I collected 21 types of tax deduction in Germany for you in this article. You will learn from real-life examples why filing those deductions is essential annually. They can significantly reduce your tax burden. You may also get back any taxes you overpaid from the tax office.
Note: The article below is based on my experience and contains trustworthy information. Nevertheless, this is not professional advice. If you need professional advice, don’t hesitate to contact an accountant or Finanzamt.
- The German tax system might sound scary at first to you. While reading through my article here, you will learn what tax deductions are easy to file.
- Those already are “standard,” like, for example, the German “Werbekostenpauschale” of 1,000 euros.
- On the other hand, others are less easy to file, and some documentation work needs to be done like household-related costs or “Haushaltskosten.”
- The last category of tax deductions in Germany that you are only eligible to use in specific cases. There are, for example, funeral costs, medication costs, nursing costs, and others.
Claim your tax deduction in Germany by filing your tax return
Usually, every employee or self-employed pays too much income tax in Germany. But there are ways to get some of it back at the beginning of every new year. So let me introduce you to the three most common ways to file your tax deduction in Germany.
Any costs related to filing your tax return in Germany can also be filed as a tax deduction.
Best way: Use the tax deduction Germany calculator from SteuerGo
SteuerGo* is Germany’s best and easiest way to file a tax deduction. You can try the platform and register free of charge. After that, a one-time submission costs currently only 34.95 euros.
SteuerGo is available as an app on android and iOS or as web app. There are simple step-by-step questionnaires you have to follow. As soon as you pay for the SteuerGo Plus version, you have access to the tax return submission and their customer support.
From my experience, I can tell you that their English language support is excellent whenever you have any questions. So I can highly recommend you use that platform. It can’t get any easier than that, especially for foreigners who file their income tax in Germany for the first time.
Hire an accountant
The other more common way is to hire an accountant. However, take into account that the amount of work that must go into preparing all documents, bills, receipts, and insurance documents for the accountant is significant.
Or file it by yourself
The last option for you is to use the ELSTER form provided by the tax office. The main disadvantage is that you won’t receive any tips to save on your tax payment.
So as long as you don’t know what you are doing and you are a tax specialist, I don’t recommend filling your taxes that way.
1. Home office tax deduction in Germany – Homeoffice-Pauschale
Many friends and neighbors of mine were asked to only work from home during the first few months of the COVID pandemic. However, for those specific cases, the German government introduced a new home office tax deduction in Germany.
The home office lump sum has been applied retroactively since 01.01.2020. It amounts to 5 euros per day and 600 euros per calendar year. This, therefore, corresponds to 120 days in the home office.
The intention is to relieve those who worked from home during the Corona pandemic. The flat rate is “unbureaucratic and easy to understand.” You can even claim this deduction if you voluntarily work from home without receiving instructions from your employer.
My friends recently told me that the “Fourth Corona Tax Relief Act” extends the existing home office allowance provision through December 31, 2022.
When is it worth claiming a home office tax deduction in Germany?
It’s only beneficial to claim the home office tax deduction if your calculated home office lump sum and other income-related expenses (Werbungskosten) amount to more than the lump sum of €1000.
What are the requirements for claiming the home office tax deduction in Germany?
The requirements for being allowed to deduct this new home office allowance from profits are straightforward. It is sufficient for an entrepreneur to have worked exclusively in the home office for one day.
Is the home office lump sum also valid for students and trainees?
Yes, the home office lump sum can also be deducted from your tax if you are a student or trainee and cannot attend university or work.
2. Bicycle tax deduction in Germany – Fahrrad steuerlich absetzen
It is pretty popular to use a bike instead of a car to get to work in bigger cities or towns in Germany.
For example, one of my neighbors rides about 12 kilometers daily to work and back with his bike. His employer offered him to get a so-called “Dienstrad” or company bike for him. A tax exemption applies to all company bikes bought after 2019. It has to be a classic bike, mountain bike, race bike, or even an e-bike that is no faster than 25 km/h.
Any electric bike faster than 25 km/h will be treated the same as any other “Kraftfahrzeug” or motor vehicle. Then the 1% rule applies.
In which cases is bicycle tax deduction in Germany possible?
A tax deduction can be filed for self-owned bikes in Germany by using the “Pendlerpauschale” at 30 cents per kilometer. As my neighbor drives 12 kilometers a day in one direction times 30 cents, he is eligible for a tax deduction of 3,60 Euros per day he goes to work by bike.
