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TAXES

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

Starting in 2023, people working from home will be able to deduct €1,000 per year for working from home, up from the previous annual amount of €600. Here's what you need to know.

Published: 1 December 2022 16:54 CET
A man works on his laptop at home.
A man works on his laptop at home. Photo: picture alliance/dpa | Sina Schuldt

This means that in future, 200 instead of 120 days devoted to ‘home office’ will be eligible for the €5 per day deduction, which was originally introduced amid the Covid pandemic in 2020 and was set to expire at the end of this year.

READ ALSO: Germany plans tax rebate for people working from home

The sum can be deducted regardless if a separate workspace is used or available – meaning it applies to employees working on their couches or kitchen tables.

“This especially relieves families with smaller flats, who don’t have the space available for an extra office,” according to a statement on the German government’s website.

Employees who do have a separate study, though, can furthermore claim €1,250 back on their taxes.

However, certain criteria must be met – for example, the room must be used exclusively for professional purposes and must be separable from the rest of the apartment.

All workers in Germany also receive a lump sum of income-related expenses, which can be deducted each year: that amount is going up by €200 in 2022, bringing the total to €1,200.

The higher working-from-home allowance is part of the Annual Tax Act 2022, which was discussed by the Bundestag Finance Committee on Wednesday, and is set to be approved on Friday.

In September, about a quarter of employees in Germany were ‘continuing to work from home’ after Covid-measures were relaxed, according to the Munich-based Ifo Institute.

READ ALSO: Who benefits most under Germany’s tax relief plans

More tax changes

The new tax law will also introduce an ‘excess profits tax’ (officially called the “EU energy crisis contribution”) for companies that make large profits from oil, natural gas, coal and refineries. 

People with larger incomes will also be required to pay the tax on the gas price cap, which is set to be paid out to residents early next year. 

Vocabulary

Deduct – abziehen

Workspace – (der) Arbeitsbereich/ (der) Arbeitraum

Lump sum – (die) Pauschale

Income-related expenses – (die) Werbungskosten

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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TAXES

German government clashes over Finance Minister’s tax relief plans

Finance Minister Christian Lindner has been slammed over his proposals to cut taxes in Germany, with his coalition partners saying they benefit the wealthy.

Published: 6 June 2024 10:17 CEST
German government clashes over Finance Minister's tax relief plans

Lindner, of the pro-business Free Democrats (FDP), said he wants to offset the effects of high inflation and provide taxpayers with relief totalling around €23 billion over the next three years. 

The plan is to adjust wage and income tax in three stages by 2026, Lindner said during a presentation in Berlin on Wednesday. “It is simply a matter of fairness to adjust the tax system to inflation. The state must not be the winner of inflation.”

Lindner wants to gradually increase the tax-free allowance, up to which no tax is paid by earners, to €12,336 by 2026, including a backdated increase of €180 to €11,784 this year.

The next step would come into force from January 2025 when the basic tax-free allowance would rise by a further €300 to €12,084.

READ ALSO: 8 unlikely tax breaks in Germany that international residents need to know

In his plans, Lindner argued that this would provide a saving to taxpayers of €2 million in total – and would be a signal of support to working people after unemployment benefits – or Bürgergeld – were increased due to inflation.

The FDP politician also said he wanted to combat cold progression – a phenomenon where pay increases are eaten up by inflation but taxed at a higher amount – by raising the threshold for paying the top rate of tax to €69,798 per year in 2026.

German Finance Minister Christian Lindner (FDP) at an event in Berlin on June 15th.

German Finance Minister Christian Lindner (FDP) at an event in Berlin on June 15th. Photo: picture alliance/dpa | Michael Kappeler

However, it comes as the German government is having to make tough budget choices and savings. And there is currently still a financing gap of around €25 billion in the German government’s budget plans for the coming year.

Despite the high costs of his tax relief plan, the FDP leader does not see the current budget discussions being jeopardised: “If the coalition strengthens economic growth with bold impulses”, sources close to the minister said. 

The FDP’s coalition partners – the Greens and Social Democrats (SPD) – have hit back, arguing the plans will primarily help those who are better off at a time when budgets are tight. 

“You can’t demand drastic savings from other departments…and then demand tens of billions yourself without need,” Green Party finance expert Katharina Beck told Reuters.

“In view of necessary investments in defence, it is dubious to bring tax cuts in the double-digit billion range into play,” Beck said, adding that the rich would benefit most from the reduced tax burden.

Michael Schrodi, financial policy spokesman for the SPD parliamentary group, expressed a similar view, saying that social security should take priority — rather than providing tax relief for top earners. 

In the last months, more cracks have been showing in the coalition government, which is led by the SPD, as junior partner – the Free Democrats – has been pushing for changes to spending and cuts to social security.  

READ ALSO: Why a push for tougher benefit sanctions in Germany is sparking a dispute

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