Income tax return

What is an income tax return? Who has to file it?
Here are our answers! Detailed, understandable and informative.

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What is income tax and who has to file an income tax return?

Published: - If the income exceeds the basic tax-free amount of currently 9,744 euros (or 19,488 euros for married couples assessed jointly), it must be taxed. How much income tax must ultimately be paid depends on the amount of income. Under certain circumstances, an income tax return must also be filed.

Who is required to file a tax return and who is not? Can the tax return also be filed voluntarily? Who can claim which costs? Are there deadlines that must be met and which forms are needed at all? The following article provides information about this.

We will use some technical terms from German tax law in the text, which you will encounter when dealing with the German tax authorities / the tax office. It is therefore important that you have seen or read these words before. But don't worry – we will always explain and translate the terms! You can find a more detailed English-German tax dictionary in our guide "My German Tax Return: A step-by-step guide to file your taxes in Germany".

When and for whom is it compulsory to submit a tax return?

Employees pay income tax every month, which is automatically deducted from their salary. The submission of an income tax return is therefore no longer mandatory for employees.

Under certain circumstances, however, the income tax return may become compulsory. For example, if other income is earned in addition to the main job (e.g. wage replacement benefits such as short-time allowance or child sickness benefit) or if tax-free allowances are claimed.

When is the submission of an income tax return obligatory for employed persons?

For employed persons, the employer automatically deducts the income tax from the salary each month and forwards it to the tax office. However, if other income is added to the main income, if there are certain tax class combinations or other special features, the submission of an income tax return may be obligatory. In such a case, the state fears that too little income tax has been paid despite the fact that wage tax has been paid. The obligation to file a tax return for employees is regulated in § 46 of the Income Tax Act (Einkommensteuergesetz, EStG).

Employed persons must file a tax return for a particular tax year if:

  • Incidental income of more than 410 € was earned, which is not subject to wage tax deduction,
  • tax allowances were claimed when deducting wage tax (e.g. for income-related expenses, extraordinary expenses, special expenses, etc.),
  • more than 410 € in top-up contributions for partial retirement, unemployment, sickness, short-time working, insolvency, parental or maternity benefits were received, which are subject to the progression proviso,
  • several employment relationships with different employers existed in parallel and were settled according to tax class VI,
  • both spouses receive wages and the tax class combination III/V or IV/IV with factor was entered,
  • married, divorced or permanently separated parents do not split the education allowance or the disability allowance in half or claim it in a ratio other than 50% each,
  • one of the spouses has died or the marriage has been divorced and one of the spouses has remarried in the same year,
  • a spouse living abroad in the EU was included on the electronic income tax card,
  • the place of residence or habitual abode is abroad and unlimited tax liability has been applied for in Germany,
  • there is capital income for which no final withholding tax could be levied,
  • the employer was changed and the new employer did not take into account the values of the wage tax calculation of the previous employer,
  • taxable income exceeded the basic tax-free amount, although no salary was received,
  • a loss carry-forward was claimed.
  • An income tax return must also be submitted if the tax office requests it.

Who is subject to limited tax liability (183-day rule)?

Individuals who have their residence or habitual abode in Germany are subject to unlimited tax liability. People who have their habitual residence or no residence in Germany are subject to limited income tax liability.

At least if they earn taxable income according to Section 49 of the Income Tax Act. This includes, among other things, income from renting, leasing or selling or income from non-self-employed work.


When is a voluntary income tax return worth the effort?

If you are not obliged to file an income tax return, you can still do so on a voluntary basis. Especially in the case of high income-related expenses, special expenses or if the tax class has changed (from tax class 3+5 to 4+4), the tax return may well be worth the effort.

Voluntary income tax return for employees

The tax authorities give employed persons a whole range of options for claiming varying income and expenses for tax purposes. These include:

  • Income-related expenses,
  • special expenses,
  • Extraordinary expenses,
  • expenses for household-related services,
  • entitlement to child allowances,
  • Insurance premiums paid in excess of the lump-sum pension allowance,
  • Variable salaries within one year,
  • Change of tax class (e.g. through marriage) or tax class IV without factor.

