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Five simple steps to getting your German tax refund

It can’t be avoided – wherever you live, taxes are a certainty. However, the taxes we pay provide an enormous benefit to society, in that they provide a social safety net.

Five simple steps to getting your German tax refund
Photo: Getty Images
Nowhere is this more evident than in Germany, where the wealthiest can expect to pay up to 45% in 'Lohnsteuer', or income tax. Unemployment benefits, pension payments and ‘Kindergeld' (literally ‘child money') for parents are all significant benefits paid for by German taxpayers. 
 
Filing a tax return in Germany is not compulsory (unless you fit into a few select categories). You'd be crazy not to however! With the tax-filing app Taxfix, a return typically takes under half an hour to complete – and the average person gets back more than €1,000. If you're an expat and unfamiliar with how German tax deductions work, you could easily be paying more than your fair share of tax. Here are five simple steps to help you make sure you get your return in on time – and get back all the money you're entitled to. 
 
 
1. Gather your paperwork – and keep it in order 
 
Germans prize organisation and good record keeping as a virtue, and if you follow them in this respect, you'll be well-prepared for tax season. Firstly, do you know the final deadlines for filing a tax return? The last chance to file for 2016 comes on December 31st this year, as part of a four-year rolling cycle.
 
Using a single folder for each tax year and a hole punch will often suffice to keep your receipts and invoices in order, with dividers for different categories, such as fuel receipts, energy bills, food expenses during business trips, and software.
 
If you're intent on reducing your paper waste, there are a number of apps, such as Simple Scan and Microsoft Office Lens, that allow you to photograph your paperwork, turning them into readable PDF files that you can store somewhere on the cloud. This can be handy and a major timesaver at tax time, when you're hunting down figures – new technology means that figures can often be copied and pasted from these files directly. 
 
 
2. Keep up to date on what you can claim.
 
The federal government in Germany often updates legislation regarding what people can claim as deductions against their tax. There are always attempts to close loopholes and maintain tax revenues. Generally, your everyday, regular travel costs to work can be claimed, as can a percentage of home office costs such as internet and power bills. 
 
Other common tax deductions for employees include business literature and work equipment. Personal deductions can be made for a variety of things, including health insurance premiums, childcare expenses up to the age of 14, and charity contributions.
 
Depending on what you do, professional insurance that you may have taken out can also be claimed. However, it pays to check websites such as the official federal government Make It In Germany site for updates in the lead up to tax season. If you're genuinely confused about what you can claim, any tax adviser should be able to help you for a minimal fee. 
 
 
3. Get the help you need in an app (in English!) 
 
Paradoxically, Germany's complex tax system has given rise to a number of apps, websites and services that streamline the process of lodging a tax return. Multiple popular services, including Taxfix, use a series of guided conversational questions to lodge your return, calculating your estimated return based on the answers and data that you provide.
 
The apps work with Elster, the German government's tax return software, to process your return speedily. While you can also file a paper return, and some prefer this method, electronic services save not only time, but a significant amount of paperwork. 
 
Each of these electronic tax services have different strengths – Taxfix especially has been designed with the needs of expats in mind. All questions are in simple, direct English and have been drawn up to make sure you get back all the money you're due under German law. The app aims to make it simple for everyone to claim their full tax refund, even with no prior tax knowledge – so you won't be confronted with confusing jargon!
 
Photo: Taxfix
 
4. Don't rush it – time really is money
 
You can easily feel overwhelmed or confused by the rules of the German tax system. While the temptation may be to click through each question in an app as quickly as possible, you can save potentially hundreds of euros by reading each question carefully, and ensuring you can justify each answer with your records. Even doing so, it won't take anymore than an hour at the most – and isn't that worth a chunk of money landing in your account?
 
5. Avoid hidden costs with a transparent service
 
The amount tax accountants charge can vary wildly. With Taxfix, all costs are set and transparent. If your estimated return is under €50 and you're not obligated to make a return, submitting via Taxfix is free.
 
If your estimated refund is over €50 (or you're obligated to file), there's a single fee of €39.99. That's it. Furthermore, this fee can be claimed against your next return, as tax consulting fees.
 
Ready to find out if you're due a tax refund? Taxfix is available via their website and their app, which can be downloaded from both Google Play and the Apple App Store. Try it out today to see how much money you could get back.
 
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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.

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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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