When it comes to completing your tax return successfully, the rules are pretty simple:
- Any expenses related to income earned in Germany can be deducted
- Your income tax burden can be offset with tax prepayments or wage tax
Anyone who follows these simple and logical rules is rewarded, on average, with a tax refund of 1.007 euros. The problem is, there are a variety of allowances, limitations and special regulations that you need to be aware of, in order to maximise your return.
Here is a brief overview.
The employment expenses you can deduct from your income
If you are working as an employee, you can deduct the following kinds of expenses:
- 0,30 cents per kilometre for your daily commute to work (if not already compensated by your employer).
- Costs for maintaining a home office (if your company does not provide you with a workplace). This only applies if you use the room for work purposes only (not for private purposes).
- Training or work equipment not covered by your company.
- Travel costs, utilities, stationery supplies and photos (e.g. if you apply for a new job).
- Account management fees.
- Relocation costs if you move for business or work-related reasons.
- Costs for maintaining a double household if you establish a second household for business reasons.
Deductible expenses for freelancers and entrepreneurs
If you work as a freelancer or you run your own business, you may also be able to deduct the following:
- Costs for business trips, for instance, hotel and flight costs. There is also a meal allowance depending on the destination country and the duration of the trip. For a domestic one day trip (more than eight hours), the allowance is 12 euros. If you use your private car, 0,30 euros per kilometre is deductible.
- Costs for entertaining business partners (up to 70 percent).
- Gifts for business partners (up to 35 euros per calendar year).
- Assets of up to 800 euros net can be considered costs in the year of purchase.
- Assets above this amount can be amortised, depending on the item’s useful life.
Deducting private costs on your German tax return
To a certain extent, some private related costs are also deductible. This includes:
- Childcare costs, such as Kindergarten or school fees.
- Social security contributions that are deducted from your salary. You can find information on these in your wage tax certificate (Lohnsteuerbescheinigung).
- Private health insurance premiums (you’ll need a certificate from your health insurance company).
- Contributions to private pension plans like “Riester” or “Rürup”.
- Costs for hiring a housekeeper or cleaner for your private household. If you rent a flat, these costs are included in the ancillary cost bill (you will need to ask your landlord for documentation).
Completing your tax return the year you move to or from Germany
In the year you move to or from Germany, the tax regulations of both countries need to be taken into consideration. Both countries are keen to tax your worldwide income. To avoid double taxation, bilateral agreements - so-called “double taxation treaties” - apply for many countries.
Most of them foresee that income earned outside of Germany will be tax-free but considered for the calculation of your individual tax rate. A different mechanism applies if there is no such agreement in place, for instance with countries like Brazil. In this case, your worldwide income is taxable in Germany but any foreign taxes already paid are offset against your tax burden in Germany.
Deadline for filing the German tax return
The deadline for filing your tax return for 2019 is July 31, 2020. It is possible to ask the responsible tax authority for an extension; the extension is automatically extended to February 28, 2021, if you engage a certified tax advisor.
You can file the tax return online via ELSTER or, if you are in regular employment, you can still choose to fill out the return on paper and post it to your local tax office.