It might also be worthwhile to file a tax return for those who received a severance payment without applying the one-fifth rule or who did not work as an employee for the whole year.


Which are the most important forms for the income tax return?

Anyone who has to or wants to file an income tax return for the first time can quickly lose track of the numerous forms. Which forms do you have to fill out at all and what should you include? Even if it takes some time and patience to get an overview, the forms are important. After all, they give taxpayers the opportunity to apply for tax relief or to declare special types of income or expenses.

We focus here on the most important attachments. All forms can be downloaded free of charge here in the service area.

Attention: The forms for the tax declaration are (unfortunately) only available in German.

Cover Sheet (Mantelbogen or officially: Hauptformular ESt 1 A)

The cover sheet is the first form in the tax return and the basic structure of every income tax return. It comprises a total of two pages and must not be omitted under any circumstances. Personal data such as name, address, marital status, religious affiliation, bank details and also the tax identification number are entered in the cover sheet. In addition, it can be noted whether the tax assessment is single or joint or whether a community of property has been agreed.

Annex N - Non-self-employed work (Anlage N)

If you have an occupation that is subject to social security contributions, you have income from non-self-employed work and must fill out Annex N. The tax return must be completed by the taxpayer. In addition to information on wages, taxable pension payments or tax-free expense allowances, income-related expenses can also be entered. These include, for example, travel costs (distance allowance) for journeys between home and the first place of work, travel costs, expenses for work equipment or the home office as well as further training costs.

Pension expenses annex (Anlage Vorsorgeaufwand)

All insurance contributions for old-age provision are entered in the annex "Vorsorgeaufwand". In addition to contributions to statutory health, long-term care and pension insurance, details can also be entered for income or occupational disability insurance, liability insurance or accident insurance. The contributions can then be claimed as special expenses to reduce tax.

Caution: Contribution refunds from the health insurance fund are offset against the contributions for statutory health insurance. This reduces the special expenses deduction. Unlike contribution refunds, however, premium and bonus payments from statutory health insurance do not increase the tax expense. If the tax office considers premium and bonus payments to be special expenses, it is advisable to file an objection and refer to this ruling of the Federal Fiscal Court: BFH, 27 August 2020, X R 16/18.

Annex AV - old-age provision (Anlage AV – Altersvorsorge)

The contributions for certified old-age provision contracts (e.g. Riester or Rürup pension) can be claimed as special expenses with the AV annex.

Attention: Since the end of 2019, Riester providers are legally obliged to electronically transmit all data required for the special expenses deduction to the tax office. This concerns not only the national insurance number and the allowance number, but also the number of contracts, contributions made and changes to the contract data. If you do not want a special expenses deduction for individual contracts, you must apply for this in the Annex AV.

Special expenses annex (Anlage Sonderausgaben)

In the special expenses annex, for example, church tax paid, statutory pension insurance contributions, maintenance payments, training costs, membership fees or donations are entered.

The special expenses annex has been a separate form since 2019. Prior to this, information on special expenses was entered in the cover sheet (Mantelbogen = Hauptformular ESt 1 A).

Extraordinary expenses annex (Anlage Außergewöhnliche Belastungen)

Extraordinary expenses include costs incurred due to illness or disability. These can then be claimed for tax purposes as part of the income tax return via the annex for extraordinary expenses. These include, for example, the disability allowance, the survivor's allowance or the lump-sum care allowance, or also costs for the disability-friendly conversion of a vehicle.

Up until 2018, extraordinary expenses were also part of the cover sheet (Mantelbogen = Hauptformular ESt 1 A). Since 2019, there is a separate form for this.

Annex for household-related expenses (Anlage Haushaltsnahe Aufwendungen)

Expenses for household-related employment and services, care services and craftsmen's services can be entered in the Schedule of household-related expenses.

