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How to save money on your taxes for pandemic year 2020 (and what to watch out for)

The unusual working conditions that were forced upon Germany by the pandemic have opened up opportunities to save money on your tax return. But there could be a nasty surprise in store too.

How to save money on your taxes for pandemic year 2020 (and what to watch out for)
Home office. Photo: DPA/Julian Stratenschulte

Filling out tax forms is obligatory for more people than usual in Germany this time around. While employees don’t normally have to fill out their tax returns, anyone who took in more than €410 in Kurzarbeit allowance last year must file a tax return.

The good news is that the pandemic has created a few opportunities to save some pennies.

Home office savings

Many of us have been sent into home office this year by our employers as the country tries to limit personal contacts.

The good news here is that you can deduct an office space in your house from your overall earnings.

If your office is a separate room in your house that you use exclusively as an office, and you worked in it for at least three of the five days of the week, then you can deduct the entire rental cost of this room, plus the heating and electricity costs, from your salary.

There is a cap here of €1,250 on the business expenses you can claim, unless you can show that your home office is the “qualitative centre” of your job. In other words, you have carry out most of the activities essential to your job there. But since most meetings now happen over Zoom or by telephone, it shouldn’t be too hard to prove this applies to you!

If you’ve just been using the kitchen table or you’ve set up a desk in the corner of your bedroom, don’t worry.

For the first time, in the 2020 tax year there is also a savings to be made here. This year, the tax authorities recognize any type of home office as a €5 per day work expense up to a maximum of €600.

READ MORE: What you need to know about tax changes in Germany in 2021

According to a report in Spiegel though, this €600 tax gift for 2020 isn’t as shiny as it seems. The tax office will not count it as an additional expense on top of the block €1,000 every taxpayer is given as an automatic earnings deduction for work expenses. That means that you have to prove more than an additional €400 in work expenses in order to jump over that €1,000 hurdle.

Office materials are key

The good news is that you can also deduct the money you spent on office materials for your new home office from your tax bill. A new monitor for your computer, an office chair, or a printer will all be approved as business expenses.

According to the consumer watchdog Stiftung Warentest, you can only deduct a percentage of a notebook computer from your tax bill, as the Finanzamt considers computers to be used as much for private entertainment as for business purposes.

There is also an important change on computers this year. The normal rule is that, if the purchase price before VAT is under €800, you can deduct it from tax in a single year. If it’s above €800 you have to deduct it over three years.

But an exception has been made for 2020 – regardless of how expensive you computer is, you can deduct the entire price from your income.

Possible arrears payments

Some six million people in Germany were put on Kurzarbeit (reduced work) at the height of the crisis last year. While that programme saved many people from unemployment, the slight downside is that it has had an impact on one’s tax declaration.

This is due to something called the Progressionsvorbehalt (progression caveat). The tax code states that money that you receive as benefits from the state, such as unemployment benefits, parental support, or short-time working benefits, are tax free.

READ ALSO: Why people on ‘Kurzarbeit’ in Germany need to prepare for a tax surprise

But that is not the end of the story. Thanks to the Progressionsvorbehalt, the money you receive in benefits is taken into account when the tax office considers how much tax you should be paying on the rest of your earnings.

Basically, the amount that you receive in benefits is added to the amount you received as income, and the state calculates your tax rate based on this total.

In many cases, the result is that people have to pay an additional sum in tax on top of what has been taken from their salary throughout the year. In other words, the Kurzarbeit benefits push you into a higher tax bracket.

Experts say that the difference could be around €1,600 for a gross income (salary plus benefits) above €40,000.

SEE ALSO: Everything you need to know about paying taxes in Germany

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For members


New deadlines and deductions: How to file taxes in Germany in 2023

The deadline for people in Germany to file their 2022 tax return is coming up. Here are the newest tax changes to keep in mind - and how you can benefit from them.

New deadlines and deductions: How to file taxes in Germany in 2023

For many people in Germany, submitting a Steuererklärung (tax return) is about as pleasant as hearing nails slowly scratching the surface of a chalkboard. 

As a result, they put it off as long as possible. But with the deadline for 2022 taxes slowly coming into sight in September, here’s a look at what you should know – and which changes to tax law will take effect for the very first time.

