Since I have been working in Austria and living in Germany for more than a decade, filing a tax return in Germany – Steuererklärung – every year is mandatory.
For most people living in Germany, with some exceptions, this is not mandatory. However, filing a tax return in Germany can save you a lot of money.
Read this article to learn how.
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.
- In this article, you will first learn when filing a tax return in German is mandatory.
- As a key takeaway, I can advise you always to file a tax return. Because the deductions from your yearly tax payment can be pretty significant.
- Next, I will tell you which tax deductions you can benefit from in Germany.
- There are different deductions for different income sources that you can use to reduce your tax burden.
- To round up this article, I will give you more information about the three options for how to file a tax return in Germany.
- You will learn what essential and optional documents you might need to file your tax return and the deadlines.
When is filing a tax return in Germany mandatory? And when not?
The tax declaration or filing a tax return in Germany is mandatory for everyone who receives taxable income. You may file a tax return as a regular employee, but it’s not mandatory as all employers subtract the income tax.
From my experience, I can recommend every employee submit their tax declaration, as you can save some taxes. How? I have written a separate article about tax deduction in Germany.
Despite that, there are different cases where you have to file a tax return in German, which I will discuss in the following paragraphs.
Earning more than 810 euros from other income sources
A neighbor of mine, volunteering as a local soccer trainer, receives a small compensation for every match he attends. The single compensation is not significant, but throughout the year, he receives roughly 500 Euros on top of his salary.
Everyone who earns more than 810 euros on top of their regular salary must file a tax return in Germany.
Receiving more than 410 euros in a year in salary replacement benefits
One of my colleagues was on temporary leave because of covid for a few months. He explained to me just recently, after filing his 2021 tax return, that he was asked to do that. In total, he received a short-time allowance from the state of approximately 6,000 euros in 2021.
Arbeitslosengeld (unemployment benefits), short-time allowance (Kurzarbeitergeld), or sick pay (Krankengeld) fall into that category.
Working for multiple employers
The wife of a good friend of ours is a social worker. Since she cannot get one full-time position in our town, she works for two different employers.
She explained that, on the one hand, one job (the secondary) is accounted for with income tax class 4. On the other hand, you must file a tax return in Germany if you are in that situation.
You can learn more about income tax classes in my article about the salary calculator.
Married couples with one of them being taxed with tax class V or VI
For married couples, it’s almost mandatory that you file your tax return in Germany. My wife and I have to set our tax classes to add up to 8. Meaning, either both of you have the tax class 4. Or, if someone earns significantly earns more, it might make sense for you to change to tax classes 3 and 5.
There is an exception from the rule for married couples where the partner with tax class 5 is not working (for example, due to extended maternity leave).
Allowance for travel expenses and earnings over 12,250 euros (or 23,350 euros for couples)
An allowance, or “Freibetrag,” may be added to your monthly income tax as an automated reduction. By adding this allowance, you are asked to file a tax return in Germany every year. This is a beneficial way to save taxes on my monthly income automatically.
Since I have to travel a bit by car every day from Germany to Austria to my job, it automatically reduces my monthly income tax payments.
So, the “Freibetrag” is very helpful if you have high regular spending due to one of the following reasons:
- High income-related expenses (Werbungskosten) due to commuting costs or double household management
- High extraordinary expenses (Sonderausgaben) – e.g., childcare costs, education costs, donations, etc.
- High extraordinary burdens (Außergewöhnliche Belastungen) – e.g. medical expenses, disability, institutional care, etc.
- Negative income (Verlust) – e.g., from self-employment, business operations, or renting and leasing
Severance payment with reduced taxation
If you are a long-term employee at a company and they have to lay you off, sometimes you will receive something like a severance payment or “Abfindung.” Abfindungen in Germany is always subject to be taxed.
You must file your tax return for the year you receive your severance payment.
Losses carried forward from previous years
If you are in a situation where your income is higher than your expenses, you can claim this loss against tax.
In the case that you start a business, it is not unusual that you make losses first.
Students and employees also sometimes have expenses that they may be able to offset against positive income for tax purposes. Then they have to pay less tax or no tax at all in that year.