Child annex (Anlage Kind)

Parents who receive child benefit for their offspring or who wish to claim the tax-free allowances must fill in the child annex in their income tax return. Here, for example, childcare costs or education costs, the relief amount for single parents or school fees can be entered.


What deadlines must be met for the income tax return?

Anyone who is obliged to submit an income tax return should mark 31 July in red in their calendar each year. Since the 2018 tax year, this is the deadline by which the tax return must be received by the responsible tax office. Anyone who misses the deadline and has already received a reminder must expect the tax office to estimate the taxable amount after a period of 15 months, to set back tax payments and then to demand them. In addition, late payment surcharges amounting to 0.25 % of the income tax due per month of late payment, but at least 25 € per month, must be paid.

The deadline is different for voluntary tax returns. This begins directly after the end of the tax year, but only ends after four years. The latest submission date for the tax return for 2020 is therefore 31.12.2024.

If the deadline falls on a Sunday or public holiday, the tax office must receive the tax return on the next working day at the latest. This applies to both the mandatory and the voluntary income tax return.

You can also conveniently determine your objection and submission deadlines for voluntary tax returns with our deadline calculator.


Which are the 10 most important income-related expenses & lump sums in the tax return?

The former German Chancellor Helmut Schmidt once said: "Those who have the duty to pay taxes also have the right to save taxes". We take this statement as an opportunity to point out the 10 most important income-related expenses and lump sums for taxpayers that reduce the tax expense:

  • Travel expenses to the first place of work
  • Bank account management fees
  • Application expenses
  • Contributions to statutory and private pension insurance
  • Contributions to health, nursing care, liability and accident insurance
  • Household-related services & craftsmen's services
  • Child allowances
  • Relief amount for single parents
  • Old-age relief amount
  • Medication and treatments that were medically necessary and appropriate and whose costs were not covered by the health insurance fund

Important tax return terms at a glance

Annexes (Anlagen)

Annexes are tax forms that are submitted to the tax office together with the tax return.

Employee lump sum (Arbeitnehmer-Pauschbetrag)

When employed persons file their tax return, the tax office automatically deducts costs incurred for work-related reasons up to a maximum amount of € 1,000 as an employee lump sum. No receipts or proof are required for this form of income-related expenses.

Extraordinary expenses (Außergewöhnliche Belastungen)

If a taxpayer has higher costs than the vast majority of taxpayers with the same income due to a disaster or illness, this is called an extraordinary expense. These expenses include, for example, care costs incurred due to illness or funeral costs.

Basic allowance (Grundfreibetrag)

The basic allowance is a tax-free annual amount. Income tax only has to be paid if the income exceeds the basic allowance.

Covering sheet (Mantelbogen or officially: Hauptformular ESt 1 A)

Every tax return begins with this tax return form. It contains, among other things, the taxpayer's personal data and bank details, tax ID and religious affiliation. In addition, the joint assessment of married couples or registered civil partnerships can be applied for on this form.

Commuting allowance / commuter allowance (Entfernungspauschale or Pendlerpauschale)

With the commuter allowance, the travel costs between home and the first place of work are claimed for tax purposes. Employed persons can deduct a lump sum per kilometre of distance from their taxes.

Special expenses (Sonderausgaben)

Special expenses are private costs that are tax-privileged by the legislator. These include, among others, donations, costs for a tax advisor, training costs, school fees or contributions to additional voluntary long-term care insurance.

Pension expenses (Vorsorgeaufwendungen)

Pension expenses are, for example, contributions to statutory pension insurance.

Joint assessment (Zusammenveranlagung)

For spouses or registered civil partnerships who opt for joint tax assessment, there is often a considerable tax advantage. At least if both partners earn different amounts.

FAQs about the income tax return

When does it make sense to file an income tax return?

Basically, it makes sense to file an income tax return in almost all cases. However, a blanket assessment is very individual and therefore definitely not suitable for remote diagnosis. For the majority of tax payers, however, an income tax return makes perfect sense. First and foremost for employed persons who have not worked the entire calendar year, as well as spouses who are assessed in certain tax class combinations. Single parents in tax bracket II should also not forgo filing an income tax return.

