5 Min.

Annual Taxation Allowances that are Available to Employees (Freibeträge)

What different types of allowances there are.

It always seems as though the tax year goes by so quickly and the month of July is upon us again before we know it. Although you will be eager to relax and enjoy the warm spring sunshine it is vitally important that you don’t ignore the problem of completing and submitting your tax return on time.

As usual, the annual deadline for returning tax forms is on 31st July. The approaching deadline can cause a great deal of worry for you as an employee in case you can’t submit your tax return on time. In the worst situation you can even be issued with a notice to pay a fine but there is no need for you to be unnecessarily alarmed at this stage.

Submitting your tax return on time is basically something that can work to your advantage financially. As an employee, returning your tax forms before the deadline ensures you are eligible for allowances (Freibeträge) or refunds of money from the state. Submitting a tax return is the only way that any of the available allowances can be granted to you. What different types of allowances there are and how you can claim them are outlined in the following paragraphs.

  • Did you buy a laptop or a mobile phone?

  • Did you move last year for work?

  • Did you work less than 12 months last year?

  • Was your work commute more than 30 minutes?

  • Are you married with tax class III/V?

  • Did you pursue a further education?

  • Did you receive self-employment income?

You are required to file a tax return.

Filing your tax return is worth it! You will most likely get a very high tax refund.

You can expect a high tax refund.

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Allowances (Freibeträge)

Under certain circumstances you can apply for an exemption allowance (Freibetrag) to prevent a sum of money being deducted through taxation. However, if the limit has been exceeded tax will still be charged on the whole amount.

Exemptions are usually granted when various circumstances arise within the family which forces you as a taxpayer to increase your annual spending. As part of the total wage tax assessment (Lohnsteuerveranlagung), allowances are approved according to various government acts including Inheritance Tax Law (Erbschaftsteuergesetz), Income Tax (Einkommensteuergesetz), Corporation Tax (Körperschaftsteuergesetzt) and the Trade Tax (Gewerbesteuergesetz).

The following allowances (Freibeträge) are the most important:

  • Grundfreibetrag
  • Rabattfreibetrag
  • Kinderfreibetrag
  • Erziehungsfreibetrag
  • Sparerfreibetrag
  • Ehrenamtsfreibetrag
  • Ausbildungsfreibetrag

Training Allowance (Ausbildungsfreibetrag)

If there are additional costs involved in sending a child for further education or training you can be awarded a € 924 allowance (Freibetrag) for each year your child studies or trains. The total amount of tax liable on your income will be reduced but only if the following conditions are met:

  • The child is of an appropriate age
  • The child does not reside with the parents
  • The child is in education or training
  • The child has been awarded child benefit or allowance

Basic Allowance (Grundfreibetrag)

To ensure that your minimum subsistence funds are maintained at all times you can apply for a basic allowance (Grundfreibetrag) and you don’t have to pay tax providing you’re earning below a specified amount. If you should earn more than the allowance (Freibeitrag) limit at any given time, tax must then be paid.

  • For the year 2018: Basic allowance limits are € 9,000 (single) and € 18,000 (married)
  • For the year 2019: Basic allowance limits are € 9,168 (single) and € 18,336 (married)

Freibetrag in Anspruch nehmen

Child Tax Credit (Kinderfreibetrag)

If you are a parent, you can claim allowances for your children through your tax returns. This allowance (Kinderfreibetrag) ensures that the basic subsistence level of each child is always maintained. This benefit is guaranteed and does not affect the amount the parents can earn before being taxed.

The child allowance (Kinderfreibetrag) total is made up from two parts; the allowance for each child and the BEA (Freibetrag für das Existenzminimum des Kindes und dem Freibetrag für den Betreuungs- und Erziehungs- oder Ausbildungsbedarf). The child allowance total (Gesamtkinderfreibetrag) in 2017 was € 7,356. This allowance is paid in full if one parent is deceased or not eligible for full taxation or if the father cannot be found. A separate form must be completed in the tax return for each child so that child allowances can be claimed.

Education Allowance (Erziehungsfreibetrag)

Parents can apply for allowances for the education, care or training needs of each child. However, this can only be used as long as the following conditions are met:

  • The child has taken initial vocational training or first degree
  • The child is aged between 18 and 25
  • The child has opted for vocational training
  • The child has volunteered for social or ecological work for one year
  • The allowance is currently up to € 2,640 for each year.

Discount Allowance (Rabattfreibetrag)

As the taxation for an employee who is both employed by a company and also produces goods or services on his or her own account fails, according to paragraph 8 of the EStG, the discount deduction clause (Rabattfreibetrag) grants the employee an allowance of 4% and a refund of up to € 1,080 each year under the following circumstances:

  • An employee can receive perks because of the employment relationship
  • If an employee receives perks that are cheaper or free of charge they have to be produced or distributed mainly for the needs of third-party final consumers.