Investment income without final withholding tax
Investment income usually does not need to be included in your yearly tax return in Germany. There is only one exception, as I know from a friend who invested some of his money into stocks. Last year, before the stock market plummeted, he took out some dividends from his portfolio.
He told me that these dividends are affected by the final withholding tax. Since the earnings did not exceed the amount of 1,602 euros for him and his wife, he did not have to pay any taxes on them.
In 2023, this “Freibetrag” or allowance will be increased to 1,000 euros for singles or 2,000 euros for married couples.
The tax office requests the submission of a tax return
Last but not least, the tax office can request at any point in time the submission of your tax return. In this case, you must follow their request and submit a tax return in Germany.
How much money do Germans save by filing a tax return in Germany?
As you might remember, at the beginning of this article, I mentioned that I recommend everyone submit their tax returns in Germany. This is a statistic from DESTATIS.
This statistic says that in 2019, Germany’s 12.6 million citizens received a tax return of 1,072 euros. That’s not just a few euros. For me, it’s worth the effort to go through the process I will describe to you in one of the following chapters.
My tax return varied between 400 and 1,300 euros during the past couple of years. That highly depended on how many expenses I had throughout the year. Having kids and being married in Germany can also bring some benefits.
What tax deductions in Germany can you benefit from?
Let me explain the tax deductions you may benefit from with real-life examples from my friends or coworkers.
Tax deductions in Germany for families
There are two standard allowances in Germany for families: On the one hand, it’s the “Kinderfreibetrag” (child allowance) as well as the “Freibetrag für Betreuung, Erziehung der Ausbildung” (allowance for care, education, or training).
Families with kids benefit from the “Kinderfreibetrag.” This has been at 8,388 euros per child per year. From my experience, as we have two kids, we were granted an allowance of an additional 16,776 euros in addition to our “Grundfreibetrag.”
The general allowance was an additional 2x 9,744 euros, 19,488 euros, per year. So, we did not have to pay taxes for 36,264 euros of our income. All earnings above that sum needed to be included in our tax return in Germany.
Work-related tax reductions in Germany (employed or self-employed)
Every employee in Germany receives a general allowance of 9,744 euros for the tax return in 2021. This allowance is subject to an increase almost every year. In 2022, the allowance will be raised to 9,984 euros.
As a married couple, you do get twice the amount and can use it for the “Gemeinsame Veranlagung” (joint assessment) for your tax reduction in Germany.
In addition, you can use the so-called “Pauschbeträge, ” the short form for “Pauschalbeträge” or lump sums in Germany. The most well-known is the “Werbungskosten.” In 2022 it was decided that this specific income expense lump sum is raised to 1,200 euros per year.
Lump sums mean you don’t have to prove that you used that amount. You may deduct that sum directly from your yearly tax statement in Germany.
It’s a bit of a different story for self-employed people, as I know from one of my neighbors, a graphic design freelancer. He works for different clients and is allowed to deduct all work-related expenses from his income before paying any taxes on it.
The caveat for freelancers and self-employed people is that they must file two tax returns in Germany. The first is for their self-employment, the second for the income that results from self-employment.
Deductions for landlords
As mentioned in my previous article about tax deduction in Germany, I have a friend who bought two apartments as an investment. He rents out both apartments to his tenants.
As the owner, he can deduct 20 percent of the expenses for his apartments from his taxes. Also, only the costs for the pure working time (possibly also travel and machine costs) are considered.
However, a maximum of only 1,200 euros may be claimed against tax. Anything above that cannot be deducted from the tax.
Other types of deductions
There are even more lump sums that can be used in specific cases.
As you might remember from my previous article about tax deduction in Germany, I have a friend who earns a bit aside by helping as a trainer at their local soccer games. He receives a form of compensation of about 500 euros.
So his allowance of 810 euros is not exceeded, and the 500 euros are tax-free.
|Lump-sum||Amount in 2021|
|Commuting allowance||0.30 €/km up to 20 km to work; 0.35 €/km from the 21st kilometer onwards|
|Meals allowance||14 or 28 € (for business trips or stays in Germany – for trips abroad, please check the official list|
|Lump-sum for moving expenses||860/870 € + 573/580 € (per additional household member)|
|Savers’ lump sum||801.00 €|
|Special expenses lump sum||36|
|Nursing care lump sum||600 – 1.800 €|
|Disability lump sum||384 – 7.400 €|
|Surviving dependents lump sum||370.00 €|
|home office lump sum (no specific room at home available)||€ 5 per day, maximum 120 days per year|
|Telephone communication allowance (professional use of private telephone)||20 € per month or 240 € per year|
|Income-related expenses lump sum for pension payments||102|
|Online application||2,50 € per application|
|Written application folder||8,50 € per folder|
|Cleaning allowances for uniforms||varies|
How to file a tax return in Germany?
