German Tax Guide 2022
It's tax season! So time to file your German tax declaration which will secure you on average 1.051€ tax money. Our Tax Guide will help you get the most money back.
Table of contents
Introduction: How To Secure 1.051€ In Tax Money
It is tax season, so time for our German tax guide 2022! Even though taxes are not the most beloved topic of interest for most people, it is still time to celebrate. When filing a tax declaration in Germany, 9 out of 10 people get on average 1.051€ of their own money back from Finanzamt. Considering the fact that you can file your taxes in less than an hour, that is a really good hourly wage if you think about it that way.
According to the German Federal Statistical Office, 12,3 million people out of 14 million people that filed their taxes got their money back. 9% got less than 100€, 58% got 100€ – 1.000€, and 2% got more than 5.000€ tax money back. 1,5 million people paid too little taxes and had to pay Finanzamt more money.
In order to help you get the most amount of tax money back, this article will answer the 6 tax questions that you need to answer to file your taxes correctly in Germany. Later on in this article will also be different options on how you can actually file your taxes with easy-to-use, English software.
After reading through this article or watching our German Tax Guide 2022 YouTube video there is really no excuse anymore to not file your German tax declaration. So go ahead and secure yourself on average 1.051€ for just one hour of work. It is your money. You earned it with honest work. So get it back.
Tax Question #1: Is It Mandatory To File Your Taxes In Germany?
Paying taxes in Germany is certainly mandatory when earning more than a certain amount, filing your taxes is not for most people. Everyone living in Germany can earn 9.744€ in 2021 and 10.347€ in 2022 without paying any tax (9.984€ for 2022 is not correct anymore and was changed by the German government earlier in 2022).
When earning more than that 10.347€ tax-free threshold you generally speaking have to pay taxes of at least 14%. The more you earn, the more income tax, solidarity tax, and maybe church tax you have to pay. If you are an employee in Germany, your tax obligations are completed as your employer is deducting taxes directly from your payslip. Most employers deduct a little too much in taxes, that is why you can secure on average 1.051€ in tax money when filing your German taxes.
If you earn regular income from work only, you might not have to file your taxes. If anything on this list applies to you, it is mandatory that you file your taxes (the list is not complete, there are more reasons):
- You received unemployment or Kurzarbeit money, parental leave, or other benefits of +410€
- You are married and in tax classes 3+5 or 4+4 with factor
- You have capital gains that you didn’t pay capital gains tax on (e.g. broker outside of Germany)
- You received rental income from investing in rental property
In all cases mentioned above (and many more), you are required by the German government to file your taxes. If you have to file your tax declaration, how long do you have time to do it? 🤔
Tax Question #2: What Is The Deadline For Tax Declarations?
Even if filing your German tax declaration is not mandatory for you, it can still be highly worth it to secure your 1.051€ that the German Federal Statistical Office determined as the average cashback for filing your taxes. If you would like to get that money, what is the deadline for your tax declaration? 🤔
If you file your taxes on your own, your deadline is usually July 31 of the following year that you want to file your taxes (e.g. July 31, 2022, for your tax declaration 2021). As July 31, 2022, will be a Sunday, you have time until August 1, 2022, to send your tax declaration to your local Finanzamt. If you file your taxes together with Lohnsteuerhilfeverein or a professional tax advisor, your deadline is prolonged until February 28 of the year after next year (e.g. February 28, 2023, for your tax declaration 2021).
When filing your taxes voluntarily, you have 4 years to complete your tax declaration. Waiting these 4 years secured you in the past up to 6% penalty interest from Finanzamt if they were owing to you money. As of writing this article, the German court decided that 6% interest is too much and the German government has time until July 2022 to decide on a new penalty interest that will probably be lower.
Tax Question #3: What Info Do You Need To File Your Taxes?
Earlier we determined employers send tax information directly to Finanzamt and deduct your taxes directly from your payslip. The result is the “Ausdruck der elektronischen Lohnsteuerbescheinigung” that you will get at the beginning of every year for the year before. This sheet is the basis that you need to start your tax declaration.
Other than the “Ausdruck der elektronischen Lohnsteuerbescheinigung” you also need your personal tax identification number (“Steuerliche Identifikationsnummer“) that you will get from Finanzamt right after registering in Germany. Even babies get their German tax ID right after being born so Finanzamt can identify them. Your tax ID consists of 11 digits and will stay the same throughout your entire life.
On top of your tax ID, you also need your tax number (“Steuernummer“) which consists of 13 digits with dashes in between. While your tax ID stays the same your entire life, your tax number changes if you move to a different local Finanzamt, change your employment status (e.g. become self-employed), or get married.
Last but not least you need your tax class (“Steuerklasse“) that determines how much income tax you paid from your payslip already. The more taxes you paid from your payslip, the more likely you will get tax money back when filing your taxes – and vice versa. German tax classes range from 1 to 6 and can be chosen freely only by married couples. Singles, divorced, and widowed people have no freedom to choose their tax class. All details on tax classes in Germany are explained in this video.