He did the math and told me why he decided to go for a self-owned bike instead of a “Dienstrad.” If he rides a bike on average 200 days a year, one gets a tax rebate of about 720 euros per year.
He bought an expensive bike for the price of about 3,000 euros. After over four years, this has already paid itself through tax relief.
Can I claim repair costs with a bicycle tax deduction in Germany?
Maintenance, repairs, care, and depreciation costs are deductible as income-related expenses. But not by 100%. Because, first, the private and business use portions must be estimated. And also the annual costs must be allocated to the business and private use portions.
3. Car insurance tax deduction in Germany (Haftpflichtversicherung absetzen)
From personal experience, I know that car insurance can only be deducted from tax in Germany if you have a company-owned car. When using a company-owned car, you always have to pay a share of the car liability insurance (KFZ Haftpflichtversicherung).
Is car insurance tax-deductible in Germany?
Car insurance is only deductible if you have a company-owned car. Your private car insurance can’t be deducted from your tax in Germany.
4. Relocation tax deduction in Germany (Umzugskosten)
Relocation costs can be used for a tax deduction in Germany. There are two different reasons for relocation: work-related relocation or private relocation. The type of relocation defines where those costs can be filed.
Let me explain how it works with the help of an example of a colleague who moved significantly closer to work. This colleague traveled roughly 1 hour per day to work. After his probation period, he decided to move closer to work. He now lives in the neighborhood, about 10 minutes away by bike.
The fact that he moved closer to more than 30 minutes in the commuting time allowed him to file a tax deduction for his relocation costs. The relocation costs can be filed as “Werbungskosten.”
When can you benefit from a relation tax deduction in Germany?
When relocating because of your job, it’s classified under income-related expenses (Werbungskosten). Your relocation must justify any of the following:
- Starting your first job
- Changing your job or transferring to another city
- Shorter communting time
- Moving in or out of a company apartment
- Returning from abroad to start a new job in Germany (only applicable if you are a German citizen)
What other costs can be claimed with a relocation tax deduction in Germany?
- Necessary travel expenses to prepare for the move
- Packing and transportation of belongings
- Double rent payments for up to six months
- Costs for broker and inspection
- Repairs resulting from transportation damage
- Acquisition costs for stove (up to 230 euro) and ovens (up to 164 euro) for moves before 01.06.2020
- Tutoring costs for your children if you move to another federal state
5. Education expenses and training costs
Just recently I talked to one of our students that work in our company on a part-time contract. He told me he could deduct all education-related costs from his income tax.
There is a general allowance for work-related expenses of 1,000 Euro per year that you can deduct in any case. If your expenses exceed this amount, please make sure to list all expenses in detail so that it gets recognized as a tax deduction.
Are our German lessons tax-deductible in Germany?
Unfortunately, German lessons are not valid for a tax deduction in Germany. If you want to improve your German skills even further, it’s considered voluntary education.
Are online courses tax-deductible?
You can deduct anything that serves to maintain professional knowledge and skills or to adapt to the development of professional conditions. This means all online courses and webinars that were not taken out of pure interest.
6. Social Security Contributions
Most social security contributions are eligible for a tax deduction in Germany. I will explain to you in detail the most common ones here.
Contributions to health insurance can be deducted from taxes in the form of basic coverage. This applies both to private health insurance and statutory health insurance. If you haven’t found the best health insurance yet, please find my detailed article about finding the best health insurance in Germany.
What can not be deducted from your tax are the so-called “Wahlleistungen” or optional services, as those do not count as primary care in Germany.
On the other hand, so-called “Zusatzversicherungen” or supplementary insurance can be deducted. The most common one is probably supplementary dental insurance.
Long-term care contributions
Contributions to state-subsidized long-term care insurance are tax-deductible. It’s the same with any contribution to unsubsidized supplementary long-term care insurance.
Since 2012, it’s no longer clear according to haufe.de whether unemployment insurance should be tax-deductible as well. There is a yearly allowance of only 1,900 euros, most of which will be consumed by your regular health insurance.
Pension scheme contributions
Taxpayers can deduct the costs of old-age provision or “Rentenversicherung” that serves basic coverage as extraordinary expenses. These include, for example, contributions to statutory pension insurance.
Contributions to pension plans and basic pensions – including Rürup pensions – can also be deducted.
