Taxes

You are employed

In 2022, around 11.6 million employees weren't assessed for income tax, more than two in five (Federal Statistical Office, 2026). Many wouldn't have to file a tax return, but many would get money back.

Do I have to file a tax return?

As an employee, you have to file if you're in tax class VI, or if you're married, you both work and one of you is in tax class V or you use the factor method. You also have to file if you received more than €410 in parental allowance, unemployment benefit or sickness benefit, or if your other income, such as the profit from a side job or the surplus from renting out property, is above €410. Otherwise it's voluntary, and you can file for up to four years back. For 2022, you can still do this until 31 December 2026.

What's the deadline?

If you have to file and do it yourself, you have until 31 July of the following year. With a tax adviser or a wage tax assistance association (Lohnsteuerhilfeverein), the deadline for 2025 is 1 March 2027. If you file late, the tax office can charge a late filing penalty.

When is it worth collecting receipts?

The tax office automatically allows a flat €1,230 for work-related expenses (Werbungskostenpauschale). So receipts only help once you go above that. Since 2026, your commute counts at €0.38 per kilometre, from the first kilometre and for one way only.

How does the home office allowance work?

For each day you work mainly from home, you can claim €6, up to €1,260 a year. The allowance counts as a work-related expense, so it only makes a difference once your total goes above €1,230.

What else can I deduct apart from work-related expenses?

For tradespeople, cleaners or gardeners in your own home, you can deduct 20% of the labour costs directly from your tax, up to €1,200 a year for trade work and €4,000 for household services. You need an invoice and must pay by bank transfer. Cash payments don't count.

What you can do now

1. Check whether one of the compulsory cases applies to you, such as tax class V or parental allowance above €410.
2. If you haven't filed a return for 2022 yet, do it by 31 December 2026.
3. For 2026, keep a note of your home office days and the distance to work, so you can see whether you'll go above €1,230.
4. Pay tradespeople and household help by bank transfer and keep the invoice.

You work part-time or in a minijob

On a smaller income, more wage tax is often withheld than is due in the end. More than half of all minijobs are held by women (Minijob-Zentrale, 2026).

Does my minijob go on my tax return?

Usually not. Up to €603 a month, your employer usually pays a flat 2% tax, and that settles it. You only have to declare the minijob if it's taxed through your tax class. The payroll office can tell you whether that's the case.

What changes between €603 and €2,000?

In what's called a midijob, you pay wage tax according to your tax class but lower social security contributions. In tax class V, a lot of wage tax is withheld. How much of it you really owe only becomes clear with your joint tax return.

Is a tax return worth it if I work part-time?

Often, yes. In 2026, you pay no income tax on taxable income up to €12,348 a year. If wage tax was deducted anyway, for example because you only worked for a few months, you get it back with your return.

What applies if I have two jobs with wage tax?

The second job is taxed under tax class VI, and you then have to file a tax return. A minijob with flat-rate tax as a second job doesn't trigger this obligation.

What you can do now

1. Ask the payroll office whether your minijob is taxed at the flat rate.
2. Check your annual payroll tax certificate (Lohnsteuerbescheinigung) to see whether wage tax was deducted even though you earned less than €12,348 that year. If so, file a return.
3. If you have a second job in tax class VI, remember you'll have to file a tax return.

You are married

Tax class V is almost exclusively made up of women. It doesn't change how much tax you pay as a couple over the year, but it does change what you have left each month.

Do we pay less tax with III and V?

No. The tax class only splits the monthly deduction between you. What you pay for the year is only settled with the tax return, and with III and V it's compulsory. Of the couples with this combination, almost 46% recently had to pay extra (Federal Statistical Office, 2024).

Why does the tax class matter anyway?

Parental allowance, unemployment benefit and sickness benefit are calculated from your net pay and are much lower in tax class V. For parental allowance, what counts is the tax class that applied for most of the twelve months before the maternity protection period (Mutterschutz). So a change must take effect at least seven months beforehand. For unemployment benefit, a change only counts if the new class fits the ratio of your two salaries. So a quick switch shortly before you become unemployed usually doesn't help.

What's the factor method?

You're both in tax class IV with a factor that splits your joint tax according to your actual salaries. That way your net pay reflects your share, and large back payments are less likely. You apply for it together at the tax office, which you can also do through ELSTER, the tax office's online portal.