Do I have to file an income tax return?

Filing an income tax return is not obligatory for everybody. Employed persons in tax class I, i.e. who receive income exclusively from an employment relationship, are in principle not obliged to file an income tax return. An exception is made for employed persons who have applied to the tax office for tax allowances (e.g. income tax allowance, child allowance), who receive additional income or who receive (have received) wage replacement benefits. Who exactly is subject to the so-called duty to pay tax and thus has to file an income tax return is regulated in § 46 of the Income Tax Act (EStG).

Who has to file an income tax return?

Filing an income tax return is not mandatory for every taxpayer. It is only obligatory under certain conditions. You are obliged to file a tax return, for example, if you have received wages from several employers at the same time or have earned additional income from pensions or renting/leasing. The same applies if you are married and you or your spouse are taxed according to tax class 5 or 6.

By when do I have to file an income tax return?

The deadlines for filing the income tax return vary depending on the tax status: Whoever is obliged to file a tax return and does their tax return themselves has until the end of July of the following year to do so. For the 2020 tax return, the deadline would therefore be 31 July 2021. Consequently, the 2021 income tax return must be filed by 31 July 2022.
Exception: You have your taxes done by a tax advisor or an income tax assistance association. Then the deadline for submitting income tax returns is 28 February of the year after next. Those who are not subject to the filing obligation and wish to file their tax returns voluntarily have up to 4 years retroactively each year until 31 December. For freelancers and self-employed persons, 31 May of the following year is still the deadline for submitting the income tax return and income surplus statement.

What is the average tax refund?

The most recent figures on this are from 2016: 3.7 million taxpayers filed an income tax return for the 2016 tax year. The average refund was 1,027 €. More current figures are unfortunately not yet available. However, since tax refunds have already increased continuously in the past years, we assume that this will continue to be the case.

What does an income tax return with a tax advisor cost?

Tax advisors are mainly guided by the legally anchored fees of the Tax Advisor Remuneration Ordinance (Steuerberatervergütungsverordnung). However, the fees stated there only represent the minimum amount. How high the total bill ultimately turns out to be is solely at the discretion of the tax advisor. Thus, it can happen that tax advisor A charges 150 € for determining the income and preparing the tax return and tax advisor B charges 450 € for the same work.
If you prepare your income tax return yourself with the tax software SteuerSparErklärung (available in German only), you can save yourself the comparatively high costs of a tax consultant.

How long does it take to prepare a tax return?

It is impossible to say in general how long it takes to prepare a complete income tax return. The actual time required depends on many factors. For example, if you have several types of income and want to deduct many special expenses and income-related expenses, you will probably need 3-4 hours. If, on the other hand, you largely use the lump-sum amounts and only a few special expenses, 60-90 minutes are quite realistic.

How long can an income tax return be filed retroactively?

Anyone who has to file a tax return according to the compulsory system has no possibility to file it retroactively. In this case, the tax offices are very strict with the deadlines and only grant extensions upon formal application. On the other hand, those who voluntarily file their income tax return can do so retroactively for up to 4 years.

How do I file an income tax return?

There are various options available to you for submitting an income tax return. The tax authorities themselves offer the ELSTER system. However, tax programmes often offer better handling when completing the income tax return.
Which documents have to be submitted and which attachments have to be filled out when you want to or have to file an income tax return varies from person to person. If you want to get started right away, we recommend our tax software SteuerSparErklärung (available in German only). The software comes with a "red thread" that guides you through your income tax return in real time and shows you exactly how to do your tax return so you get a profitable refund.

Can I file my income tax return without using ELSTER?

Yes and No. ELSTER is the only interface through which an income tax return can be transmitted to the tax office. Income tax returns may only be submitted to the tax office in paper form in very few exceptional cases, for example by employed persons.
But when it comes to whether one can complete one's income tax return without necessarily using the ELSTER portal of the tax offices, then the answer is yes:

Whoever does not want to do their tax return with ELSTER has various other options for submitting their income tax return. For example, via an income tax help association (Lohnsteuerhilfeverein), a tax consultant (Steuerberater) or via a professional tax software like our tax software SteuerSparErklärung (available in German only).

