Filling in a tax return is never a fun experience, but statistics from the German government show that it can definitely be worthwhile. In 2017, the average worker received a €1,051 rebate after submitting their tax return, according to the Federal Office of Statistics. Not only that, but 90 percent of workers got at least some money back from the tax office.
If you’re planning on filling in your tax return yourself this year without the help of a tax advisor – and you have to submit one because you’re a freelancer or self-employed – the deadline for doing so is October 31st, 2022.
Remember that if you’re filling in a tax return voluntarily you can generally do so up to four years after the year in question. But keep in mind that if you have been part of the Kurzarbeit reduced working hours scheme, then you will have to submit a tax return this year (more on this below).
Here’s what you need to know about the most important tax allowances and write-offs you may be entitled to.
Increased commuter allowance
Since January 1st, 2021, the so-called commuter allowance has been increased by five cents. The commuter allowance enables workers to write off expenses for every kilometre they have to travel to work, with the amount increasing in commutes of more than 20km one-way.
For the first 20km, commuters can claim 30 cents in expenses, and from the 21st kilometre onwards, commuters can claim 35 cents per kilometre. So a person who travels 25km to work would be able to claim €7.75 in travel expenses for each working day.
The amount taxpayers can claim for commutes over 20km is set to go up again this year in light of rising fuel costs. Workers will soon be able to claim 38 cents back on each kilometre over 20 that they travel to work, but this will only apply to the 2022 tax return, so the benefits won’t be felt until 2023.
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Workers on Kurzarbeit must submit a tax return
The Kurzarbeit scheme, which allowed workers to receive similar pay for reduced hours during Covid, remains an important issue for many who now have to file their tax returns. The basic rule is that anyone who received more than €410 via the scheme in 2021 is obliged to file an income tax return this year. Incidentally, this applies to all of the so-called “wage replacement benefits”, i.e. also to sickness, maternity, parental, unemployment or insolvency benefits.
“Even those who are not very good at tax returns should take the compulsory assessment very seriously,” says Bernd Werner, chairman of Lohnsteuerhilfe für Arbeitnehmer, a tax advice agency based in Gladbeck.
This is because experts believe that the tax office is likely to review all cases and could ask people who have neglected the 2021 tax return to fill one in several months later. These unlucky people will then have to pay €25 per month in late fees and will possibly face interest on their tax repayments as well.
Whether Kurzarbeit employees are due a tax rebate is subject to a number of factors. While the Kurzarbeit allowance itself isn’t subject to tax, it will be counted as income for the purposes of determining which tax rate is applicable.
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Tax relief for people with disabilities
On January 1st, 2021, the government hiked up the financial allowance granted to people with disabilities. The amounts – which had remained unchanged since 1975 – were doubled. Since last year, for the first time, people with a “degree of disability” (GdB) of 20 can claim a lump sum of €384, with the allowance increasing with each additional degree of disability. People with a degree of disability of 100, for example, can claim €2,800. For a full list of the relevant amount for each disability grade and for blind people, check out these helpful charts.
If you received the lump sum in 2020 or before that, you don’t have to do anything more this year as the tax authorities will automatically apply the increases. However, numerous glitches surfaced at the beginning of last year, so do double-check whether the tax authorities have granted the correct lump sum.
If you were first diagnosed with a disability in 2021, you’ll need to apply for the financial aid at your local tax office before you can receive the money.
It’s important to note that if medical expenses have been incurred due to the disability, they can still be deducted from the tax return. In addition, lump-sum travel allowances have been introduced for people with disabilities:
- €900 is given to people with a GdB of at least 80 or with a GdB of at least 70 and severe mobility issues
- €4,500 for people with a severely disabled person’s ID card or those who are classed as blind (Bl), deaf-blind (TBl) or helpless (H)
As of 2021, the legislator also raised the flat-rate care allowances significantly. Carers who work for free can now claim:
- €600 for care level 2,
- €1,100 for care level 3
- €1,800 for care degree 4, 5 or helplessness (sign “H”).
Changes to child benefit
In an important change for families, child benefit and child allowances were increased in 2021.