Filing a tax return always sounds complicated, but choosing one of the more accessible options, can be as easy as it is for me. So let me provide some information about how you can file a tax return in Germany based on different examples.
Filling a tax return in Germany by yourself – Elster / Finanzamt
The option with the most negligible costs involved filing your tax return in Germany with the help of Elster, an online platform provided by the tax office or “Finanzamt.”
When my wife and I first arrived in Germany, we talked to one of our first neighbors about tax returns in Germany. He told us that he used the Elster platform right after finishing his apprenticeship and starting to work as a freelancer.
He explained that using Elster is similar to filling out forms online by entering all income and expenses and submitting it to the tax office online. You need to have all documents ready, and if you are an employee, you must add in your yearly “Lohnabrechnung” or payroll.
Sounds easy, but there is a caveat to that process. Unfortunately, the Elster platform does not provide you with any tax-saving recommendations.
For example, Elster will not tell you whether you used all your general allowances for a tax deduction. So, in our neighbor’s case, he forgot to file his 1,000 Euros of standard income-related expense lump sum called “Werbungskosten.”
That’s why my neighbor decided, in the end, to go with tax software like SteuerGo* for his subsequent tax declaration. I will explain to you how to file your tax return with that in one of the following paragraphs.
Hire an accountant – Steuerberater – to file a tax return in Germany
Hiring an accountant or “Steuerberater” to file your tax return in Germany is never a wrong choice. Especially if you are still unfamiliar with the whole process and would like to be on the save side, you might want to consider choosing one of the two following options.
Independent accountants can help file your yearly tax return in Germany. But independent accountants can be pretty expensive. On the other side, you can only deduct 100 Euros every year from tax consultancy costs.
Accountants usually work based on a fixed-rate card. The Bundes Steuerberater Kammer BStBK published some examples for different bookkeeping tasks here.
According to Finanztip, they assume that a standard “Einkommenssteuererklärung” or income tax declaration done by an independent accountant could cost roughly around 280 euros. Since only 100 euros are deductible from your tax return, you would have to pay an additional 180 Euros on your own.
This was one of the reasons I chose the following option, the Lohnsteuerhilfeverein or wage tax help association.
Lohnsteuerhilfeverein: What is this? How to contact them?
The Lohnsteuerhilfeverein is an independent institution that helps people file their tax returns in Germany. I use their services as we do have a particular situation.
You have to be a “member” of the Lohnsteuerhilfeverein to be able to use their services. The average yearly membership fee or “Mitgliedsbeitrag” is around 150 euros. Again, as with the independent accountants, 100 euros are tax-deductible.
Since I live in Germany but work in Austria, I am a so-called “Grenzgänger” or cross-border commuter for the German tax office. I need their support. Every year, they come to our home and help us through all documents and legislative issues.
Online tax return Germany by using a tax return calculator such as from SteuerGo
The last option you have, as I previously mentioned, is using a tax return calculator and software like SteuerGo* in Germany. It’s the same process as going through a tax declaration with Elster.
The significant difference is that SteuerGo will give you valuable assistance throughout the process and tell you exactly where you can save money on your tax return in Germany.
Especially for foreigners, as I am in Germany, I strongly recommend using SteuerGo as it’s available in English and various other languages like Polish, Russian and more.
What documents are needed for filing a tax return in Germany – Steuererklärung?
With every tax return in Germany, you will also need some additional documents as proof of your expenses. But, you no longer have to submit everything to the tax office. It’s enough to keep that for your records if the tax office requests any specific information.
Let’s dig deeper into the required documents.