7. Childcare expenses (Kinderbetreuungskosten)
Especially since COVID, any kind of childcare expense, is eligible for a tax deduction in Germany. Kindergarten and Kita (Kindertagesstätten or daycare centers in English) were always eligible for that deduction. Now, other expenses, even communicating expenses for grandparents that might be able to jump in on a day-to-day basis, can be deducted from tax.
8. Mortgage deduction
A friend who bought two apartments as a financial investment can file a tax deduction in Germany for his mortgage. The caveat is that he only can take into account the interest on the loan taken out in his tax return.
And as you know from my article about income tax in Germany, he has to pay a significant amount of income tax on the rent he gets from his tenants.
Is house rent tax-deductible in Germany?
Rent for a house or apartment is only deductible from tax in Germany as long as you are a student or in your apprenticeship. You have to have a “Zweitwohnsitz” or secondary residence far enough away to be able to file that tax deduction.
9. Flat rate for general allowance for work-related expenses (Werbungskostenpauschale)
As previously mentioned in this article, there is this flat rate for general allowance for work-related expenses. The lump-sum is automatically deducted for 1,000 Euros. If you can or want to file more, you must prove all expenses within that category.
10. Flat rate for commuting expenses (Entfernungskostenpauschale/Pendlerpauschale)
As described in the example of a neighbor who rides a bike every day to and from work, you can file almost any kind of communing expense within your tax return in Germany.
Usually, the math is quite simple. For every kilometer in one direction, you can get 30 or 38 Cents at the 21st kilometer. If you have to drive 60 kilometers a day, you can get a tax deduction in Germany for 30 Kilometers.
The final calculation would look like this:
20 x 30 Cent + 10 x 38 Cent is a total of 9.80 Euros daily.
If you work 200 days throughout the year, you can reclaim 1,960 euros from your tax.
If you use public transportation instead of your car, company car, or bike, you can also file the tickets instead.
11. Craftsmen’s costs and household-related services (Handwerkerleistungen)
Artisans’ costs can be very high in Germany. The average labor costs in Germany rank 7th in Europe according to DESTATIS. The average hourly rate was 35,90 Euros in 2019. Having a craftsman doing some repairs can soon cost a couple of thousand Euros.
What can owners deduct from taxes in Germany?
As I do own a house, I know that I can deduct 20 percent of the labor costs from my taxes. This can save me up to 1,200 euros in taxes per year.
But as a caveat, I can only deduct work that serves to maintain or renovate our house. If I asked an artisan to build something completely new, I would not be able to file any tax deduction in Germany.
Yet there is another rule. You may only deduct the hourly rates of the artisans but not the used materials.
What can tenants deduct from taxes in Germany?
As a tenant, you can deduct 20% of your share of the costs, up to 1,200 euros per year. Landlords can pass on repair or maintenance costs to you as a tenant on a pro-rata basis.
12. Funeral expenses (Bestattungskosten)
The related expenses are deductible if you have paid for a relative’s funeral. However, you can only enter those expenses in your tax return that exceed the amount of the estate. If there is death benefit insurance or ‘Sterbegeldversicherung,’ this will also be deducted.
You can file for the rest of your tax deduction if the expenses exceed the estate. Those are costs for the gravesite, coffin, wreaths, flowers, and obituaries. Catering for the mourners at the funeral service cannot be deducted.
Who can deduct funeral expenses?
You can only file a tax deduction in Germany on funeral expenses if the funeral is for a close relative.
13. Alimony (Unterhaltskosten)
Alimony must be paid for every child, usually a former partner, after a divorce. If you have to support your parents, you can also add those costs to your tax deduction in Germany.
You are eligible to file expenses up to the current “Grundfreibetrag” of the actual year. The “Grundfreibetrag” or basic tax-free amount for 2022 is currently at 9,984 Euros.
Is there alimony in Germany?
So yes, there is alimony in Germany. It usually covers costs like food, cloth, or an apartment or house.
How long does spousal support last in Germany?
The law lacks regulation on how long divorced persons must pay each other alimony. In principle, there is no lifelong claim to maintenance. After the divorce, payments may be limited in time and amount or may cease altogether.
Did the marriage last longer than 20 years? The family court may also award maintenance for an unlimited period (Section 1587b BGB). However, this also depends on the individual case.
14. Care lump sum (Pflegepauschale)
Entitlement to the long-term care allowance (Pflegepauschbetrag) is paid to people who care for a family member with higher care needs.
There are some conditions you must meet to receive the care allowance:
- the personal care of a relative or a close person
- the person in need of care is cared for in their home or the home of the caregiver, and
- the care is provided without any remuneration
By 2021, the following lump sums are granted:
- Care degree 2: a care lump sum of 600 Euros.