The monthly child benefit for last year is:
- €219 each for the first and second child
- €225 for the third child
- €250 each for the fourth child and above.
At the same time, the child allowance has also increased. This is now €8,388 for each child if the parents are assessed together.
The tax office calculates which is more advantageous for the taxpayer – child benefit or child allowance – with the “Günstigerprüfung”.
In addition, there was a one-time Kinderbonus of €150 for each child in 2021 due to the Covid pandemic. In 2022, an additional Kinderbonus of €100 per child is to follow, but this won’t apply until 2023.
Relief for single parents
An increased amount of tax relief for single parents with one child of €4,008 also applied in 2021. This had been raised because of Covid, but the government has decided to keep the higher amount on a permanent basis. For each additional child, the relief increases by €240, as before.
Simplified proof of donations
Due to the catastrophic flooding in July 2021, some federal states – including Saxony, Bavaria and North Rhine-Westphalia – have decided to simplify the proof of donations, which are also a tax write-off. The prerequisite is that donors transferred money to one of the donation accounts that was eligible for tax relief.
Generally, states have increased the maximum amount of donations for which the simplified proof of donation (e.g. the remittance slip) is accepted. Now, you can use simplified proof for donations of up to €300.
Home office allowance
With so many people continuing to work from home throughout the pandemic, the home-office allowance of €5 per day will also apply to the 2021 tax return.
“The home office allowance sounded good on paper,” says Werner. “However, it didn’t pay off for many home workers who could certainly have used the money.”
That’s because the deductible amount is based on the number of days an employee works from home and is capped at €600. However, since the tax office already assumes expenses of around €1,000 per employee, workers will have to have at least €400 in other expenses to benefit from it. This may not be too hard to find, however – especially if you bought equipment like a printer or laptop to use for work last year, or paid for training related to your profession.
Home office workers should also be aware that they cannot claim a commuter allowance on home office days.
According to Lohnsteuerhilfe für Arbeitnehmer, another way to get tax relief from working from home is to have a dedicated working room in the flat. This allows you to deduct part of your rent and expenses for furniture and equipment from your return. However, the conditions for this are very strict: you must be able to prove your flat is big enough to support a separate office and that this room is solely used for work purposes.
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Income-related expenses
As we mentioned above, even people working at their kitchen table or in the living room (or, dare we say it, in bed) can write off income-related expenses in their tax return.
These include, for example, purchases such as a PC or a printer, a camera for video conferences, but also furniture such as an office chair or desk. There are a few things to be aware of, however: purchases such as a PC must be at least partly used for work and only the amount used for work can be deducted from the tax return. That means, for example, that a €2,000 laptop that is used for work 50 percent of the time equates to a €1,000 deduction in your tax return.
Equipment costs of up to €800 (excluding VAT) can be deducted immediately, while more expensive purchases must be “depreciated” over several years. For example, a pricey work phone costing €1,000 could equate to four lots of €250 deductions over four years. Computers and software are exceptions: since 2021, these can be written off immediately regardless of what they cost.
Another important thing to note is that working from home allows you to deduct slightly more for your phone and internet service. Currently, a flat-rate of 20 percent of your monthly internet and phone costs can be treated as income-related expenses.
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Tips for pensioners
If a pension was paid for the first time in 2021, 81 percent of the pension is counted as taxable income. Even a monthly pension of €1,250 may mean that tax has to be paid. Furthermore, the tax authorities ask pensioners who have not yet submitted a tax return to fill in backdated ones stretching back several years. In individual cases, this may even result in back-payments of several thousand euros as well as considerable late fees, according to Lohnsteuerhilfe für Arbeitnehmer.
Seek advice and double-check your return
As a final word of advice, Lohnsteuerhilfe für Arbeitnehmer suggests speaking to a tax support association and being extra thorough when reviewing income and potential expenses.
“It’s also worth seeking good advice from an income tax assistance association,” says Werner. “Furthermore, we advise everyone to check their tax assessments carefully, because many tax assessments are incorrect. This is shown every year by the number of rejected returns listed by the Federal Ministry of Finance.”
READ ALSO: Five simple steps to getting your German tax refund
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