Information about you and your family (Allgemeine Angaben)
The “Mantelbogen,” or cover sheet, includes all general information about you, your spouse, and your kids. You need to add the following information there:
- Your, your spouses, and your kid’s names
- Date of birth
- Your address
- Whether you belong to any religion
- And your marital status
- The information, whether you’d like to choose between Einzelveranlagung (single assessment), Zusammenveranlagung (joint assessment), or Gütergemeinschaft (community of property)
Income for the year for which you make the tax return (Einkommensnachweise)
If you are an employee, you will receive at the beginning of the following year the “Lohnsteuerjahresbescheinigung,” an annual income tax certificate, or just “Lohnsteuerbescheinigung” from your employer.
That certificate has all the required information on it. This includes, amongst others:
- Gross income
- Income tax paid
- Church tax (if applicable)
- Social security contributions
- Health insurance payments
- Unemployment insurance payments
- Net income
- and more
With that information, it’s easy to start filling out your yearly tax return in Germany. If you have any other income source, you have to include this in your tax return document. That way, the tax office can calculate any additional income tax you might have to pay.
Deductible expenses for employment income (Werbungskosten aus nichtselbständiger Arbeit)
All work-related expenses you have throughout the year can be filed as deductible, often referred to as “Werbungskosten.” This lump sum of 1,000 euros can be used as a tax reduction without further evidence. If your expenses exceed those 1,000 euros, you will most likely have to prove it.
Typical “Werbungskosten” is from my own experience:
- application costs (offline and online)
- professional literature
- technical equipnecessaryrtant for work at home
- desk equipment and office supplies
- printers and other computer peripherals
- commuter allowance/mileage allowance
- professional clothing (within certain limits)
- training and others
Evidence of deductible expenses for income from renting, leasing (Werbungskosten aus der Vermietung von Wohnraum)
If you do own a second apartment or even two as that friend of mine, you can deduct expenses in your tax return in Germany. They call those deductions “Werbungskosten,” or income-related expenses from renting or leasing.
Typical expenses you can deduct, as far as I know from my friend, are:
- Building depreciation
- Debt interest
- Real estate taxes
- Maintenance costs
- Rental-related costs (keys, newspaper advertisements, cleaning, janitor, etc.)
Extraordinary expenses (Außergewöhnliche Belastungen)
Here the information regarding any serious illnesses or disabilities needs to be stated. Also, if you are a caretaker for a close relative who is seriously sick, you can add that information here.
Based on your grade of disability, you again have a lump sum between 384 euros and 2,840 euros that will be automatically deducted from your tax in Germany.
Other documents (Weitere Unterlagen)
If you work with an independent accountant or the Lohnsteuerhilfeverein, you will need other documents to file your tax return in Germany successfully. For the first meeting, you must show them your Personalausweis (ID card) or Reisepass (passport).
They will also need information regarding your bank account, the “Einkommenssteuerbescheid” or income tax notice of the previous year, and information about your insurance.
Other important documents you should provide for your tax return are:
- Interest, share, and capital income
- Unemployment benefits “Arbeitslosengeld”
- Maternity benefit “Mutterschaftsgeld”
- Parental allowance “Elterngeld”
- Sick pay “Krankengeld”
Deadline for tax return in Germany
Germany’s tax return must be filed by a specific date. But, there are a few exceptions I’d like to tell you about here.
When is usually the deadline for filing a tax return in Germany?
The regular “Abgabefrist” or deadline for filing a tax return in Germany is the 31st of July every year. There are a few reasons you can extend your tax return deadline.
Impact of the pandemic on tax deadline in Germany
When COVID hit Germany, the deadline was automatically pushed to the 31st of October as a standard. If you were living in a state where the 31st of October is a national holiday, the deadline was pushed out to the 1st of November.
When can the deadline for tax returns in Germany be extended?
There are a few reasons why the deadline for tax returns in Germany can be extended.
First, if you are working with a “Lohnsteuerhilfeverein,” the deadline is pushed automatically out to the last day of February, the year after next. So you would be able to file your tax return for 2022 in 2024.
Second, if you are using the services of an independent accountant, the same rules apply as for the “Lohnsteuerhilfeverein” or wage tax help association.
Filing a tax return in Germany, either on your own with the help of SteuerGo*, or with an independent tax consultant or Lohnsteuerhilfeverein, is not hard. I hope this article was helpful for you to understand the proceedings.
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