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FINANCE

Taxes in Germany – how to get more money back on your return

The deadline to submit tax returns may have moved to July 31st. But you should still be prepared. Here's how to make tax day into your own personal pay day.

Taxes in Germany - how to get more money back on your return
Taxes in Germany. Photo: DPA

Germans receive about €900 on average back from their tax returns, according to the Frankfurter Allgemeine Zeitung. But how the heck do they get up to that figure or higher? Perhaps some of these hints can help.

SEE ALSO: Everything that's changing in May 2019 in Germany

1. Find an online tax return service – in English

If you’re using the free ELSTER software, which can be downloaded here, Toytown has a pretty thorough translation and explanation of the various forms to fill out, found here.

Otherwise, SteuerGo offers an English-language version of filling out the tax return, complete with tips along the way for how to get back even more money (though some tips are only in German, and some of the translations may be a bit funny). It also tells you how much you can expect to get back, and allows you to submit your tax return online for about €25.

2. Make sure you have the paperwork

Remember that if you’re going to try to deduct certain expenses, you should have the receipts as proof to back up these claims. Your local Finanzamt may write to you after you file your return, asking for this paperwork – so be prepared.

3. Costs of moving for work

If within the tax year you moved for work, you can write this off as a work-related expense (Werbungskosten).

This is also valid if your move within the same area significantly reduces your commute by at least an hour total, according to expat tax adviser Peter Scheller in Hamburg.

Deductible costs include moving boxes, moving trucks, extra food and drink expenses incurred, extra accommodation costs, and costs for the previous flat or home if the move had to be made before your contract could be legally cancelled.

You can also write off broker fees for finding a new place to rent, as well as increased educational costs for your children due to the move.

If you move but it's not work-related, you may also be able to write off certain costs incurred as household services – haushaltsnahe Dienstleistungen. This includes certain hired handy-workers, such as for renovations, according to Finanztip.de, as explained further in tip number 6.

4. Write off your home office

Photo: DPA

If you ever work from home and don’t have an alternative from your employer, you can write off up to €1,250 for the year in the costs for that space – so a portion of your rent. Teachers, freelancers, and sales representatives may all use home offices regularly.

The amount of rent to deduct can be calculated by the size of the room – living room, extra bedroom, etc – where you work, and therefore how much of your rent it makes up.

You can also deduct the costs of utilities for this room.

FIND A JOB: Browse thousands of English-language jobs in Germany

5. Work-related costs, no matter how small

Coffee or lunch with a potential client, a new desk at home to do work, business clothes for a job interview or new job, pens and paper, phone bills – any of these work-related items that you pay for out of pocket can be written off as professional expenses.

This also includes expenses for your commute, which is based on distance travelled along the shortest route.

If you had to travel for work, your employer may have covered the flights and housing. But if other things like food were not part of the budget, Germany has you covered, at least partially.

Trips between eight and 24 hours long get an allowance of €12 to be deducted for extra meals. Trips lasting more than 24 hours are granted an allowance of €24 per day. Minor expenses for things like public transportation to work during the trip have a cap of €10 per day.

6. Write off renovation costs

If you have work done on your private home, you can deduct 20 percent of expenses for regular services including gardeners, window cleaners and chimney sweepers, capped at €4,000 per year. For hiring specialized tradesman for set projects like roof work, repairs, and other renovations, you can also deduct 20 percent, with a cap of €1,200, according to Scheller.

7. Even renters can deduct repair costs

Landlords often charge tenants operating costs (Betriebskosten) for repairs and maintenance around the building. You may see a breakdown of these costs in your rental contract.

Tenants can thus also deduct these costs, since they’re also contributing towards the renovations. But you need to be able to enumerate these expenses through a statement from the property owner, advises Scheller.

8. Child care expenses

Photo: DPA.

For parents, child care costs can be a major expense. But luckily in Germany, these costs can be deducted on your tax return as Sonderausgaben (extra expenses). The rule of thumb is up to €4,000 per child under 14, per year, according to income tax help group VLH. This also goes for children over 14 who cannot care for themselves due to a disability.

Child care costs include day care, babysitters, nannies or au pairs. VLH advises that payments must be shown to have been made through bank transfers, not in cash. Costs for food or games are not deductible, however.

Even if Oma or Opa babysits the little ones, you can still write off their transportation costs, for example, as child care costs, if you paid for them. VLH advises that with family members, you should write up a small contract with their signature, declaring that they regularly care for the children and are compensated for their transport.

9. Find an expat tax adviser

If you’re self-employed or a freelancer with more complicated finances to account for, finding a good tax adviser can be particularly profitable in the end, especially if they can get you €1,000 back from the Finanzamt.

Scheller from Hamburg specializes in helping expats with their taxes, as do others like Expat Tax in Munich. The free-to-use search platform Ageras also helps you to find the right accountant for your needs.

10. Start saving receipts for next year

Part of what your first tax return filing in Germany teaches you is that it’s super important to keep track of expenses. You might realize that there were many other things you could have deducted, but never kept the receipts.

So learn for the future and start filing away your own paper trail to make things easier on yourself next year – and perhaps your tax consultant, too.

For members

MONEY

KEY POINTS: Germany’s inflation relief measures to support people in cost of living crisis

The German Bundestag has passed tax relief and other measures to help people deal with rising inflation amid the cost of living crisis. Here's a look at what you need to know.

