TAXES MADE EASY

by Anshul Srivastava
WHY SHOULD YOU FILE TAXES IN
GERMANY?
It is not mandatory to file a tax declaration in Germany
(Steuererklärung) if you are a regular employee.

However, according to tax experts in Germany, people who

hand in their tax return do get roughly 1000 euros back per
year .

That’s why even if you don’t have to file a tax declaration, it is

worth investing a little bit of time, research, and effort into
submitting your tax return.

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It is mandatory to file taxes if one of the following applies:

You receive other payments or substitute income benefits

(Lohnersatzleistungen) that are more than 410 euros, such
as parental allowance (Elterngeld).
You have received extraordinary income, such as severance
payments.
You got divorced, and either you or your ex-partner got
remarried in the same year.
You have several employers at the same time (not counting
mini-jobs).

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 You have received income in another country, for example,
the year of your relocation or rent payments from a
property.
You are married, and you or your partner have opted for tax
class III or V (More on classes later).
You have received an allowance (Freibetrag) from the local
tax office.
You have been in Kurzarbeit.

For freelancers and self-employed, it is mandatory to submit a

yearly tax declaration.
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Every employee in Germany has the right to declare
expenses worth 1.000 euros, whether they actually
happened or not. However, there is misleading information on
some websites, which tell you that you can claim those 1.000
euros via your tax return. That is incorrect.

To benefit from this 1.000 euros reduction of taxable income as

an employee (Arbeitnehmer-Pauschbetrag), you don’t need to
file a tax declaration, as it usually gets considered by your
employer when subtracting your wage tax on your payslip.

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However, many employees have more than 1.000 euros in
work-related expenses per year, which you should declare to
reduce your taxable income, and thus actually get money back.

MORE ON HOW TO REDUCE YOUR TAXABLE INCOME

TOMORROW.
STAY TUNED!

DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.
HOW TO REDUCE YOUR TAXABLE
INCOME?
There are three different expense categories, with which you
can reduce your taxable income and thus increase your tax
return from Germany.

1. Work-Related Expenses (Werbungskosten)

Here are a few examples of work-related expenses:

Costs created through job applications
Your daily commute to work
Any new electronics you bought, which you also use for
work.
An office room in your apartment
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 2. Special Expenses (Sonderausgaben)

Here are a few examples of special expenses:

Charity or political donations within Germany
Expenses for private pension savings
Social security contributions (such as unemployment,
health care, etc.)
Church tax
Business-travel expenses
Educational expenses

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 3. Exceptional Expenses (Außergewöhnliche Belastungen)

Here are a few examples of exceptional expenses:

Medical costs, such as a wheelchair, glasses, etc.
Alternative medicine, such as acupuncture, homeopathy,
etc.
Fertilization
Reconstruction of a household due to a disability
Support of family in need, such as payments to your
parents.

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Some of these expenses get taken into account automatically,
others stand in relation to how much you earn.
To make your life easier, you should start collecting or archiving
the receipts for any qualifying expenses throughout the year,
so you don’t begin scrambling when it is time for your tax
return.
MORE ON HOW TO FILE A TAX RETURN TOMORROW.
STAY TUNED!

DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.
HOW TO FILE A TAX RETURN?
Now that you know the benefits of submitting your tax
declaration let’s take a look at your different options to file a
tax return in Germany.

1. Use A Tax Return Online Software

As a regular employee, using a tax return software and

entering all your data online is by far the fastest and easiest
way to submit your tax declaration. Thankfully, a few providers
will guide you through the entire process in English for a small
fee of around 30 euros. Additionally, these softwares provide
you with tips on how to maximize your tax refund.
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 Best Tax Return Softwares In Germany In English

Here are my top picks for the best tax return softwares in
Germany in English. All software providers calculate an average
tax return of more than 1.000 euros. They also offer to enter
your data first, so they function as a German tax refund
calculator.

1. Steuerbot
2. SteuerGo
3. Taxando
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 2. Use A Tax Consultant

If you are self-employed, have multiple income sources, or are

unsure how to handle taxes in Germany and your home
country, you should consider consulting a tax consultant
(Steuerberater).

