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What you need to know about tax changes in Germany in 2020

There's lots of changes in store next year for people who pay taxes in Germany. We've put together an overview of what you need to know.

What you need to know about tax changes in Germany in 2020
Photo: DPA

Basic allowance for income tax increases

From January 1st 2020, single people will have a higher basic rate exemption from income tax. Income will remain tax-free up until €9,408. That is €240 more than in 2019, said the NRW Consumer Advice Centre. For married couples, the tax-free allowance rises to €18,816.

READ ALSO: The ultimate guide to paying taxes in Germany

Child tax-free allowance (Kinderfreibetrag) increases

Photo: DPA

The tax-free allowance for parents with children (Kinderfreibetrag) will rise in 2020 to €5,172. Currently the amount is €4,980.

Parents can receive this allowance instead of child benefit (Kindergeld) if it works out at a better deal for the family. When income tax is paid, the tax office automatically checks which allowance pays more for parents. Child benefit is not set to rise again until 2021.

Earmarked cash benefits being cut

In principle, employers can grant their employees benefits in kind (often known as perks) up to a value of €44 per month free of charge or at a reduced rate without incurring taxes.

From January 1st, however, earmarked cash benefits, among other things, will cease to apply.

According to the German Taxpayers' Association, subsequent reimbursements of costs to employees, such as for a petrol receipt, will no longer be tax-free.

But there are exceptions: employers can continue to reimburse travel costs on business trips tax-free. There will also be no taxes on certain gift cards or vouchers.

READ ALSO: These are the 8 German tax breaks you need to know about

Meal expenses for employees goes up

Employees who work away from home for professional reasons can look forward to a higher meal allowance from 2020.

If the trip lasts for more than eight hours, employees will now be entitled to a €14 allowance for food instead of €12. If the employee is away for the whole day, i.e. 24 hours, a new flat rate of €28 applies. For trips lasting several days, the flat rate for the arrival and departure day increases by two euros to €14.

The employer can get a refund on these amounts tax-free. Or the employee can claim the lump sum as income-related expenses in his or her tax return – this way the employee can reduce his or her taxable income.

Relocation lump sum increase

From March 1st 2020, single people who change their place of residence for professional reasons will be able to deduct a flat rate of €820 from their tax bill.

Spouses and registered partners can declare €1,639 in their income tax return, says the Taxpayers' Association.

In addition, they can also deduct costs for the estate agent or the transport of furniture, for example.

Old-age provision: up to 90 percent deductible

Photo: DPA

People who put aside provisions for old age can deduct up to 90 percent of these expenses. According to the Taxpayers Association, the authorities will allow up to €22,541 for single people from 2020. 

Married couples and registered civil partners will be able to claim a total of €45,082 for tax purposes. The tax authorities will deduct the tax-free employer's contribution from the expenses for employees who pay into the statutory pension insurance.

Change in contributions

Those who receive an occupational pension may have to pay health insurance contributions on it. But from 2020, contributions will only be due on the amount exceeding the new allowance of €159.25 – and no longer on the entire pension, says the German Insurance Association (GDV).

READ ALSO: Prostitution, dogs and loneliness: A look at Germany's weirdest taxes

More people entitled to housing benefit

From 2020, more people will be entitled to housing benefit for the first time,  according to estimates by the NRW Consumer Advice Centre. This will affect benefit around 180,000 households across Germany.

Housing allowance is available to low-income tenants and owner-occupiers under certain conditions. The amount of housing benefit depends, among other things, on income, rent and the number of household members.

From 2020, the state subsidy for housing will increase. This means that a household with two people will receive housing benefit averaging €190 per month, according to consumer protection agencies – so far the subsidy for this amount of people has been around €145.

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LIVING IN GERMANY

REVEALED: The most commonly asked questions about Germans and Germany

Ever wondered what the world is asking about Germany and the Germans? We looked at Google’s most searched results to find out – and help clear some of these queries up.

Oktoberfest
Hasan Salihamidzic, the sports director of FC Bayern, arrives with his wife at Oktoberfest in full traditional dress. Photo: picture alliance/dpa |

According to popular searches, Germany is the go-to place for good coffee and bread (although only if you like the hard kind) and the place to avoid if what you’re looking for is good food, good internet connection and low taxes. Of course, this is subjective; some people will travel long stretches to get a fresh, hot pretzel or a juicy Bratwurst, while others will take a hard pass.

When it comes to the question on the bad Internet – there is some truth to this. Germany is known for being behind other rich nations when it comes to connectivity. And from personal experience, the internet connection can seem a little medieval. The incoming German coalition government has, however, vowed to improve internet connectivity as part of their plans to modernise the country.

There are also frequent questions on learning the German language, and people pointing out that it is hard and complicated. This is probably due to the long compound words and its extensive grammar rules, however, as both English and German are Germanic languages with similar words in common, it’s not impossible to learn as an English-speaker.

Here’s a look at some of those questions…

Why is German called Deutsch? Whereas ‘German’ comes from the Latin, ‘Deutsch’ instead derives itself from the Indo-European root “þeudō”, meaning “people”. This slowly became “Deutsch” as we know it today. It can be a bit confusing to English-speakers, who are right to think it sounds a little more like “Dutch”, however the two languages do have the same roots which may explain it.

And why is Germany so boring? Again, probably a generalisation, especially given that Germany has a landmass of over 350,000 km² with areas ranging from high rise, industrial cities to traditional old town villages and even mountain ranges, so you’re sure to find a place that doesn’t bore you to tears.

Perhaps it is a question that comes from the stereotype that Germans are obsessed with being strict about rules, organised and analytical. Or that they have no sense of humour – all of these things being not the most exciting traits. 

Either way, from my experience I can confirm that, even though there is truth to German society enjoying order and rules, the vast majority of people are not boring, and I’m sure if you come to Germany you’ll meet many interesting, funny and exciting people. 

READ ALSO: 12 mistakes foreigners make when moving to Germany

When it comes to the German weather, most people assume a cold and cloudy climate, however this isn’t entirely true. While the autumn and winter, especially in the north, come with grey skies and sub-zero temperatures, Germany can have some beautiful summers, with temperatures frequently rising above 30C in some places.

Unsurprisingly, the power and wealth of the German nation is mentioned – Germany is the largest economy in Europe after all, with a GDP of 3.8 trillion dollars. This could be due to strong industry sectors in the country, including vehicle constructions (I was a little surprised to find no questions posed on German cars), chemical and electrical industry and engineering. There are also many strong economic cities in Germany, most notably Munich, Frankfurt am Main and Hamburg.

READ ALSO: Eight unique words and phrases that tell us something about Germany

Smart and tall?

Why are Germans so tall? They are indeed taller than many other nations, with the average German measuring a good 172.87cm (or 5 feet 8.06 inches), however this may be a question better posed to the Dutch, who make up the tallest people in the world.

Why are Germans so smart? While this is again a generalisation – as individuals have different levels of intelligence in all countries – this question may stem from Germany’s free higher education system or their seemingly efficient work ethic. Plus there does seem to be some scientific research behind this question, with a study done in 2006 finding that Germans had the highest IQ in Europe.

So, while many of the questions posed about Germany and Germans on Google stem from stereotypes, we can confirm that some aren’t entirely made up. If you’re looking to debunk some frequently asked questions about France and the French, check out this article by our sister site HERE.

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