For a few years, Finanzamt does not require anymore that you send receipts and invoices together with your tax declaration. You just need to keep all receipts and invoices in case Finanzamt asks to see them. So store all information that is relevant to your tax declaration and do not throw it away.
Tax Question #4: What Kind Of Income Is Taxed In Germany?
Generally speaking: Absolutely everyone and everything is taxed in Germany. The German Tax Code determines what type of income is taxed in Germany and how much taxes we all have to pay. The tax code knows 7 different types of income that you can potentially earn money with. All 7 different types of income are explained in detail in this video and include:
- Income from employment
- Income from self-employment
- Income from business operations (e.g. from a limited liability company “GmbH”)
- Income from capital assets (e.g. from investing in ETFs & mutual funds)
- Income from renting & leasing (e.g. from renting out investment properties)
- Income from agriculture & forestry
- Other income (e.g. from buying bitcoin or other cryptocurrencies)
When having your ordinary residence in Germany (defined by being in Germany for at least 183 days of any given year), also income that you make outside of German borders will be, generally speaking, taxed in Germany. Your real tax rate for that international income depends on many factors like if Germany has a double taxation agreement with the country you made that income (which Germany does with +70 countries worldwide in this list) or if you paid taxes in the other country already.
Taxes in themselves are a very difficult topic, international taxation adds another layer of complexity to it. Please talk to your local Lohnsteuerhilfeverein or a professional tax advisor if you have any individual tax questions. As PerFinEx GmbH is no tax advisor, please do not ask any personal tax questions in the comments or book meetings with us if you want to clarify tax questions. We are happy to help you when it comes to insurance, investing, pension, real estate, or other financial questions – not in terms of taxation as we simply are no tax advisor.
Tax Question #5: What Is Tax-Deductible?
Außergewöhnliche Belastungen are extraordinary expenses that you had. In order to create tax fairness between you who had these costs and somebody else with the same income who did not have these extraordinary costs, the government decided to make them tax-deductible.
Außergewöhnliche Belastungen include:
- Costs for the education of your children (up to 924€)
- Costs in case you are disabled and need to remodel your home
- Medical costs that your health insurance did not cover (happens a lot more often in public than in private health insurance)
- Costs if you or your parents are in need of long-term care
Sonderausgaben are special expenses for anything that is not related to your job. That is why these types of expenses have strict rules and most of the time a maximum amount that can be deducted from your taxes as well (overall you can deduct up to 60.000€ in special expenses from your taxes). Special expenses can fundamentally be divided into 4 different categories as seen below.
- Expenses for retirement (e.g. public pension, Riester pension, or base pension)
- Expenses for insurance (e.g. public or private health insurance, term life, liability, disability, etc)
- Expenses for alimony, childcare, university, church tax, and donations
- Expenses if you need to renovate your home in which you are living yourself (Renting vs Buying)
Werbungskosten are all kinds of job-related expenses that you can deduct from your taxes. This will be the highest type of expense for most people as there are (most of the time) no limits on how much costs you can declare. Lazy people can deduct a flat sum of 1.000€ without any proof. If your actual costs were higher than 1.000€ (which is most likely the case), you can also declare the real costs that you had for your job.
- Driving to work or 5€/day for home office (even more if you have a real office at home)
- All types of electronics, furniture, clothing, internet, etc that you need for your job
- Educating yourself with courses or books in order to earn a higher income eventually
- Costs you had for applications when applying for a new job
There are many tax tricks that you can utilize in order to save a lot more than the average of 1.051€ per year. If you manage to deduct more in costs than you had in income in any given year, you can even carry that tax loss forward into the next year. While everyone will be starting the year at 0€, you can start in the minus (e.g. -5.000€) and save some taxes in the year ahead already.
Tax Question #6: How Can You Actually File Your Taxes?
Now that all questions are answered that you need in order to file your taxes in Germany, there is only one question left: How do you file your tax declaration? You have basically 3 options (do it yourself with tax software, Lohnsteuerhilfeverein, professional tax advisor) that you can utilize depending on how complicated your personal tax situation really is.
- Easy: Elster (from Finanzamt itself) or English software like Steuergo, Taxfix, or Wundertax
- Medium: Lohnsteuerhilfeverein can help you if you make income from employment only
- Difficult: If you make income from self-employment, rental income, or outside of Germany a tax advisor is probably best
Feel free to do your taxes in any way that you see fit (as long as you do it). You can start by trying to do it yourself with one of the tax software providers and if you find it to be too difficult you can consult your local Lohnsteuerhilfeverein or a professional tax advisor. If you are looking for an English-speaking tax advisor you can send us a message and we can help you to connect with one.