Legal but Hidden Tax Savings in Germany
Explore legal but hidden tax savings in Germany, from home office expenses to investment strategies, maximizing your financial return within legal boundaries 🤫.
Key Takeaways
- Deducting banking fees or getting Sachbezüge from your employer, offering potential savings for expats in Germany.
- Investing in an investment account is capital gains tax-free up to a certain threshold.
- Filing taxes regularly can yield substantial refunds through Werbungkosten or Sonderausgaben.
- Investing in ETFs through base pension and Riester pension plans offers significant tax advantages for long-term financial growth.
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More InformationIntroduction
Taxes in Germany can be overwhelmingly complicated, which is why many people either overpay or don’t file their tax returns at all. However, this is a big mistake, as 9 out of 10 taxpayers receive an average tax refund of 1,063€.
But what if you could claim even more? With the right tax hacks, you could maximize your refund and legally save up to 95,287€. In this guide, we’ll break down the best-kept tax secrets that could put thousands of euros back into your pocket.
The Smallest but Easiest Tax Deduction: Bank Fees
Let’s start with the simplest deduction available: bank account management fees. Regardless of whether you actually paid them, you can deduct a flat rate of 16€ per year. If your actual fees are higher, you can claim the real amount, provided you have proof of payment.
Since banking fees add up over time, it’s also a good idea to switch to a free bank account that offers interest on deposits. Our “Best Bank Accounts in Germany” calculator (linked below) shows options that provide up to 2% interest and even sign-up bonuses of up to 200€. By combining this simple deduction with a smart banking choice, you could significantly improve your financial situation.
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More InformationTax-Free Employer Benefits: Sachbezug (Up to 600€/Year)
Many employees don’t realize that their employer can provide them with up to 50€ per month in tax-free benefits under the Sachbezug rule. This means you can receive up to 600€ per year without paying any taxes or social security contributions. Companies often use this for gym memberships, public transportation passes, or even childcare costs.
Here at PerFinEx, we ensure our employees receive the full 50€ monthly allowance for Wellpass so they can stay fit without worrying about extra costs. If your employer isn’t offering this benefit yet, it’s worth asking if they can implement it—after all, it saves both you and them money.
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More InformationCompletely Tax-Free Investment Profits: Freistellungsauftrag (1,000€/Year)
Investing is an excellent way to grow your wealth, and with a Freistellungsauftrag (exemption order), you can keep up to 1,000€ of your investment profits tax-free every year. This applies to interest from savings accounts, stock dividends, and capital gains.
To take advantage of this benefit, simply inform your bank about your Freistellungsauftrag, and they won’t deduct capital gains tax on eligible earnings. Given that some European savings accounts offer interest rates up to 3.15%, this can be a highly effective way to build your savings without losing money to taxes.
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More InformationTax Benefits for Home Repairs and Household Services (Up to 5,200€/Year)
If you hire a tradesperson for home repairs, you can deduct 20% of the labor costs, up to a maximum of 1,200€ per year. Keep in mind that material costs don’t count, so ensure your invoice clearly separates labor and materials.
Additionally, hiring household-related services—such as cleaners, gardeners, or babysitters—can provide an even bigger deduction of up to 4,000€ per year. These tax benefits not only lower your tax burden but also encourage hiring professionals instead of paying under the table, ensuring legal and reliable service.
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More InformationJob-Related Expenses: Werbungskosten (At Least 1,230€/Year)
Many taxpayers forget that work-related expenses are tax-deductible. The German tax office automatically allows a flat rate of 1,230€ in Werbungskosten (job-related expenses) without requiring proof.
However, if your actual expenses exceed this amount, you can deduct the full cost. This includes commuting costs, professional development courses, work-related phone and internet use, office supplies, and more. If you work from home, you can claim an additional deduction of up to 1,260€ for your home office, provided you use a dedicated workspace.
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More InformationInsurance and Special Expenses: Sonderausgaben (Up to 1,900€/Year)
Certain essential costs, such as health insurance premiums, childcare expenses, and alimony payments, fall under Sonderausgaben (special expenses). Most people in Germany already pay enough in health insurance premiums alone to reach the maximum deductible limit of 1,900€.
This means you’re likely entitled to this deduction without any extra effort. However, if you want to optimize your health insurance costs, check out our six expert strategies to reduce your premiums and maximize your savings.
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More InformationRiester Pension: Tax Savings & Bonuses (Up to 2,100€/Year)
The Riester pension offers substantial tax advantages, making it particularly beneficial for families with children. By investing in a Riester pension, you can receive up to 2,100€ in tax benefits each year, along with government bonuses: 175€ per adult and 300€ per child.
Since Riester pensions allow ETF investments, they provide solid long-term returns while reducing your tax burden. If you’re unsure whether a Riester pension is right for you, book a free consultation with us to explore better options.
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More InformationCompany Pension Plans: Steuerfreie Vorsorge (Up to 7,728€/Year)
Company pension plans offer one of the best tax-saving opportunities for employees. You can invest up to 3,864€ per year completely tax- and social security-free. If you want to contribute more, up to 7,728€ is tax-free, but social security contributions still apply.
Many employees don’t take full advantage of this benefit, missing out on significant savings. If you’re unsure about the best approach, a financial consultation can help you determine whether a company pension or a private retirement plan is better suited for you.
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More InformationThe Biggest Tax Hack: Base Pension Level 1 (Up to 60,000€/Year)
The most significant tax-saving strategy involves investing in a base pension (Rürup-Rente). Singles can deduct up to 30,000€ per year, while married couples can deduct up to 60,000€.
This type of pension allows you to invest in ETFs while benefiting from massive tax savings. With the right planning, this could be your most powerful wealth-building tool. If this sounds interesting, book a free meeting with us to tailor a strategy that maximizes your benefits.
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More InformationConclusion
By implementing these tax-saving strategies, you could legally save up to 95,287€ over time. Many of these deductions require minimal effort, while others—like pensions—offer long-term benefits.
If you want to maximize your tax refund and take advantage of every possible deduction, check out our step-by-step guide on how to file your taxes in Germany efficiently. Don’t leave money on the table—start saving today!