Is Voluntary Tax Return Worth It in Germany? [2024 Guide]

Key takeaways

• On average, you can save 1095 € in taxes by submitting a voluntary tax return in Germany.
• Take advantage of tax allowances in Germany to reduce your tax burden,
• You’ll only get back tax if you voluntarily file an income tax return in Germany.

This is how you do it

• Use the tax tools we recommended to check how much of a tax refund you can expect.
• If you can get a tax refund, file the income tax return. Otherwise, don’t.
• We find SteuerGo*, Wundertax*, and Smartsteuer* easy to use for most expats in Germany.
• We recommend consulting a tax advisor for complex tax returns. You can get a free quote from the tax advisor we recommend here. They offer services in English.

Table of Contents

Is voluntary tax return worth it in Germany?

Yes, in most cases, filing a voluntary tax return is worth it in Germany.

We understand filing a tax return may seem daunting to people new to Germany. Learning the tax vocabulary and understanding what expenses you can deduct can take some time.

However, many English tax software programs nowadays exist that expats can use to file their tax returns. The tax software even suggests tips on saving taxes based on your data.

The best part is that you can fill in all your data in the tax software for free. The tool will then show you the estimated tax refund you will get.

If you can get a tax refund, file the tax return. Otherwise, don’t.

Moreover, you only pay when you file the tax return using the tool and not for calculating the estimated tax refund.

We recommend SteuerGo*, Wundertax*, and Smartsteuer* for expats in Germany.

However, tax software can only help you in simple cases. You should consult a tax advisor for complex tax returns.

What is the average tax refund in Germany?

The table below shows the tax refund data for the tax year 2019.

Number of taxpayers	26.5 million
Taxpayers who filed the income tax return	14.4 million
Taxpayers who received a tax refund	12.7 million, or 88% of people, received a tax refund
People who received a tax refund between 100 € and 1000 €	7.23 million or 57%
People who received a tax refund above 5000 €	254,000 or 2%
Average tax refund	1095 €

When does filing a tax return in Germany worth it?

You can expect a tax refund only if you file an income tax return. For some, filing a tax return is mandatory; for others, it’s voluntary.

Here are some of the cases where you can expect a tax refund.

• Income-related expenses: Your income-related expenses exceed the flat rate (Werbungskostenpauschale) of 1,230 € (as of 2024). These expenses include commuting costs, home office expenses, books, etc. You can learn about all the tax-deductible income-related expenses in our guide on how to save taxes in Germany.
• You were not employed for the entire year. Suppose you were unemployed for certain months in the year. It could be because you switched jobs, or recently graduated and got the job, etc. The tax office deducts the tax from your salary as if you worked the entire year. However, in reality, you didn’t. In this case, you can get a reasonable tax refund if you file your tax return.
• Church tax: You are not a church member but pay the church tax. You can get back the church tax you paid by filing the income tax return.
• Donations: You can deduct the donations you made during the year from your taxes.
• Married couples: Suppose you didn’t opt for favorable tax classes as a couple and paid more taxes during the year. In this case, you’ll get the tax back only if you submit your tax return. 
• Insurance costs: You can deduct pension, health, and unemployment insurance costs from your taxes. You can also deduct the legal and dental insurance costs from your taxes.
• Lower tax bracket: People in the lower tax brackets don’t have to pay the complete capital gains tax (i.e., 25% plus 5.5% surcharge). Usually, your bank and broker withhold the capital gains tax when paying interest or dividends. It is called the withholding tax in Germany. In this case, you can get back the excess tax withheld by filing a tax return.
• Medical costs: Suppose you had higher medical expenses in the past year due to illness, accidents, caring for parents, floods, funerals, etc. In this case, you can claim these expenses on your tax return.
• Labor costs: You made some repairs or renovations. You can deduct the labor expenses from your taxes.

These are some of the common expenses that can save you money by filing a voluntary tax return. Read our guide to learn about other ways of saving taxes in Germany.

Deduct tax allowances during tax declaration and save taxes

You can also take advantage of tax allowances to save taxes in Germany. But you must file a tax return for the same.

Here are the tax allowances you can deduct by voluntarily filing a tax return in Germany.

• Tax-free allowance for single parents: The tax-free allowance for single parents is higher than others. It’s the basic tax-free allowance (11,604 as of 2024) plus a relief amount (4,260 € as of 2024). The allowance also increases by 240 euros for each additional child.
• Capital gains allowance: The capital gains tax-free allowance is 1000 € as of 2024. So, you don’t have to pay capital gains tax on the realized profits of up to 1000 €.
• Travel allowance: You can deduct 30 cents per kilometer as travel allowance from your taxes. How you commute from home to the office doesn’t matter: walk to the office or go by car. Moreover, if your travel costs are higher, you can deduct more. 
• Home office flat rate: You can deduct unlimited home office expenses from tax year 2023. The tax office also offers a home office flat rate of 1260 € as of 2023. You don’t need any proof to claim the home office flat rate.
• Disabled allowance (Behinderten-Pauschbeträge): You can deduct between 620 € and 7,400 € from your tax declaration. 
• Care allowance (Pflege-Pauschbetrag): If you care for someone at home, you can deduct the care allowance from your taxes. The allowance is 600 € for care levels 2 and 3 and increases to 1,800 € for care level 4.

Carryforward the losses to reduce the tax burden in the future

Even if you cannot reduce your tax burden this year, you can reduce it in the future. In Germany, you can carry forward losses to the next years. 

This allows you to deduct the losses incurred in the past from the profits in the future. 

Example: 

Suppose you lost 5000 € in 2021 in the stock market. You can deduct the stock market losses only from the profits from the stock market. So, the best thing to do is to carry forward these losses.

Suppose you made a profit of 6000 € in 2022. Now, you can deduct the losses of 2021 (5000 € in our example) from your profits in 2022.

As a result, you pay capital gains tax on 1000 € (6k – 5k) instead of 6000 €. This way, you can save a lot of money by voluntarily submitting tax returns in Germany.

References

• https://www.finanztip.de/steuererklaerung/
• https://www.wiwo.de/finanzen/steuern-recht/steuererklaerung-diese-steuerfreibetraege-sind-2024-wichtig/27825826.html