Welcome back, friends! Today, let’s dive into the topic of tax returns for students in Germany. I know, it may sound like a headache, but trust me, spending just a few minutes each year can lead to a handsome tax return of around €1,000 on average. Yes, you read that right! So, let’s explore why filing a tax return as a student in Germany can be highly rewarding.
Do I Have to Submit a Tax Return in Germany?
The good news is, as a student, you don’t have to submit a tax return if you’ve had only one job at a time and your tax class has always been number one. But hold on, before you dismiss the idea, consider this: voluntarily submitting a tax return could be worth your while.
Should I Submit a Tax Return Every Year?
Nope, not necessarily. As a student, you’re not obligated to submit a voluntary tax return every year. In fact, many students never file one. But here’s the catch: if you find yourself in a different tax class or have had multiple jobs at a time, it might be beneficial to give it a shot. Now, let’s explore why.
The Benefits of Filing a Tax Return as a Student in Germany
- Refund Potential: Filing a tax return opens up the possibility of claiming tax refunds based on your expenses as a student. And we’re not talking pocket change here. Depending on your situation, your tax return could amount to thousands of euros.
- Carrying Forward Losses: If you incur losses during your studies, you can carry them forward for up to seven years. So, if you start earning a higher income in the future, these losses can offset your tax burden.
- No Deadline Pressure: Unlike mandatory filers, students enjoy the flexibility of no specific deadline for voluntary filing. You can submit a tax return for up to four previous years, giving you ample time to gather the necessary documents and maximize your refund potential.
How Does a Tax Return Actually Work?
As an employee in Germany, when you earn income, you’re required to pay taxes on it. However, there’s a tax-free limit called the “Grundfreibetrag” or basic allowance. This amount varies each year and is tax-free for every employee in Germany. Any income above this limit is subject to progressive income tax rates, ranging from 14% to 42%, depending on your tax class.
Declaring Expenses to Reduce Your Tax Burden
Here’s the exciting part: you can show your job- or study-related expenses in your tax return to reduce your tax burden. These expenses include:
- Educational Materials: Books, course fees, and study-related software.
- Transportation: Public transportation costs to and from your educational institution.
- Rent and Utilities: A portion of your rent and utility bills if you use your residence as a home office or for studying.
- Health Insurance: Contributions to your public or private health insurance.
- Internet and Phone: Expenses related to internet and phone services used for educational purposes.
By declaring these expenses, you lower your taxable income, potentially leading to a higher tax refund.
How Tax Returns Work: A Story of Deductions and Refunds
Let me walk you through an example to illustrate how tax returns function in Germany. Imagine there’s a full-time employee earning €45,000 per year. Using a tax calculator, we determine that their annual income tax amounts to €6,747. Now, let’s factor in work-related or study-related expenses.
Suppose this individual has €5,000 worth of expenses and decides to submit a tax return, detailing these costs. The tax office doesn’t simply hand back the entire €5,000. Instead, they recalculate the income tax based on the revised income of €40,000 (€45,000 – €5,000 in expenses).
Considering the new calculations, the income tax owed is determined to be €5,445 instead of the initial €6,747 based on the €45,000 income. Consequently, the tax refund for this individual amounts to €1,302 (€6,747 – €5,445).
It’s important to note that social contributions, such as pension insurance, health insurance, and care insurance, are not considered taxes. Only income tax and solidarity surcharge are classified as taxes. Additionally, individuals who hold multiple jobs may be exempt from paying pension and care insurance, except in specific cases.
You might be thinking, “I’m a student and I don’t earn such a large amount, or maybe I don’t earn anything at all!” Fear not, my friend. Even if you don’t earn a single cent, you can still submit a tax return showcasing your study and work-related expenses. By doing so, you can benefit from the tax office.
If you’ve paid enough taxes during the year, you’ll receive a tax refund. On the other hand, if you haven’t paid enough taxes or any taxes at all, you’ll receive a tax loss carry forward statement or a “Verlustbescheinigung” from the tax office. This document confirms that you incurred losses in the previous year and allows you to offset those losses against your current year’s tax burden.