KEY POINTS: Germany's inflation relief measures to support people in cost of living crisis

The Inflation Compensation Act, which was passed with a majority in the Bundestag on Thursday, is aimed at offsetting the effects of high inflation on income tax.

The German parliament has also agreed on the largest increase in child benefit in the history of Germany. 

The changes are set to come into force after the Bundesrat – which represents the states – has given its approval.

Here’s a roundup of the planned relief:

Tax system will be adjusted to high inflation

The inflation compensation act, which was put forward by the coalition government of the Social Democrats, Greens and Free Democrats, provides that taxation will be adjusted to inflation, to help around 48 million people in Germany avoid additional burdens.

The law provides for two relief stages in the coming years. 

The total amount of tax relief will be over €12 billion in 2023, going up to around €18 billion in 2024.

It’s aimed at addressing cold progression, which refers to a situation where a pay rise is ‘eaten up’ by inflation. The result is that people have less money at the end of the day, despite getting paid more.

Finance Minister Christian Lindner, of the pro-business FDP, recently argued that if an income of €43,000 has a purchasing power of only €39,000 in the coming year due to inflation, the state should not levy as many taxes as if it were still €43,000 in buying power.

To compensate for this, the government is turning the screws on the income tax scale.

The basic tax-free amount, i.e. the income up to which no tax has to be paid, is to rise – by €561 to €10,908 next year. Furthermore, the top tax rate of 42 percent will not apply until taxable income reaches €62,827 next year. Currently, it’s charged on incomes above €58,597.

In 2024, this benchmark is set to rise to €66,779. The federal government is deliberately not touching the limit for the even higher wealth tax rate of 45 percent because it does not consider any additional relief necessary in this income bracket.

A person in Germany holds cash. The government has pledged to clamp down on gas prices.

A person in Germany holds cash. The government has pledged to clamp down on gas prices. Photo: picture alliance/dpa | Lino Mirgeler

Rise in child benefit

Families can look forward to extra relief from January 2023. Child benefit (Kindergeld) is to be raised to a uniform €250 per month per child, and €275 per month for their third child.

This translates to an increase of €31 a month for the first and second child and €25 per month for the third child. Child benefit for any additional children will remain unchanged at €250 per month. 

Child allowance (Kinderfreibetrag), which guarantees that the parents’ income remains tax-free up to a certain amount, will also be increased, as will the maximum amount of tax-deductible child support, for example for students.

READ ALSO:

The increase in child welfare support is intended to ease the burden on families, as they suffer more from the rising cost of living than households without children, the coalition government said.

One-off payment for gas and district heating

A billion-euro emergency aid grant funded by taxpayers for gas and district heating customers in Germany has also been agreed. 

In December, consumers will have their instalment payments waived for a month.

The one-off relief is meant to bridge the gap until the general gas price cap takes effect – at the latest for consumers in March next year.

READ ALSO: How much could households save with Germany’s gas price cap?

A person turning on their radiator in Germany.

A person turning on their radiator in Germany. Photo: picture alliance/dpa | Bernd Weißbrod

Households and small businesses with an annual consumption of up to 1.5 million kilowatt hours will receive the one-off relief payment.

Certain institutions in the care and education sector and in medical care will also receive the emergency aid – even if their consumption is higher.

The amount of relief is calculated on the basis of one-twelfth of the annual consumption forecast by the supplier in September 2022 and the December gas price.

In this way, the prices, some of which have risen significantly at the end of the year, are to be taken into account.

When it comes to district heating, the amount of the September bill and a “flat-rate adjustment factor” are to be used, which takes into account the price increases up to December.

Tenants are to receive the December relief with their next annual heating bill. Landlords have one year to prepare and submit the statement – but must provide notice of the estimated credit this December.

READ ALSO: When will people in December get their gas bill paid?

Sharing of CO2 costs

The Bundestag also passed a regulation for sharing the costs of the climate levy between tenants and landlords.

Up to now, landlords have been able to pass on the CO2 levy on heating oil and natural gas, which has been payable since the beginning of 2021, in full to tenants.

In future, the additional costs are to be divided between tenants and landlords. Authorities say there will be a graduated model which will encourage tenants to to save energy, and will give landlords an incentive to make structural improvements.

Landlords will bear a higher share (up to 95 percent) of the climate levy the more carbon dioxide emissions their building causes, for example because of an old heating system or poor insulation. If a building is in good energy condition, tenants pay the larger share of the CO2 levy (up to 100 percent).

READ ALSO: German liberals delay plans to cut CO2 for tenants

Reform of housing benefit (Wohngeld)

The Bundestag has also passed a far-reaching reform of housing benefit.

As a result, the benefit will be available to more people from next year and will also be higher: instead of the previous figure of around 600,000 households, around two million households will be entitled to Wohngeld.

The average amount is to rise significantly too – from around €180 to about €370 per month.

Housing benefit will also be restructured. There is to be a permanent heating-cost component, which will be included in the allowance calculation as a supplement to rent. A climate component takes into account rent increases due to energy-efficiency measures.

Furthermore, the general formula for calculating housing benefit will be changed.

READ ALSO: Wohngeld – How people in Germany can get help with rising living costs

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