Can I do my income tax return in english?

You may only prepare your income tax return in German. Unfortunately, the forms are also only available in German. You can find help in filling out the most important tax forms in our English-language guide "My German Tax Return: A step-by-step guide to file your taxes in Germany".

I earned money outside of Germany during the year – do I need to declare it?

Foreign income earned during a stay in Germany is generally fully taxable. Exceptions are only possible if a corresponding double taxation agreement (Doppelbesteuerungsabkommen) exists between Germany and the country in which the additional income was generated. The Federal Ministry of Finance provides information on the double taxation agreements concluded by Germany on this website.

Can I deduct maintenance to my spouse or familiy abroad?

You can only claim maintenance payments if the recipient is needy. This is the case if the person being supported has no or only little assets of his or her own and has no or only little income of his or her own.

If you provide normal living expenses for a needy person, you can declare a maximum amount of € 9,744 per year in your tax return for 2021 (this corresponds to € 812 per month).

In the case of a recipient residing abroad, the maximum amount of maintenance and the tax credit allowance as well as the so-called »Schonvermögen« (i.e. assets that are not taken into account when calculating the neediness) of the recipient depend on the living conditions in the country of residence. Each country is assigned to one of four country groups according to its living conditions. The classification of countries is updated from time to time. At the moment, this list applies. The classification in the columns means: column 1: maintenance payments up to € 9,744 are recognised, column 2: maintenance payments up to € 7,308 are recognised (3/4 of 9,744), column 3: maintenance payments up to € 4,972 are recognised (1/2 of 9,744), column 4: maintenance payments up to € 2,436 are recognised, (1/4 of 9,744).

In addition, strict requirements apply to the proof of the recipient's eligibility for support and neediness as well as the amount of your expenses.

The deduction of support payments is only possible if you are obliged to support the recipient according to German standards and thus according to the rules of German law. An obligation to support according to foreign law alone is insufficient!

What is a Lohnsteuerbescheinigung?

At the beginning of each year, you receive the wage tax certificate (Lohnsteuerbescheinigung) for the previous year from your employer. This shows, for example, how much you earned and what amounts were paid to social security. In your income tax return, you transfer the information from the wage tax certificate to Annex N. The income tax statement indicates which line the information belongs in.

What is a Steuer-Identifikationsnummer?

In principle, the ID number is issued to every natural person registered in Germany by the Federal Central Tax Office (Bundeszentralamt für Steuern). It is valid for life and does not change when a person moves or marries. The IdNr is an 11-digit number and does not contain any information about the taxpayer or the responsible tax office.
If you cannot find your number or have not yet received one, contact the Federal Central Tax Office and ask for your tax identification number to be sent to you (info@identifikationsmerkmal.de).

You must send the following information in order to have the tax ID reissued: Name, First name, Address, Place of birth, Date of birth. For reasons of data protection, however, the tax ID will only be sent by post and to the current registration address.

I lost my documents / I never received my documents – what do I do?

If you cannot find your ID number (Steuer-Identifikationsnummer) or have not yet received one, contact the Federal Central Tax Office and ask for your tax identification number to be sent to you (info@identifikationsmerkmal.de).
You must send the following information in order to have the tax ID reissued: Name, First name, Address, Place of birth, Date of birth. For reasons of data protection, however, the tax ID will only be sent by post and to the current registration address.

If you cannot find your wage tax certificate, contact your employer. He or she can print it out again, or many employers make it available to their employees electronically anyway.

What is my tax class?

For the purposes of wage tax deduction, employees subject to unlimited income tax are assigned wage tax classes. Spouses can choose between different combinations of wage tax classes.

You can read all about the different tax classes in our guide book "My German Tax Return: A step-by-step guide to file your taxes in Germany".

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