By when do I have to submit my tax return?

Normally, the deadline for filing an income tax return is always July 31st of the following year – provided the taxpayer completes and files the return themself. 

During the Covid-19 pandemic, however, the German government temporarily granted tax payers an extra three months more time, which also benefited the overburdened Steueramt (tax office). 

For the 2022 assessment period, there will still be an extended deadline, but just for two months – or to the end of September 2023. 

However, because September 30th falls on a Saturday this year, the documents do not have to be submitted to the tax office until the next working day, or October 2nd.

And even in Germany there’s a little flexibility: Taxpayers can always request a later submission date from the tax office. However, they need a valid reason for this – for example, if they have a longer stay in hospital that affects the process. 

READ ALSO: What you need to know about Germany’s extended tax filing deadlines

What deadline applies if I use the services of a tax consultant or income tax assistance association?

If you work with a Steuerberater (tax advisor) or tax association, your tax return for the year 2022 does not have to be submitted until July 31st, 2024. 

Starting with the 2025 assessment period, the regular deadlines will apply again. This means: Those who entrust a professional with their tax return have seven months more time than a self-filer. 

Do employees have to file a tax return at all?

Theoretically no, as taxes are automatically deducted from an employee’s payslip. Yet 50 percent of employees are still required to submit a tax return  – for example, if he or she earns additional income through renting out a property, receives wage replacement benefits such as Kurzarbeit short-time allowance or makes use of Ehegattensplitting (spousal splitting) together with his or her partner. 

Self-employed people also need to submit a return in all cases. Anyone who doesn’t file their return in time should expect the tax office to impose a surcharge for late payment.

READ ALSO: The top tax deadlines often overlooked by employees in Germany

There is no obligation for single people with tax class I, nor married single earners with tax class III, to file a return if they don’t have extra income.

In such cases, though, it’s still recommended to voluntarily file a tax return, for example to claim income-related expenses thus get money back from the tax authorities. 

Employees have four years to do this – so there is plenty of time to file a return. 

Typewriter with German tax return

A Steuererklärung – or German tax return – on a typewriter. Photo: Markus Winkler on Unsplash

Can I still submit my tax return on paper?

Employees and retirees who have no other taxable income (except from capital assets or renting/leasing) may continue to fill out their tax return on paper and submit it to the tax office. In all other cases, electronic submission is mandatory. 

The tax authorities recommend the state portal “My Elster” for this, though there are also an array of filing apps in Germany, including several such as Taxfix, with an English option.

What changes in tax law should be noted this year?

Last year, the basic tax-free amount on which no tax is payable was set at €10,347. It’s now gone up to €10,908.

In light of the high inflation and to prevent a creeping tax increase (“cold progression”), Germany has also increased the benchmarks of the 2022 tax scale by just under 1.2 percent, so the bottom line is that taxpayers have more money left. 

Last year, Kindergeld (child benefit) was €219 for the first two children, an amount which has now gone up to €250. The tax-deductible Kinderfreibetrag (child allowance) was previous €5,620 per child and has now been raised to €5,760.

READ ALSO: The tax cuts foreign parents in Germany should know about

Which tax deductions have changed?

As Germany grappled with skyrocketing inflation of over 10 percent last year, the government decided on some changes to relieve the burden on taxpayers.

These included an increase in the employee lump sum (Pauschbetrag), which is often also called the income-related expenses lump sum. 

It increased retroactively to January 1st, 2022 by €200 to €1,200. 

For 2023, the figure will go up once again to €1,230. 

Anyone who does not wish to claim individual income-related expenses in their tax return automatically benefits from the flat rate.

Germany also agreed on an increased commuter allowance. The change, which was set to come into effect in 2024 was brought forward in view of high inflation. The commuter allowance is now 38 cents from the 21st kilometre. Up to the 20th kilometre, it is still 30 cents per kilometre. The regulation is – at least for now – limited until the end of 2026.

Employees working from home can furthermore claim up to €600 for the tax year 2022 – €5 per day for a maximum of 120 days. 

READ ALSO: Germany to extend (and increase) tax rebate for people working from home