Welcome to this insightful video where we’ll discuss 11 financial changes happening in Germany in 2023. By the end of this video, you’ll discover how you can save over €34,000 with completely tax-free income. So let’s dive right in!
Step-by-Step Guide: How to Submit a Tax Return as a Student in Germany
1. Increase in Kindergeld
Germany is introducing a significant increase in Kindergeld for 2023. Previously, the government provided support to parents to help them provide the best for their children. The amount varied depending on the number of children, ranging from €219 for the first child to €250 for the fourth child and onwards. However, the system has been revamped, and now every child will receive €250. This Kindergeld is granted to all registered residents in Germany with children, and it continues until the child turns 18, or until 21 if they are unemployed, and even until 25 if they are in vocational training.
Real-Life Example: Let me share a personal story. When Alina and I started living together and working, Alina was still in vocational training at the age of 22. The Kindergeld she received was incredibly helpful in managing our household expenses. It’s a valuable support system for parents.
2. Kinderfreibetrag (Child Tax Allowance) Increase
The Kinderfreibetrag, or child tax allowance, is another favorable change for couples with children. This tax credit allows couples to have an additional tax-free allowance per child. Previously set at €2,810, it has now been raised to €3,012.
Real-Life Example: If you multiply this amount by two for couples with two children, you’ll have an additional tax-free allowance of €6,024. Combine this with the current tax-free allowance of €9,984 per person, and you’ll have a total tax-free income of €31,268.
3. Betreuungskosten (Childcare Costs) Subsidy
The Betreuungskosten, or childcare costs subsidy, is aimed at supporting parents with the various expenses associated with raising children. Every parent now receives €1,464 per child, providing valuable assistance for extracurricular activities, workshops, and educational needs.
Real-Life Example: When you add this subsidy to the previous benefits, a couple with two children receives an additional tax-free income of €8,952. Considering the basic tax allowance for couples of €21,816 and the tax-free Kindergeld, the total tax-free income reaches €31,268.
4. Introduction of the Überbrückungsgeld (Bridge Money) Program:
Previously, individuals unable to work received Hartz IV, an unemployment benefit of around €449. However, the amount was insufficient, and the program had restrictions. In 2023, the government has increased the benefit to €502 and removed certain limitations, allowing recipients to earn additional income up to a specific threshold before normal taxation applies.
5. Solidarity Surcharge is Finally Gone!
Imagine an extra 5.5% in your pocket every month. Well, you don’t have to imagine it anymore! The solidarity surcharge, which used to take a slice out of your hard-earned income, has been abolished. This means more money for you to spend on the things you love. Cheers to that!
6. Income Tax Rates Are Decreasing
Who doesn’t love paying less tax? The good news is that the income tax rates in Germany have decreased. The basic rate is now 14.5%, and the top rate is 42%. This means you get to keep more of your money while still enjoying the perks of living in this fantastic country.
7. Child Benefits Are on the Rise
If you’re raising little ones in Germany, you’ll be thrilled to know that child benefits have increased. For each child, you’ll now receive €219 per month, up from €219.67. It might not seem like much, but every little bit counts, right?
8. Tax-Free Income is Increasing Too
Hold on to your hats because this one’s a biggie! The tax-free income in Germany is going up. Previously, it was at €9,984, but the German government is taking it up a notch to €10,908. That’s nearly a €1,000 increase per person or a whopping €2,000 for couples! So, if you’re a couple, you get to enjoy a tax-free income of €21,816. That’s like having a bonus every year!
9. The Maximum Tax Limit Is Going Up
Yes, you read that right. While the top tax rate remains 42%, the maximum tax limit is increasing from €58,597 to €62,810. That means you’ll earn an extra €4,213 without paying the highest tax rate. More money in your pocket, more opportunities to treat yourself!
