Tax Returns for Employees: Deductible Expenses
In this article, you’ll learn which important deductible costs can be claimed on your tax return – everything from provisional expenses to childcare to moving costs.
For most employees, it’s 100% worthwhile to file a tax return. Most costs that are racked up throughout the year can be claimed on your tax return, which leads to an average tax refund of 1.095 euros.
Business trips and travel expenses
If your employer only pays for part (or none) of your business trip expenses, you can claim the uncovered costs on your tax return as income-related expenses. Business trips to training courses, trade fairs, etc. which were not required by your employer but that you visited on your own initiative can also be claimed. This includes costs for the seminar, travel costs, as well as room & board. In our article regarding business trips, you can find out more about deducting these costs. For room & board costs, you can claim a lump sum of 14 euros if you are absent for at least 8 hours and 24 euros if you were away at least 24 hours.
Childcare (Kinderbetreuung)
Parents with children under 14 years of age can deduct 2/3 of their childcare expenses as special expenses (Sonderausgaben) with a maximum of 4,000 euros per child per year. There is no age limit for children with disabilities.
Church tax (Kirchensteuer)
Church tax can be deducted in full as special expenses.
Commuter allowance & mobility premium
The commuter allowance (Entfernungspauschale or Pendlerpauscahle) allows you to claim 30 cents per full kilometer of travel between your home and first place of work, regardless of your means of transportation. Note: You can only claim one-way per day, either to or from work. As of January 1st, 2021, long-distance commuters can claim 35 cents from the 21st kilometer of one-way travel.
Along with the 2021 tax return, a new mobility bonus was introduced: Long-distance commuters whose total annual income doesn’t exceed the basic tax-free allowance (Grundfreibetrag) and whose income-related expenses (Werbungskosten) are above the lump sum of 1,000 euros per year can receive 14% of the increased commuter allowance from the 21st kilometer of one-way travel, i.e. 4.9 cents per kilometer.
Donations (Spenden) & membership fees
Donations to charitable causes and organizations can be deducted as special expenses on your tax return. The tax office (Finanzamt) recognizes donations amounting up to 20% of your annual income. As of January 1st, 2021, donations up to 300 euros no longer require a donation receipt as proof – a bank statement is sufficient.
50% of donations and membership fees for political parties that amount up to 1,650 euros are deducted directly from your tax liability.
Funeral costs (Beerdigungskosten)
Funeral costs can be claimed as extraordinary expenses (außergewöhnliche Belastungen). Keep in mind: Specific burial costs (gravestones, etc.) can only be claimed if your possible inheritance doesn’t exceed the total funeral costs.
Household-related services & tradespeople costs
If you’ve hired service providers to complete work in your household, the costs can be deducted as household-related services (haushaltsnahe Dienstleistungen) or tradespeople costs (Handwerkerleistungen) on your tax return. These services can include, for example, cleaning, gardening, meal prep, moving services, pet care (in your home), etc. Up to 20% of these costs can be claimed up to a maximum of 4,000 euros per year.
An additional tax reduction of 20% off (max. 1,200 euros per year) can be received for tradespeople expenses serving to maintain or renovate your home.
Important: An official invoice from your service provider must be presented in order to deduct tradespeople and household-related expenses. These invoices cannot be paid in cash.
Job application expenses (Bewerbungskosten)
Job application costs can be deducted as income-related expenses – regardless of whether the application is successful or not. You can deduct technical literature, folders, application photos, self advertisements, etc. In addition, you can claim a flat rate for each submitted application: 2.50 euros for each electronic application and 8.50 euros for each postal application.
Moving expenses
Those who move households for professional reasons can benefit from the moving expenses lump sum (Umzugskostenpauschale). As of April 1st, 2021, this lump sum amounts to 870 euros (previously 860) for the entitled person and 580 euros (previously 573) for each additional household member. As of April 1st, 2022, this will increase to 886 euros and 590 euros respectively.
Those who move for private reasons can deduct 20% of the expenses for contracted service providers (e.g. moving companies) as household-related services.
Offices at home (Arbeitszimmer)
If you have a separate room serving as an office in your home, you can deduct relevant costs on your tax return provided that the room meets certain conditions. Up to 1,250 euros can be claimed in these expenses per year if you don’t have another workplace for certain parts of your work (such as preparing lessons). The full costs of your office can be claimed if the center of your professional activity takes place in your office at home (i.e. if you are a writer).
Certain conditions must be met:
- The room must be used for professional purposes at least 90% of the time
- It must be a separate room integrated into the domestic sphere of your home/apartment
- There must be a reasonable amount of living space for all residents of the home outside of the study
- The furnishings in your office must correspond to your professional activity and cannot suggest private use (such as a guest bed)
Provisional expenses (Vorsorgeaufwendungen)
Provisional expenses can be claimed on your tax return and are divided into two groups:
Contributions to retirement provisions
In 2022, you can claim 94% (max. 25,639 euros) of your retirement contributions on your tax return as special expenses (Sonderausgaben), previously 92% in 2021. Married couples who file joint assessments can deduct double this amount (max. 51,278 euros). Retirement provisions include contributions to a statutory retirement, occupational pension schemes, Rürup pensions, and agricultural pension schemes. In addition, up to 2,100 euros of your contributions to Riester pension can be claimed on your tax return – these do not count towards the previously mentioned maximum amounts.
Note: You don’t typically have to declare contributions to company pension schemes (betriebliche Altersvorsorge) on your tax return. These contributions are deducted from your gross salary (deferred compensation) and automatically reduce your tax burden. Company pension schemes are taxed on a deferred basis, for example, when they are paid out later on.
Other provisional expenses (Sonstige Vorsorgeaufwendungen)
Up to 1,900 euros per year can be deducted for other provisional expenses. This limit is raised to 2,800 euros for freelance workers. Other provisional expenses can include contributions to:
- Statutory or private health & nursing care insurances
- Unemployment insurance (Arbeitslosenversicherung)
- Accident insurance (Unfallversicherung)
- Liability insurance (Haftpflichtversicherung)
- Employment and occupational disability insurance (Erwerbs- or Berufsunfähigkeitsversicherung)
- Term life insurance (Risikolebensversicherung)
- Private endowment (Kapitallebensversicherung) and retirement policies taken out before 2005 (private retirement insurance policies with the choice of capital payment must have a minimum term of 12 years)
- Other voluntary supplementary insurances
The basic coverage of your health and nursing care insurances can be deducted in full. The tax office deducts a flat rate of 4% from your contributions as sick pay entitlement is not a part of the basic coverage. If you don’t use up the maximum amount of 1,900 or 2,800 euros by deducting these contributions, additional insurance contributions can be claimed.
Telephone & internet costs
Any telephone and internet expenses acquired from professional activities can be deducted as income-related expenses (Werbungskosten) at a rate of 20% of the invoice amount. A maximum of 20 euros per month or 240 euros per year can be claimed. If your costs exceed these amounts, you can prove the expenses individually to deduct them in whole.
Trade unions
Members of trade unions (Gewerkschaften) or professional associations (Berufsverbände) can claim their contributions as income-related expenses (Werbungskosten).
Volunteering & exercise leaders
If you volunteer for a club, association, or social institution, you can earn up to 840 euros tax-free per year with the volunteer lump sum (Ehrenamtspauschale). Exercise leaders such as trainers, choir leaders, etc. can take advantage of the exercise leader lump sum (Überleiterpauschale) which amounts to 3,000 euros per year.