Various properly documented and necessarily incurred income related expenses may be deducted by an individual unless they are - in cases of employment relationship - reimbursed by the employer.
For employees common tax deductions include:
- costs of travelling to and from work
- business literature
- professional dues, and
- work equipment.
There is a blanket employee allowance for business deductions of EUR 1,000 per annum. To the extent actual employment connected expenses exceed the lump sum of EUR 1,000, they are deductible if they can be substantiated.
Individual taxpayers may take deductions up to EUR 13,805 for the alimony paid to a divorced partner.
Contributions to German charities and certain international charities are deductible up to 20% of adjusted gross income. Church tax is also fully deductible.
Fulfilling certain requirements, the actual expenses for child care can be deducted up to a maximum of EUR 4000 per year/child for children younger than 14 years or for handicapped children.
30% of tuition fees (except for housing, care, and food) of a recognised private school located in the EU/EEA countries or of German schools is applicable, if special tax relief for children is granted and if graduation is approved by the government. The special expenses which can be claimed are limited to EUR 5,000 per annum per child.
Social security contributions
Social security contributions and insurance premiums can be deducted up to specified limits, as follows.
Health insurance and long-term care contributions
Contributions to a health insurance are completely tax deductible as far as these contributions are paid for primary healthcare. Contributions to a long-term care insurance are also tax deductible.
Unemployment insurance contributions
Additionally, contributions paid to certain other insurance policies (e.g. unemployment insurance) can be deducted up to a maximum of EUR 2,800 per year (EUR 1,900 for employees and pensioners). This only applies if these amounts have not already been utilised for health and long-term care insurance contributions.
Pension scheme contributions
Contributions to old-age pension schemes are, in general, tax deductible up to an overall limit of EUR 23,362 (EUR 46,724 for married taxpayers filing jointly). However, for a transitional period (2005 to 2025) only a reduced amount can be deducted. In 2017, the tax deduction amounts to 84% of the actual contributions, at a maximum of 84% of EUR 23,362 (EUR 46,724), and increases by 2% in each of the subsequent years up to the year 2025. For employees contributing to the state pension scheme, the deductible amount will be reduced by contributions paid by the employer to the state pension scheme, as those contributions are already tax exempt under the income tax act.
Mortgage interest is only deductible against income from the property (i.e. not deductible for privately used property).
A lump sum special expense deduction totalling EUR 36 for a single person or EUR 72 for married couples is provided without need for proof. Furthermore, there are also a number of other specific allowances and reliefs, for example, for children, the elderly and the disabled.
Deductions are allowed for extraordinary burdens such as:
- Subsistence for parents and children with low income (documentary evidence of low income is required) if entitled by law. The maximum deduction is EUR 8,820 and may be reduced by the standard of living of the country and the personal income situation of the beneficiaries.
- Deductions for children who are being educated in Germany or abroad (within limitations), who are older than 18, and living outside the parents' household amounting to EUR 924 per annum. If the child lives abroad, the amount may be reduced by the standard of living of the appropriate country. A child's own income of more than EUR 624 will also reduce the deduction.
- Further deductions may be granted, for example, for handicapped family members and expenses for household help.
The allowances shown below are deductible in computing taxable income.
|Per annum / per taxpayer
|Investor's allowance (for interest, dividends, and capital gains)
|Social security allowance
|Lump sum special expense deduction
|Child allowance - per child registered in Germany
Fixed assets and intangibles are subject to depreciation or amortisation.
For businesses common tax deductions are:
- interest expenses
- personnel expenses
- operating materials, and
- work equipment.
Losses not offset in the year in which they occur can either be carried back to the previous year up to EUR 1 million or carried forward to future years up to EUR 1 million (double amount for married taxpayers filing jointly). A loss carry-forward exceeding EUR 1 million is subject to further detailed limitations.