Tax allowance: You can claim these tax allowances in your tax return.

There are several tax allowances in German tax law, but you have to claim one tax allowance yourself first. We will show you which different tax allowances there are.

How does a tax allowance work?

• A tax allowance benefits both high-income earners and lower-income households. Probably the most important tax allowance relates to income.
• If you earn your own money, you pay income tax on your income. For 2023, the so-called basic tax-free amount is 10,908 euros.
• This means that your income is not taxed until you exceed the tax-free amount of 10,908 euros per year. Up to this amount, no matter whether you earn more or less, no tax is due.

Savers’ lump sum: claim tax allowances by declaration

The basic tax-free amount for income tax automatically applies to every citizen. Here, the tax-free amount does not have to be claimed separately. However, the situation is quite different for other tax-free allowances

• You pay what is known as capital gains tax on interest and capital gains. This means that 25 per cent of the profit goes to the state. The so-called saver’s allowance gives you a tax-free allowance of 1000 euros from 2023.
• However, in order for the tax-free amount to apply, you must complete an exemption order. You can get one online or at your local bank. Spouses can combine their tax-free amount so that one of them has a tax-free amount of 2,000 euros.

Claim the child allowance by declaration

• From the birth of your child, you can claim the child allowance. To do this, you only have to submit the application for income tax reduction to your tax office
• In 2023, the child allowance per child is 8,952 euros. In 2024, this figure will rise further to an expected 9,312 euros. This amount is in addition to the current basic allowance of 10,908 euros that applies to everyone.
• If you claim the child allowance, however, you will not receive child benefit. Depending on your income, child benefit or the child allowance may therefore be worthwhile.
• To do this, calculate your income tax with and without the child allowance. If the savings are 12 times higher than the monthly child benefit of 250 euros, the child allowance is worthwhile.