Seven ways to pay less tax in Germany

Doing your tax return in Germany can be a famously complex process. The German tax authorities don't always make things easy for English speakers either.

Seven ways to pay less tax in Germany
Photo: Getty Images

However, forewarned is forearmed. Not only can knowing what can be claimed help you to prepare, it can also lead to a substantially lower tax bill. Together with tax expert Lars Weber, from Taxfix, The Local investigates some of the costs you can claim in Germany that you might not know about as an international resident.

Make the process of filing your German taxes a breeze with Taxfix and receive a 50 percent discount by using the code ‘TX_TheLocal50’

1. Childcare

If you’ve got young children, you’re able to claim their childcare costs as a deductible on your tax return. As Weber tells us: “Many expats don’t know that you can claim these childcare fees, you simply need to have a record of payment somewhere safe, that you can show if your local tax office wants to see your records.”  

2. Home office 

Starting in late 2020, the Jahressteuergesetz 2020  (Annual Tax Act 2020) allows employees to claim up to €600 for both last year, and the following tax year, as home office expenses. This is known as the Home Office Pauschale  (‘Home Office Flatrate’). If you’ve been forced to set up a desk and laptop in a corner of your living room to work over the past year or so, you should be sure to claim this expense. 

3. Job education and training 

“If you need further training for your job, and that training is conducted in German, you should claim any associated costs on your tax return,” says Weber. So, if you’ve been sent off to another city to do a course, especially overnight, be sure to keep your receipts, whether they be for hotels, petrol, or any other reasonable costs. If you’re paying for this training out of your own pocket, you should be especially sure to keep your receipts for tax time. 

On the web, iOS or Android – Taxfix is the fast, simple way to claim an average of €1,051. Use the code ‘TX_TheLocal50’ for a 50 percent discount

Photo: LinkedIn/Lars Weber

4. Professional memberships 

Similarly, if you’re obliged to be a member of a German professional organization as part of your work, membership costs and other costs associated with maintaining your membership can and should be claimed. This is not solely restricted to those who require a licence or certification to do their job – if it’s an expectation that you should be a member of an organisation in your professional field, then you should consider these a deduction. 

5. School fees

If you have a family, it’s not just childcare costs you should consider. “If you’ve got school-aged children who are attending a private or international school, then their school fees can be claimed as a deduction,” Weber says. As always, be sure to keep full records, as if the Finanzamt  (‘Finance Office’ for your region) come calling, they’ll want to see them in their entirety, for the year in question. 

6. Workroom 

While everyone who has been forced to work from home by the pandemic can claim the Home Office Pauschale of €600, those who have an entire room in their home dedicated to work can claim up to €1,200 in outfitting costs. “You can even claim the cost of curtains, if you can provide the receipts.” Having a room solely dedicated to work can also lead to further deductions, such as power and internet costs, if you can prove that those costs were incurred in the course of your job.

Be careful however. As Weber warns: “Your local Finanzamt can be very strict in what is considered a workroom, and may come asking questions. Be sure that it is a distinct and separate room to your living area, and somewhere you’re not spending a lot of time outside work.”

7. The simple, fast tax solution

“If you’re using Taxfix to lodge your return, you shouldn’t worry about claiming things on your tax return”, says Weber. This is because Taxfix is specifically designed with a question flow that guides you to answer only the questions that are required for your unique personal circumstances.

Everything is in simple, clear English, and your return can be completed in roughly 22 minutes. If your return is under €50, there is no cost, and if it’s over, you play a flat rate of €39.99. Best of all, users usually receive around €1,051 back – more money to enjoy Germany with! 

Wherever you are, use Taxfix to lodge your return in just 22 minutes. Use the code ‘TX_TheLocal50’ to receive a 50 percent discount

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EXPLAINED: The German tax changes coming into effect in April 2023

April 1st will see many of the recent changes to Germany’s tax regime implemented. Although passed through the Bundestag last year and technically effective as of January 1st, April is the first month many of the changes will be evident on employee payslips. We explain what might look different.

EXPLAINED: The German tax changes coming into effect in April 2023

Employees working in Germany should finally see some changes on their payslips in a month from now, as tax law amendments passed last year finally leave some extra money in their bank accounts at the end of each month.

The most important changes concern tax credits or allowances—and many don’t have to be applied for.

Employees will generally see the new allowances automatically calculated into their monthly payslips.

Freelancers will have to use these new numbers when filing their 2023 tax returns after the end of the year. Here are the most important changes:

Basic tax-free allowance increases

The Grundfreibetrag – or “basic allowance” – is the amount of money you get to make a year before being subject to any German tax. In 2022, the first €9,984 a person made in Germany was subject to no tax at all, with any money made on top of that being taxable. As of April 2023, that number is increasing by quite a bit, to €10,908 annually. Employees should see this extra money prorated by month starting with their April 2023 payslip.

READ ALSO: EXPLAINED: How to understand your German payslip

Higher income threshold before entering top tax rates

Before April 1st, earning €58,597 annually put you into the highest possible income tax bracket in Germany. Any earnings above this were subject to the top tax rate of 42 percent.

As of April 1st, the amount someone has to earn before paying the top tax rate of 42 percent goes up by several thousand euros to €62,810 per year, meaning a little bit extra stays in the accounts for anyone earning less than this. There is still a special tax bracket above this for wealthy people. That threshold starts at earnings of €277,826 annually and will remain the same, with people making at least this amount subject to a top tax rate of 45 percent.

READ ALSO: Reader question: How do I find a German tax advisor?

Employee lump sum tax credit to go up

Although freelancers can deduct almost anything associated with their work on their annual tax returns—from stationary to computer and phone purchases—German tax offices also generally assume that employees have certain expenses related to their work that they may pay out of their own pockets.

These could be phones or LinkedIn subscriptions for example. Crucially, the tax office simply gives an amount to each employee in tax credits—without them having to prove the expense through receipts.

The tax office is now hiking this allowance to  €1,230 per year as of April 1st, and this should be reflected on the April 2023 payslips for employees.

READ ALSO: EXPLAINED: Which German benefits are increasing in 2023 – and how do I claim them?

Tax allowance for single parents to go up

Single parents specifically will have an additional tax-free allowance they get to keep, now set to go up with the April payslip to €4,260 annually, assuming they have one child. If they have more than one child, their allowance will increase by another €240 per year, per child—on top of the base amount.

READ ALSO: What benefits are you entitled to if you have children in Germany?