Germany

Employment expenses

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.

For the years 2020, 2021, and 2022, employees who have switched to remote work are allowed to deduct EUR 5 (EUR 6 as of assessment period 2023) for each calendar day working from home, whereby the total sum is limited to EUR 600 (EUR 1,260 as of assessment period 2023) per calendar year and thus the limit of days to be claimed is 120 (210 days as of the assessment period 2023).

There is a blanket employee allowance for business deductions of EUR 1,230 per year. To the extent actual employment connected expenses exceed the lump sum of EUR 1,230, they are deductible if they can be substantiated.

Personal deductions

Alimony payments

Individual taxpayers may take deductions up to EUR 13,805 for the alimony paid to a divorced partner.

Charitable contributions

Contributions to German charities and certain international charities are deductible up to 20% of adjusted gross income. Church tax is also fully deductible.

Childcare expenses

Fulfilling certain requirements, a portion of the actual expenses for childcare can be deducted up to a maximum of EUR 4,000 per year/child for children younger than 14 years or for handicapped children.

Education expenses

30% of tuition fees (except for housing, care, and food) for qualifying dependent children is deductible if a recognised private school located in the EU/EEA countries or a German school is attended and if graduation is approved by the government. The special expenses that 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 health insurance are completely tax deductible as far as these contributions are paid for primary basic healthcare. Contributions to long-term care insurance are also tax deductible under these circumstances.

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 25,639 (EUR 51,278 for married taxpayers filing jointly). However, for a transitional period (2005 to 2023), only a reduced amount can be deducted. In 2022, the tax deduction amounts to 94% of the actual contributions, at a maximum of 94% of EUR 25,639 (EUR 51,278), and increases to 100% in 2023. 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 deduction

Mortgage interest is only deductible against income from the property (i.e. not deductible for privately used property).

Standard deductions

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.

Personal allowances

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 9,984 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 year. If the child lives abroad, the amount may be reduced by the standard of living of the appropriate country.
• 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.

Business deductions

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

Losses not offset in the year in which they occur can either be carried back to the previous year up to EUR 1 million (for 2020 until 2025 this amount is increased to EUR 10 million) or carried forward to future years indefinitely, whereby in the latter case an amount of EUR 1 million can be offset fully per year and a loss carryforward exceeding EUR 1 million can only be used within detailed thresholds per year. For married taxpayers filing jointly, the mentioned amounts are doubled.