- Care level 3: 1,100 Euros.
- Care degree 4: you are entitled to 1,800 Euros
Care costs can be deducted from income-related expenses (Werbungskosten).
15. Donations / Charitable contributions (Spenden)
A couple I have known for many years donates to three organizations yearly, roughly 1,000 Euros. The told me how it works and how they can use those donations for a tax deduction in Germany.
What are charitable contributions tax-deductible in Germany?
In general, every kind of charitable contribution is tax-deductible. There is only one rule for it. The receiving institution must be a “gemeinnützige Organisation” or non-profit organization.
Is there a limit to charitable contributions?
In general, there is no limit on charitable contributions per year. But you will only be able to deduct up to 20% of your income from your tax.
16. Church tax (Kirchensteuer)
Church tax is mandatory for all citizens who are members of the Catholic or Protestant church. The tax rate depends on the state you are living in.
How do I exclude church tax in Germany?
You can get back part of the church tax you have paid. This is because the church tax paid – including the church tax – is deductible without restriction as an extraordinary expense (Section 10, Paragraph 1, Number 4 of the German Income Tax Act).
17. Telephone / Internet costs (Telefon-/Internetkosten )
There are two ways to use a tax deduction in Germany for telephone or internet costs. If you are an employee, you can use the 20% rule. You can deduct 20% of all monthly telecommunication costs from your taxes. The maximum amount is 240 Euro per year.
The other way is to use the “Einzelverbindungsnachweis” (itemized bill) and document exactly which calls were because of your home office activities and which were private.
Can I buy a phone as a professional expense as an employee?
No, you are not eligible to file a tax return when you are a regular employee in that case.
18. Office at home (Arbeitszimmer)
To be able to deduct an office at home from your yearly income taxes, your “Arbeitszimmer” has to fulfill specific criteria.
- It has to be a separate room
- The room should not be used for anything else (only 10% of the room could be for private purposes)
- All interior (90% of it) has to be work-related
You have to be able to do your job as an employee from home. A dedicated home office would not be deductible from your tax if you were, for example, a craftsman.
If the tax office accepts your “Arbeitszimmer,” you would be able to deduct, for example, a desk, an office chair, a filing cabinet, and the like.
19. Double household maintenance (Doppelte Haushaltsführung)
Running two households (doppelte Haushaltsführung) is connected with specific criteria. For the tax office to accept the deductions for two households, you have to take into account:
- The second residence (even a room in a shared house) has to be used for occupational purposes.
- If you can reach your place of work faster from the second residence than you could from the primary residence.
- Outside of the place of work, there is another home that is your primary residence.
- The primary residence is the center of your life.
- Financial investment in the home that is the primary residence.
20. Additional expenses for meals (Verpflegungsmehraufwand)
One of my colleagues in sales recently explained to me the “Verpflegungsmehraufwand” in Germany and how to deduct it from your tax.
Employees in German companies have fixed per diem rates to cover travel expenses. The government sets these rules, which in theory makes things more efficient. Companies don’t need to create their policies – they follow the rules.
Additional meal expenses are filed as “Werbungskosten” and “Auswärtstätigkeiten.” The Bundesfinanzministerium published a list of the maximum rates that can be deducted per day or hours here.
21. Medication, medical aids, medical treatment, and more (Außergewöhnliche Belastungen)
Medical expenses are a classic example of extraordinary expenses. Expenses for glasses, hearing aids, wheelchairs, dentures, or co-payments for prescriptions are just a few typical examples of medical expenses that you can deduct.
It is essential that the medical measures are necessary and prescribed by a doctor.
For the care of relatives, you can also claim the lump-sum care allowance of 924 Euros (2020). As of 01.01.2021, this amount was raised to 1,800 Euros and, thus, almost doubled. If your actual costs are lower than this, it is better to use the lump sum. However, this only applies to helpless persons or relatives with care level III.
In the case of a disability, you can either deduct the costs incurred as extraordinary expenses or use the disability lump sum. The lump-sum depends on the degree of disability.
If unforeseeable disasters, such as a flood or fire, have destroyed your valuable items and household, the replacement costs are extraordinary burdens. This also includes the costs for clean-up work.
I hope I could provide you with a comprehensive list of real-life examples of how to start with your tax deduction in Germany. I understand that this sounds like a lot of information, but going through it step-by-step makes things easier for you.
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