to sign section B of attachment U, the alternative is the deduction as an extraordinary burden.
But unfortunately, the maximum amount you can deduct in this situation is 10,908 €.
Deduct donations as special expenses.
You can deduct donations to a non-profit organization from your income to save taxes.
The tax authorities limited the tax-deductible donation amount to 20% of your total income. In addition, you must provide a donation receipt issued by the recipient to enjoy the tax benefits.
The tax authorities honor the donation to the following entities.
Non-profit organizations
Legal entities under public law, such as a university.
Every donation receipt pays off because special expenses reduce the taxable income as soon as they exceed the flat rate of 36 € (72 euros for jointly assessed persons).
A bank statement is usually sufficient proof of donations and membership fees of up to 300 €.
You can also use a bank statement as proof of more than 300 € donations. But, the payment must go to a special account (Sonderkonto in German), and you must pay it within a fixed period.
Donations to political parties
You can deduct half of the donations to political parties from your tax liability.
The tax office limited the amount to 825 € per year for individuals and 1,650 € for partners filing tax returns jointly.
Childcare expenses
You can deduct 2/3 of the childcare expenses per year per child as special expenses. However, the tax office limited the amount you can deduct to €4,000 per child.
The child must be part of the taxpayer's household and below the age of 14.
Parents of children with disabilities
Parents of children with disabilities can deduct childcare expenses even if the child is older than 14.
The prerequisite is that the child cannot support themselves because of a disability that occurred before the age of 25.
Extraordinary expenses
Deduct medical expenses from your taxes.
Depending on your income, marital status, and the number of children, you can deduct the medical expenses as extraordinary burdens (außergewöhnliche Belastungen in German).
The tax authorities consider medical expenses only if they exceed a reasonable amount.
The most common high medical expenses include glasses, dentures, physical therapy, and acupuncture.
You can also deduct
the hospital and medical expenses,
expenses for drugs prescribed by a doctor,
the prescription fee,
and travel expenses to doctors, hospitals, and pharmacies.
Thus, keep the receipts of your medical expenses to save taxes.
Besides that, you should also consider taking supplementary health insurance. The most important one is supplementary dental insurance to cover expensive dental treatments.
Funeral expenses
If a loved one dies and you pay for the funeral expenses, those expenses can be deductible. However, the costs must exceed the inheritance.
Cost of supporting a relative in need
You can deduct up to 10,908 € (in 2023) to support the people in need.
For example, supporting
a destitute child for whom there is no child benefit (anymore),
a relative, or your parents in need of care.
You can also claim contributions to basic health insurance and statutory long-term care insurance of the supported person if you paid them.
The tax office considers the recipients' income, especially if the income is more than 624€.
German tax authorities consider a person in need if their net assets do not exceed 15,500 €. A self-used property is not considered an asset.
You enter the support expenses in the Extraordinary Expenses attachment (Anlage Außergewöhnliche Belastungen in German).
Cost of civil proceedings
Since 2013, you can no longer deduct the costs of civil proceedings. This includes divorces.
One exception is if you have to conduct a legal dispute to safeguard your economic livelihood.
In this situation, you can deduct all the legal and court expenses you spent to secure your vital income.
You can learn more about legal and court expenses in our guide on legal insurance in Germany.
Volunteering while being financially compensated
For volunteer work, you can accept
Trainer flat rate (Übungsleiterpauschale in German) - up to 3000 € per year tax-free for volunteering as a trainer.
Volunteering allowance (Ehrenamtsfreibetrag in German) - up to 840 € a year tax-free for volunteering in a non-profit organization.
You must enter the income from a part-time job or volunteering in Appendix N or Appendix S.
You can save taxes by using both flat rates. But not for the same activity.
Thus, you can enjoy tax benefits from both; the "trainer flat rate" and "volunteering allowance" if you hold multiple posts, remunerated separately.
For example, if you work as a trainer for a sports club and also look after the club's treasury.
NOTE: Appendix N applies if an association employs you. However, you must submit Annex S if you are self-employed.
Loss from an investment
There are special rules for compensating for losses from an investment.
Here are a few points to consider
If your expenses exceed your income in a year, you can carry the loss back to the previous year or forward to the following years.
If you sell an investment at a loss, you can never offset this against other income, such as wages, pensions, or rentals.
If you sell shares at a loss, this can only be offset against a profit from share transactions.
If you sell investments (apart from stocks and futures) at a loss, you can offset this against other investment income - including a profit from the sale of stocks.
You can learn more about capital gain taxes in Germany here.