Are tax classes III and V being abolished?

As of October 2026, no. The previous federal government wanted to replace them with the factor method from 2030, but this was never passed into law. Both classes can still be chosen, and you can switch several times a year.

What you can do now

1. Check your payslip to see which tax class you're in.
2. Have the factor method calculated at the tax office or with the Federal Ministry of Finance's calculator.
3. If you're planning a child, sort out your tax class at least seven months before the maternity protection period starts.
4. If you stay with III and V, set money aside for a possible back payment.

You are having a child

Mothers plan for almost 15 months of parental allowance on average (Federal Statistical Office, 2026). That year has tax consequences that many only notice when the tax assessment arrives.

Parental allowance is tax-free. Why do I still have to pay extra?

Parental allowance and maternity benefit are tax-free, but they raise the tax rate on the rest of your income. That's why you have to file a return once they exceed €410 a year. Back payments mostly affect couples where one partner keeps earning.

Do I have to choose between child benefit and the child allowance?

No. The tax office checks in your tax return which is better for you. In 2026, child benefit (Kindergeld) is €259 a month. On a higher income, the child tax allowance (Kinderfreibetrag) is worth more, and child benefit is then offset against it.

What can I deduct for nursery, childminder or after-school care?

You can deduct 80% of childcare costs, up to €4,800 per child a year, as long as the child is under 14. You need an invoice and must pay by bank transfer. Meals don't count. If your employer contributes to nursery costs, this is tax-free until your child starts school.

What relief is there if I'm a single parent?

As a single parent, you get a tax relief of €4,260 a year (Entlastungsbetrag für Alleinerziehende), plus €240 for each additional child. It is built into Steuerklasse II (tax class II). The condition is that your child is registered at your address and no other adult lives in your household. An adult child for whom you still receive child benefit doesn't count.

What you can do now

1. In the year you receive parental allowance, set money aside for a possible back payment and file your return.
2. Pay for childcare by bank transfer and keep the invoices.
3. Ask your employer about a tax-free contribution to nursery costs.
4. If you're a single parent, check that your payslip shows tax class II.

You are investing

Your first investment account brings your first tax questions: what stays tax-free and how to get back tax you overpaid.

How much of my return stays tax-free?

€1,000 a year in interest, dividends and capital gains, or €2,000 if you're assessed jointly. To stop your bank deducting tax on this, give it an exemption order (Freistellungsauftrag). If you have several banks, you split the amount between them.

The bank deducted tax anyway. Can I get it back?

Yes, with Anlage KAP (the capital income form) in your tax return. This often happens when the exemption order was too low or was with the wrong bank.

Do I pay 25% even if I work part-time or I'm on parental leave?

Not necessarily. If your personal tax rate is below 25%, you can apply for a comparison test (Günstigerprüfung) in Anlage KAP, and your lower rate is then used. If your total income is below the basic tax-free allowance, you can give your bank a non-assessment certificate (Nichtveranlagungsbescheinigung).

What happens to losses on shares?

Losses from selling shares can only be offset against gains from selling shares. If you have several banks, ask for a loss certificate by 15 December, and the tax office will then offset them across all your investment accounts.

What you can do now

1. Check whether your exemption orders add up to the full €1,000 or €2,000.
2. If you work part-time or you're on parental leave, apply for the comparison test in Anlage KAP.
3. If you have losses at one bank and gains at another, request the loss certificate by 15 December.

How to build up an investment account is covered under Building wealth.

You are self-employed on the side

Seven in ten new businesses start alongside a job (KfW, 2026). When it comes to tax, there are a few things you need to get right from the start.

When do I have to tell the tax office?

No later than one month after you start, with the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung) via ELSTER. If your work counts as a trade, you also register it with the Gewerbeamt (trade office). Freelancers don't need to register a trade.

What does the small business VAT exemption do for me?

Under the small business VAT exemption (Kleinunternehmerregelung), you don't charge VAT and don't have to file advance returns, but you can't reclaim input VAT either. You can use it as long as your turnover was no more than €25,000 in the previous year and stays at or below €100,000 in the current year. In the year you start, a stricter limit applies: your turnover in that year must stay at or below €25,000. If you cross a limit during the current year, VAT applies from that sale onwards, not only from the following year.