10. Investors Rejoice: Reduced Taxes on Investments
If you’re into investing, this one’s for you. The tax on capital gains, dividends, and interests is changing. The first €1,000 of profits will be completely tax-free! Woohoo! For married couples, this means an additional €2,000 tax-free income from your investments. So, start investing and let your money work for you.
Now you might be thinking, “Wow, that’s a lot of tax benefits!” And you’re absolutely right. These changes are designed to put more money back in your pocket and stimulate the economy.
But here’s the thing – staying informed about these changes and taking advantage of them is crucial. Understanding German and being able to read official government websites can be a game-changer. If you’re not fluent yet, don’t worry! There are affordable German courses out there that will help you become proficient in no time.
So, there you have it – your step-by-step guide to the 2023 tax changes in Germany. Save more, invest wisely, and make the most of this taxpayer-friendly environment.
Keep in mind that tax laws can be complex, and individual situations may vary, so it’s always a good idea to consult with a tax professional to optimize your financial strategy.
11. Deducting Home Office Costs
Due to the COVID-19 pandemic, many people have transitioned to working from home. In Germany, there’s a beneficial system that allows you to deduct your home office expenses. These costs include electricity, internet usage, and even the wear and tear on your personal devices like laptops and stationery. Initially, you could deduct five euros per day for a maximum of 120 days, totaling 600 euros in a year. However, the good news is that this limit has now been extended to 200 days, allowing you to deduct up to 1000 euros per person annually.
Let’s say you and your partner both work from home and are eligible for this deduction. In that case, you can add an extra 2000 euros to your tax-free allowance. This means that as a couple with two children, your tax-free allowance becomes an impressive 35,268 euros. With these deductions, it’s clear that Germany offers significant tax benefits for families.
12. Private Health Insurance Options
At a certain income threshold, you may find that public health insurance becomes costly in Germany. In such cases, you have the option to switch to private health insurance. However, it’s important to understand the differences between the two systems. With public health insurance, you typically present a chip card when receiving medical treatment, and most expenses are covered directly. Private health insurance works differently, requiring you to pay for expenses upfront and then seek reimbursement from the insurance company.
While private health insurance may involve some out-of-pocket costs initially, it can also provide additional benefits, such as faster access to certain treatments or specialized medical care. It’s crucial to weigh the pros and cons and consider your specific healthcare needs before making a decision. Public health insurance is known for its comprehensive coverage, while private health insurance offers more flexibility but may come with additional expenses.
13. No Limit on Side Earnings for Pensioners
For those who have retired and are receiving a pension, there used to be a limit on how much additional income you could earn without facing tax implications. Previously, the limit was set at 6,200 euros per year. However, during the COVID-19 pandemic, the limit was temporarily increased to 46,000 euros. Now, the good news is that the limit has been completely removed, allowing pensioners to earn as much money as they desire on the side without any restrictions.
Of course, the tax authorities will still keep an eye on excessive earnings to ensure fairness, but for pensioners who wish to supplement their income or pursue new ventures, this change opens up exciting opportunities.
14. The 49 Euro Ticket for Regional Travel
Starting from April 1, 2023, Germany is introducing the 49 Euro ticket, which is a successor to the highly popular 9 Euro ticket introduced during the summer of 2022. This ticket functions as a subscription, allowing you to travel anywhere in Germany using regional trains, subways, trams, and buses for just 49 euros per month. The ticket is a game-changer for tourism, making it incredibly affordable and convenient to explore various cities and regions within the country.
This initiative encourages people, including students, professionals, and families, to take advantage of the flexibility offered by remote work and enjoy the beauty and diversity of Germany. With the 49 Euro ticket, you can easily plan day trips, weekend getaways, or longer vacations without breaking the bank.
These recent developments in Germany’s tax system and public services provide significant benefits to individuals and families. From increased tax-free allowances and deductions for home office expenses to the removal of income limits for pensioners and affordable regional travel options, the German government is actively taking steps to improve the lives of its citizens. By staying informed and