You can expect the most individualized and accurate service

that comes with a higher fee than the other options listed in
this guide. The fees depend on how complex your case is and
can range between 200 euros and 1.000 euros or more.
However, your tax return will most likely also be higher than if
you do it yourself or use a software.
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 3. Become A Member Of A Lohnsteuerhilfeverein

Suppose a tax consultant is too pricey for you, but you would
like to have external help for your tax declaration. Then,
become a member of a Lohntsteuerhilfeverein, which is a
German tax assistance association.
Every town has such an association, which helps members to
prepare their tax declaration. Usually, you pay an annual
membership fee based on your salary (on average, around 100-
300 euros per year).
This option is only applicable to regular employees. If you are
self-employed or earn a side income as a freelancer, you cannot
become a member of a Lohnsteuerhilfeverein.
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 4. Use The Official German Tax Authorities Online Form

ELSTER (Elektronische Steuererklärung) is the official online

platform to submit your tax declaration.
Using ELSTER is by far the most complicated, time-consuming,
and error-prone way of filing your taxes. After creating an
account, you will need to enter German bureaucratic forms.

MORE ON DOCUMENTS REQUIRED FOR A TAX RETURN

TOMORROW.
STAY TUNED!
DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.
DOCUMENTS REQUIRED FOR TAX
DECLARATION
Regardless of which of the four options you choose to submit
your tax declaration in Germany, you will need to have the
following documents handy:
Your employment tax statement
(Lohnsteuerbescheinigung), which is a summary of all your
earnings and paid taxes of the year. You will receive this
form at the end of the year or at the end of your
employment, together with your payslip.
Your tax ID (Steuer-ID, TIN, or Steuer-
Identifikationsnummer), your unique 11-digit number that
you received by snail mail, about six weeks after you did
your Anmeldung at the Bürgeramt. You can also find your
Steuer-ID on your payslip.
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Your tax number (Steuernummer), your individual tax
number assigned by your local tax office to catalog your
documents faster. If this is your first tax declaration, you can
enter ‘neu’ in this field; otherwise, you can find it on your last
tax assessment (Steuerbescheid).
Your German bank account details (IBAN, BIC) for your
refund.
Proof of any income from outside of Germany. Most
countries have a ‘no double taxation agreement’ with
Germany.
Your receipts of any work-related, special, or exceptional
expenses.
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 Details of your children (if applicable)
Amount and period for which you received child benefits
(Kindergeld).
Expenses for daycare or education, e.g., Kindergarten/Kita.
Any other income or benefit, e.g., parental allowance
(Elterngeld)
MORE ON GERMAN TAX RETURN DEADLINES TOMORROW.
STAY TUNED!

DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.
WHEN IS THE GERMAN TAX RETURN
DEADLINE?
The German tax year follows the calendar year and runs from
January to December. The German tax return deadline varies
depending on a few factors:

Mandatory tax declaration: You have to submit your tax

declaration between January 1st and July 31st of the following
year (so up to July 31st 2022, for the tax year 2021). You can
apply for an extension once with the local tax office
(Finanzamt).

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Voluntary tax declaration: You can hand in your tax
declaration and apply for refunds up to four years. So in 2022,
you can still declare your taxes for 2021, 2020, 2019, and 2018.
Through a tax advisor or Lohnsteuerhilfeverein: If you choose
to use a tax adviser to file your tax return, you have even more
time. The deadline for a tax adviser is the end of February of the
following year (so February 28th 2023, for the tax year of 2021)

MORE ON TIME REQUIRED TO RECEIVE TAX RETURN TOMORROW.

STAY TUNED!

DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.
HOW LONG DOES IT TAKE TO GET TAX
REFUND?
Once you have filed your tax return, it usually takes between
two to six months for the local tax office to process it and
send you your tax assessment (Steuerbescheid).

This paper will inform you whether your tax return was
approved or changes were made. In case of a refund, the
amount will be directly wired to your bank account, usually
when the tax assessment is sent.

DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.
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WHAT ARE THE TAX CLASSES IN
GERMANY?
 There are six tax classes (Steuerklassen) in Germany:

German Tax Class Marital Status

Tax Class 1 You are single, widowed, separated/divorced

Tax Class 2 You are a single parent, living separately

You are married (or widowed within the first year of the
Tax Class 3 spouse’s death) with a significantly higher income than your
partner in tax class 5

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German Tax Class Marital Status
Tax Class 4 You are married with both spouses earning similar income
You are married with a significantly lower income than your
Tax Class 5
partner in tax class 3
The tax class for second and side jobs (regardless of marital
Tax Class 6
status)

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The combination of tax class 3 and 5 is only possible for
married couples if both spouses live in Germany.
If your spouse is still in your home country waiting for their visa,
you will be placed in tax class 1 and you will need to apply for a
tax class change, once your spouse is also registered in
Germany.

MORE ON HOW TO KNOW YOUR TAX CLASS TOMORROW.

STAY TUNED!

DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.
HOW TO KNOW YOUR TAX CLASS?
After you registered in Germany (Anmeldung), you will receive
your tax ID within the next six weeks. You need to give this tax
ID to your employer.
Additionally, the tax authorities (Finanzamt) assign you to
your tax class primarily based on your marital status: single,
single parent, or married.
The tax authorities will inform your employer accordingly;
however, it could take a few weeks.

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Only once your employer knows your tax ID and tax class, they
can calculate the deductions of your salary correctly.

Until then, you will get taxed with the highest tax rate in the
German tax system. You will be able to see your tax class on
your payslip indicated as SKl (Steuerklasse).

MORE ON WHAT ARE THE TAX RATES IN GERMANY TOMORROW.

STAY TUNED!

DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.
WHAT ARE THE INCOME TAX RATES
IN GERMANY?
The income tax gets deducted from your monthly salary by
your employer. It is a progressive tax ranging from 14% to
42%.
Income up to 10.908 euros in 2023 is tax-free
(Grundfreibetrag). Income more than 62.810 euros gets
taxed with the highest income tax rate of 42%
(Spitzensteuersatz). The so-called rich tax (Reichensteuer)
of 45% starts at an income of 277.826 euros.
When calculating how much income tax, you need to pay,
you need to differentiate between the marginal tax rate (14
– 42%) and the average tax rate, which is what you will
actually pay (usually it is lower than the marginal tax rate).
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 Marginal & Average Tax Rates
Consider a system with three tax brackets, 10%, 20%, and 30%,
where the 10% rate applies to income from €1 to €10,000, the
20% rate applies to income from €10,001 to €20,000, and the
30% rate applies to all income above €20,000. Here 10%, 20%
and 30% are called marginal tax rates.

Under this system, someone earning €25,000 would pay

€1,000 for the first €10,000 of income (10%); €2,000 for the
second €10,000 of income (20%); and €1,500 for the last €5,000
of income (30%). In total, they would pay €4,500, or an 18%
average tax rate.
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 If you are a regular employee with no other income other
than your salary, the proper term for the tax that gets
deducted on your payslip is wage tax.

Example Calculation Of Wage Tax Rates In 2023

Marginal
Taxable Gross Average Income Tax Remaining Net
Income Tax
Income Tax Rate Amount Income
Rate

€10.000 0% 0% €0 €10.000
€45.000 35,14% 21,19% €9.537 €35.463
€85.000 42,00% 30,27% €26.701 €58.299
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Example Calculation Of Wage Tax With Insurance

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 I HOPE YOU ENJOYED LEARNING BASICS OF TAXATION IN
GERMANY!

Fin !
DISCLAIMER: I AM NOT QUALIFIED TO PROVIDE TAX ADVICE UNDER GERMAN LAW. I AM A FINANCE ENTHUSIAST WHO LOVES TALKING ON PERSONAL
FINANCE TOPICS. FOR TAX ADVICE, I STRONGLY RECOMMEND YOU CONSULT A PROFESSIONAL TAX CONSULTANT.