7 tax allowances and deductions you should know about in Germany

German tax law allows for numerous lump sums, tax allowances and deductions that you can use to decrease your taxable income and generate huge tax savings. Many of them don’t even require proof or receipts  – and sometimes you can deduct the full amount even if your expenses aren’t that high! Natascha Manthe from wundertax walks you through the seven most important tax rules all expats in Germany should know about. 

Want to save money on your tax bill? Make sure to take advantage of these allowances and deductions on your annual tax return! 

1. Income-related expenses lump sum

The German tax office grants a 1.000-euro (in 2021) income-related expenses lump sum (Werbungskostenpauschale) that you can deduct for any costs incurred through your work. From the 2022 tax year onwards, this lump sum will be increased to 1.200 euros per year. 

It’s automatically deducted from your taxable income, so you don’t need to provide any proof or receipts - even if your actual expenses don’t add up to this amount. If you exceed the lump sum with travel expenses, work equipment, further education, home office expenses, and so on, the costs can be deducted individually - and you will need to provide proof. 

It’s worth noting that, if you didn’t work the entire year, you’ll only receive the full lump sum for income-related expenses if you file a tax return!

2. Basic tax-free allowance

The basic tax-free allowance (Grundfreibetrag) ensures that you only pay income tax on your annual income above a certain threshold. In 2021 the basic tax-free allowance is 9.744 euros and will be increased to 10.347 euros in 2022. 

The same rule applies here: if you haven’t worked the entire year, you can reclaim taxes by submitting your tax return. 

3. Commuter allowance

If you commute to work, you can claim 30 cents per full kilometre of your commute with the commuter allowance (Entfernungspauschale). From 2021 onwards, long-distance commuters will also receive 35 cents per kilometre from the 21st kilometre of one-way travel and this will increase again to 38 cents from 2022 onwards. Please note that the allowance can only be claimed one way, so either for your outward or return trip. 

The commuter allowance can be claimed regardless of which form of transportation you use. Whether you commute by public transport, bike, in a carpool, or even on foot, you can claim the 30 cents per kilometre! 

4. Home office lump sum

Are you one of the 25 percent of all professionals who worked from home in 2021? If so, you can benefit from the home office lump sum (Home-Office-Pauschale): a lump sum of 5 euros per day worked from home that can be claimed on your tax return - up to 120 days per year! 

If you worked from home for (at least) 120 days, you already have 600 euros in income-related expenses in your pocket. You can easily exceed the income-related expenses lump sum, for example, by claiming the commuter allowance for the days you worked from the office. 

The home office lump sum can also be used by freelancers and self-employed people. In this case, the lump sum is deducted as a business expense. 

5. Save taxes with volunteer work

As of January 1, 2021, anyone who takes part in volunteer work or volunteers as an exercise leader in Germany can save more money on their tax return. The volunteering allowance (Ehrenamtspauschale) has been increased to 840 euros, and the lump sum for exercise leaders (Übungsleiterpauschale) has been increased to 3.000 euros per year. 

These lump sums can be claimed for your part-time volunteering commitment without you having to pay tax or social security contributions on them. 

6. Lump sums for additional moving expenses

You can also claim expenses incurred from moving for professional reasons on your tax return, as income-related expenses. There is, however, a distinction made between “general moving costs” (allgemeine Umzugskosten) and “additional moving costs” (sonstige Umzugskosten). 

General moving costs such as moving company expenses, forwarding agencies, and doubled rent payments can be deducted in full if you provide proof. 

Additional moving expenses can be deducted as a lump sum without providing any proof, even if the expenses were low. From April 1, 2022, the moving allowance is 886 euros for the eligible person and 590 euros for each additional household member. 

Additional moving expenses include, but are not limited to, expenses incurred from:

• Newspaper advertisements
• New telephone connections
• Vehicle re-registrations
• ID changes
• Trips to various authorities
• A portion of the costs of renovation / cosmetic repairs at your old residence
• Tips / meals for movers
• Curtains, curtain rods, and blinds
• Light installations in your new residence
• Dismantling / installing household appliances
• Registering your child(ren) at a different school 

7. Special expenses

Certain costs incurred in your private life can also be categorised as special expenses (Sonderausgaben) and claimed on your tax return. The tax office automatically grants a 36-euro lump sum for special expenses (or 72 euros for married couples filing a joint tax return), but this lump sum can easily be exceeded with other kinds of expenses, for instance: 

• Retirement provisions: Contributions to statutory and private retirement insurance funds, occupational pension provisions, Riester and Rürup pension plans
• Insurance: Contributions to health insurance, long-term care insurance, additional insurance such as accident, liability or employment, and occupational disability insurance
• General special expenses: Alimony, childcare expenses, church tax, donations, educational fees, initial vocational training costs

Not only do lump sums, allowances and flat rates simplify your tax return by allowing you to deduct expenses without having to provide any proof or receipts, but they also allow you to claim back tonnes of taxes as well! And with wundertax’s user-friendly interface, claiming deductions couldn’t be simpler. Get started today to secure an average tax refund of 1.072 euros.