What is an income tax return?
Each year, your income tax return gives you the opportunity to receive a tax refund and claim your expenses for tax purposes. Not everyone is required to submit a tax return, but most of the time, filing voluntarily is worth it as the average tax refund for voluntary tax returns amounts to 1.072 euros! In this article, you can find out exactly how this works and what you should keep in mind while preparing to file your tax return.
What is an income tax return?
Taxpayers that submit a tax return to the tax office can reclaim any overpaid income tax. The tax authorities do not require most taxpayers to file a tax return as it is already assumed that they have paid enough taxes on their wage income; therefore, tax returns are usually filed voluntarily. You might be wondering: Why should you take the time to file a tax return when it’s not required? Usually, voluntary tax returns result in a tax refund – the average being 1.072 euros – so why miss out? Income-related expenses (Werbungskosten) alone typically exceed the income-relate expenses lump sum (Werbungskostenpauschale) of 1,000 euros.
There’s no difference between tax return and tax declaration
There are a few different terms for tax return: income tax return and tax declaration both have the same meaning and there is no difference in tax law. In German, you might see the terms “Lohnsteuererklärung,” “Einkommensteuererklärung,” or simply “Steuererklärung.“ Just like in English, these all mean the same thing. All of these terms describe your final tax liability being evaluated and determining your overpaid or underpaid wage tax.
How to secure a tax refund
Voluntary tax returns secure a 1.072 euro tax refund on average. The amount of your refund is determined by expenses that you claim on your tax return. In principle, it’s simple: the more expenses you claim, the higher the refund. Of course, you can’t just claim expenses at random! Some common deductible expenses can be found in our list below.
Important deductible expenses include:
- Moving costs
- Household-related expenses
- Extraordinary expenses
- Application costs
- Home office costs
- Commuter costs
- Double household management
- Work equipment
- Tradespeople costs
- Business trip expenses
- Further education
- Telephone and internet costs
- Pension costs
How do I find out if I’m required to file a tax return?
Anyone who received a request from the tax office (Finanzamt) to file is required to do so. Keep in mind, the tax office does not always make requests, even when you are required.
Among other things, you are required to file a tax return if:
- You entered a tax allowance (Lohnsteuerfreibetrag)
- You were employed by multiple employers at the same time (i.e. tax class 6 was applied in an employment relationship)
- You were taxed according to tax classes (Steuerklassen) 3/5 or 4/4 with factorization
- You received more than 410 euros in wage replacement benefits (Lohnersatzleistungen such as short-term work benefits, unemployment, parental allowance, etc)
- Your spouse applied for individual tax assessment
- You received additional income (untaxed) that exceeds 410 euros per year
- You are a civil servant (Beamte) whose provisional expenses allowance (Vorsorgepauschale) exceeded your paid insurance contributions
- You remarried in the same year you were divorced
A more detailed list explaining circumstances that oblige you to file a tax return can be found in this article.
Deadline: When do I have to submit my tax return?
The general deadline for tax returns is July 31st following the tax year. Tax returns are always prepared for the previous tax year.
There is an exception for your 2021 tax return. Due to the Corona pandemic, the tax return deadline was again extended by three months. Therefore, your 2021 tax return is due on October 31st, 2022 (if you are required to file).
Taxpayers who wish to submit a voluntary tax return have up until December 31st, 4 years following the tax year – this means you can file a tax return up to 4 years retroactively. For example, if you would like to submit a voluntary tax return for the 2018 tax year, you have until December 31st, 2022.