Do I have to pay tax on a few hundred euros on the side?

As an employee, a profit from side work of up to €410 a year stays tax-free, and up to €820 it's only partly taxed. If you work as a coach or instructor, for example at a non-profit sports club, up to €3,300 a year in earnings is also tax-free, and up to €960 for volunteer work.

How is my profit taxed?

You work out income minus expenses and file this with Anlage EÜR (the profit calculation form). The profit is added to your salary and taxed at your personal rate. If you run a trade, trade tax (Gewerbesteuer) is only due on the part of your profit above €24,500 a year, and most of it is credited against your income tax. Freelancers don't pay trade tax.

What you can do now

1. Send the tax registration questionnaire within one month of starting.
2. Keep an eye on your turnover so you don't cross the €25,000 and €100,000 limits without noticing.
3. From day one, keep a list of all income and expenses and keep the receipts.

You are self-employed

Just over a third of self-employed people in Germany are women (WSI, 2025). The typical surprise comes in the second year, when a back payment and advance payments fall due at the same time.

What are advance tax payments?

The tax office sets quarterly advance payments on your income tax, often as soon as you send the tax registration questionnaire and at the latest after your first tax return. They are due on 10 March, 10 June, 10 September and 10 December. If your profit changes significantly, you can have them adjusted.

How much should I set aside?

The VAT you collect belongs to the tax office, so set all of it aside. There's no fixed rate for income tax, because it depends on your profit. The safest option is a separate account with a rate you agree with your tax adviser.

How often do I have to file VAT returns?

Usually every quarter, or monthly if your VAT in the previous year was over €9,000. The advance return is due on the 10th of the following month, or one month later with a permanent deadline extension (Dauerfristverlängerung).

What applies to e-invoices?

Since 2025, you must be able to receive and store e-invoices from other businesses, even if you use the small business VAT exemption. You have to issue them to businesses yourself from 2027 if your turnover in the previous year was over €800,000, and from 2028 for all businesses. Those using the small business VAT exemption are exempt.

How long do I have to keep receipts?

Keep invoices and bank statements for eight years, books and annual accounts for ten years, and business letters for six years.

What you can do now

1. Put the four advance payment dates in your calendar.
2. Set up a separate account for VAT and tax reserves, and agree the rate with your tax adviser.
3. Make sure you can receive and archive e-invoices.

You are separating

In 2025, around 130,100 marriages ended in divorce in Germany (Federal Statistical Office, 2026). The legal side is covered under Law. For tax, quite a lot changes from the year after you separate.

What changes for tax after the separation?

For the year you separate, you can still be assessed jointly and use income splitting if you were still living together on at least one day of that year. You both have to agree to this. From the following year, each of you is assessed separately. Your tax class is then I, or II with a child. Whoever is in tax class III must report the separation to the tax office. Agree early on who receives a refund or pays a back payment for the year you separate.

What's Realsplitting?

With Realsplitting (deducting maintenance paid to a former spouse), whoever pays maintenance to a former partner can deduct up to €13,805 a year, plus any health and long-term care insurance contributions they cover. The person receiving the maintenance must agree and then pays tax on it themselves. If you receive maintenance, agree before you sign that you'll be compensated for the tax disadvantages.

Can I deduct child maintenance or the divorce?

Neither. Child maintenance is covered by child benefit and the child tax allowance, and since 2013 the costs of divorce proceedings are generally not deductible.

What you can do now

1. Report the separation to the tax office so your tax class is correct from 1 January.
2. If you receive maintenance, only sign your consent to Realsplitting once compensation for your tax disadvantages has been agreed in writing.

The legal side of separation and divorce is covered under Law.

You inherit or receive a gift

In 2025, €141.1 billion was inherited and given away in Germany, 23.1% more than the year before (Federal Statistical Office, 2026).

How high are the tax-free allowances?

The tax-free allowance is €500,000 for spouses, €400,000 for children and €200,000 for grandchildren. Siblings, friends and unmarried partners only get €20,000.

Can I use the allowances more than once?

Yes, they renew every ten years. Gifts from the same person within ten years are added together. So if you give early and spread it out, you can use the allowances several times.

What applies if we live together without being married?

For tax purposes, you're strangers, with a €20,000 allowance and the highest tax rates. You also don't inherit the house or flat you shared tax-free. That only applies to married couples, registered civil partners and, up to 200 m² of living space, children.

