Employees in Germany should consider filing income tax returns since most receive approximately €1,000 in refunds. While companies deduct monthly income tax, they often miss daily tax-deductible expenses like transportation or childcare. So, employees should assess their finances with a year-end tax return to claim these deductions. Additional income earners must meet the annual tax deadline (July 31st, 2024, for those with tax advisors, or September 30th for others). Regular salaried employees have up to four years to claim expense reimbursements.

Married pairs/household partners

• • First-time marriage or civil partnership in a tax year allows for Ehegattensplitting (spousal splitting).
  • Ehegattensplitting is recommended by the German Taxpayers’ Association as it often reduces tax obligations.
  • Couples opt for joint assessment and submit a combined tax return.
  • The tax office combines partners’ incomes to calculate the total payment and divides it into two.
  • To determine the tax burden, the tax office calculates it by taking half of the total income and then multiplying it by two.
  • The benefit of joint assessment increases with greater income disparity between partners.
  • When both partners earn the same income, the tax burden remains unchanged.

Finding work throughout the year

• • Individuals who worked only part of the year (e.g., due to unemployment, sabbatical, or starting their career after college) can expect a substantial tax refund.
  • Monthly salary payments are typically calculated assuming full-year employment, leading to higher tax payments.
  • When earning income for only part of the year, the annual income is significantly lower, resulting in a lower tax burden compared to full-time employees.

The cost of daycare

If you have kids, you can write off childcare expenses from your taxes, including school or Kita (daycare) fees. Munich-based ex-pat tax counsellor Thomas Zitzelsberger states that individuals can write off up to two-thirds of the costs as special expenses, with a limit of €4,000 per child.

Long rides to work

Taxpayers who must travel a great distance to work may deduct these expenses. 30 cents per kilometre can be claimed as a lump sum for the first 20 kilometres. Regardless matter whether you travel by bike, vehicle, or train, they can even collect 38 cents apiece after the 21st kilometer.

High costs tied to professional activity

Extremely high “special payment”

One-time special payments, such as bonuses for excellent performance or severance pay for early termination of an employment contract, might cause an employer to withhold an excessively large amount of income tax. You can receive a refund for the additional tax you paid on them by filing a tax return.

Move related to a job

• • Moving expenses can be deducted when filing taxes for a new job, whether in a different area or returning from an overseas posting.
  • Deductible expenses include travel costs for apartment hunting, real estate broker fees, and double rent payments.
  • It’s crucial to keep records of all expenses incurred during the move.
  • A flat rate for moving expenses can be used for items like apartment remodelling, re-registration fees, and expert lamp installation.
  • Taxpayers can deduct up to €886 from their tax return, with an additional €590 per person if their spouse, partner, unmarried children, stepchildren, or foster children also move.

Church tax paid

According to Machnow from Taxfix, “Anyone who is a member of a church in Germany has to pay up to nine per cent church tax.” The fact that it can be deducted is a plus. Church taxes are recorded under special expenses and are treated just like donations for tax purposes.

The tax return is the only way for taxpayers who did not receive the €300 energy relief payment in 2022 to help with energy costs to get the money. The lump sum will be automatically considered by the tax office when it is submitted.

High additional costs resulting from illness

Whether for medical costs, prescription medicine costs, or the necessary wheelchair: “If taxpayers have incurred a particularly large amount of expenses for their medical costs in one year, this can have a tax-reducing effect,” according to the Taxpayers’ Association. The expenses are included under exceptional burdens. The requirement is that medical costs exceed the allowable burden threshold. This is dependent on your income, marital status, and how many kids you have.

Financial gains

Have you received dividends from the sale of any securities you made this tax season? Afterwards, you might be qualified for a tax refund. The Steueramt will refund the difference to a taxpayer whose marginal tax rate is below 25% but who has paid the final withholding tax on capital gains at the rate of 25%.

Craftspeople offer services

• • Craftsmen’s work inside your home, while initially costly, can reduce your tax burden.
  • You can deduct 20% of labour expenses, up to a maximum of €1,200.
  • Fill out the “Household-related services” annexe with the entire invoice amount to claim this deduction.
  • Remodelling an owner-occupied property can yield even higher tax savings.
  • You can deduct up to €40,000 or 20% of the remodelling costs.
  • Complete the “Energy Measures” annexe (Energetische Maßnahmen) on your tax return for this deduction.
  • Make sure you do not seek any public subsidies to qualify for this deduction.

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