Do I have to report an inheritance or a gift?

Yes, within three months to the responsible tax office. The Federal Constitutional Court heard the inheritance tax case in October 2026. Until there is a decision and lawmakers have responded, the current law applies. Talk to a tax adviser before making larger gifts.

What you can do now

1. Write down the date and value of every gift so you can keep track of the ten years.
2. If you live together without being married, have someone work out what an inheritance between you would cost.
3. Report an inheritance or gift to the tax office within three months.

You have your own GmbH

With a GmbH, you decide how much you pay yourself as salary and how much stays in the company. That has big tax consequences.

Salary or dividends: which costs less?

Your salary as managing director reduces the GmbH's profit and is taxed for you like employment income. It must be reasonable and agreed in writing in advance. If the GmbH pays out its profit, it first pays around 30% and you then pay just over 25% on the rest, close to 50% in total. That's why a reasonable salary usually costs less today. The GmbH comes into its own when the profit stays in the company: then it's only around 30%. From 2032, corporation tax falls to 10%, and on a high income, paying out dividends can then cost less too.

What does a holding company do for my taxes?

If your GmbH pays profits to your holding GmbH or the holding company sells shares, 95% of that is tax-free, for dividends once the holding company owns at least 15%. This leaves an effective tax of around 1.5%. You only pay personal tax when the holding company pays the money out to you.

I want to sell my business. Is there any relief?

If you sell a sole proprietorship at 55 or older, you get a reduced tax rate once in a lifetime. For smaller gains, there's also an allowance of up to €45,000, which shrinks once the gain goes above €136,000 and is gone completely from €181,000. Under 55, the one-fifth rule (Fünftelregelung) helps, though it does little if your other income is high. If you sell GmbH shares you hold privately and own at least 1%, 60% of the profit is taxable. How to set up the holding company in time is covered under Law.

Is corporation tax changing?

Yes. From 2028 it falls by one percentage point each year, from 15% to 10% from 2032.

What you can do now

1. Set out your salary as managing director in writing and in advance.
2. If you're thinking of selling, work out with your tax adviser now whether a holding company makes sense for you.

You are retiring

For many women, their pension isn't tax-free, and the taxable share rises with each new group of retirees.

How much of my pension do I have to pay tax on?

That depends on the year your pension starts. If you retire in 2026, 84% is taxed. The tax-free part is then fixed as a set amount, and later pension increases are fully taxable.

Do I have to file a tax return as a pensioner?

Yes, if your total income is above the basic tax-free allowance, which is €12,348 in 2026. The tax office is notified of your pension automatically.

What's the Aktivrente?

With the Aktivrente (tax-free earnings in retirement), if you keep working as an employee after the standard retirement age, up to €24,000 a year in wages has been tax-free since 2026, around €2,000 a month. This doesn't apply to the self-employed or to minijobs.

What you can do now

1. Work out roughly whether your income including your pension is above €12,348.
2. If you keep working after the standard retirement age, check with the payroll office that the Aktivrente is being applied.

You are ill for a long time

Sickness benefit is tax-free, but it still affects your taxes. And some of what you pay for your health yourself can be deducted.

Do I have to pay tax on sickness benefit?

No, sickness benefit is tax-free. But it raises the tax rate on the rest of your income, known as the progression proviso (Progressionsvorbehalt). So if you received more than €410 in sickness benefit in a year, you have to file a tax return, and you'll often have to pay extra. Your health insurer reports the amount to the tax office itself.

Which medical costs can I deduct?

Everything you pay yourself that your health insurer doesn't cover: co-payments for medication and therapies, treatments and aids prescribed by a doctor, and journeys to the practice or hospital. But you can only deduct the part above your “reasonable burden” (zumutbare Belastung). Depending on your income, marital status and number of children, this threshold is between 1 and 7% of your income.

Is it worth collecting receipts?

Yes. Medical costs count in the year you paid them. If several large expenses are coming up, such as dental work and new glasses, it can be worth putting them in the same year so that you get above the threshold.

What you can do now

1. File a tax return for every year in which you received more than €410 in sickness benefit, and set some money aside for the extra payment.
2. Keep all receipts for co-payments, prescriptions and journeys.
3. Where possible, put larger health expenses in the same year.