Here’s another example to illustrate this concept. Let’s say you were a student in 2021 and didn’t earn enough to pay any taxes, as your income fell below the tax-free limit. However, in your tax return, you show study-related expenses totaling €3,000.
By documenting these expenses, you establish a tax loss carry forward statement. This statement acknowledges your losses in 2021 and allows you to carry them forward to future years, where they can be offset against your tax burden once you start earning a higher income.
So, whether you’re a student with minimal income or a full-time employee, understanding and utilizing tax returns can lead to financial benefits. Don’t miss out on the opportunity to maximize your refunds or offset future tax liabilities. Take a proactive approach, gather your documentation, and confidently submit your tax return.
Understand Tax Loss Carry Forward
If you’re a student with little or no income, you might wonder how tax returns work for you. Since you don’t pay any taxes, the tax office cannot reduce your tax burden. However, the tax office can issue a tax loss carry forward statement. Here’s how it works:
Let’s say in 2022, you remained below the tax-free income limit and didn’t pay any taxes. When you submit a tax return for 2022, you can include your income, study-related expenses, and the previous tax loss carry forward statement. Since you didn’t pay any taxes in 2022, you’ll receive another tax loss carry forward statement.
As a student, you can carry forward losses up to seven years in the past. Ideally, you should be working and paying taxes within this seven-year period. This rule ensures that you can use your carried-forward losses when you start earning higher income in the future.
Gather Your Documents
To prepare your tax return, collect the necessary documents and records. Here are some common items to gather:
- Educational fees: Any fees associated with your education, such as semester fees, registration fees, and examination fees, can be fully tax deductible.
- Transportation costs: Expenses related to commuting from your house to the university, including one-way trips to seminars or study events, are tax deductible. The deduction is up to 30 cents per kilometer.
- Literature and tools: Costs for specialist literature, equipment, printing, copying, pens, and pads can be claimed in this category.
- Telephone and internet costs: Expenses for smartphone contracts, home internet, and landline can be included in your tax return.
- Electronic hardware: If you can prove that devices like mobile phones, computers, tablets, software, and peripherals are used for study purposes, you can claim them as expenses.
- Accommodation costs: If you maintain a secondary residence in another city for study purposes while having a primary residence in a different city, you can claim the accommodation costs for the secondary residence as study expenses.
- Relocation costs: If you move cities for internships or your thesis, you can take advantage of the relocation cost deduction, which can be up to €820.
- Student loans: The interest payments on student loans can be claimed as deductions in your tax return.
- Application costs: Costs associated with applying for internships, thesis positions, or full-time jobs can be claimed. This includes application fees for physical and online applications.
- Meal costs: Flat rates for meals during internships, semester abroad programs, and excursions can be claimed. The rates vary, with domestic trips typically allowing €12 per 8 hours and €24 per 24 hours.
Remember, there are various other claimable expenses that may apply to your situation. Keep proof of expenses whenever possible to support your tax return.
Submitting Your Tax Return
Once you’ve gathered your documents, it’s time to submit your tax return. Follow these steps:
- Complete the tax return form, known as “Steuererklärung,” for the relevant tax year. You can find this form on the official website of the German tax authorities (Bundeszentralamt für Steuern).
- Fill in the required information, including your personal details, income, and expenses. Be sure to accurately report your study-related expenses in the appropriate sections.
- Attach any supporting documents, such as receipts, invoices, or proof of expenses, to validate your claims. Keep copies of these documents for your records.
- Double-check all the information before submitting your tax return. Ensure that you haven’t missed any relevant deductions or expenses.
- Submit your tax return either electronically or by mailing a physical copy to the tax office. Electronic submission is the preferred method and can be done using the ElsterOnline portal or compatible tax software.
Await the Outcome
After submitting your tax return, the tax office will process your information. It may take some time before you receive a response. Here’s what you can expect:
- If you’ve paid enough taxes during the year and your expenses are valid, you’ll likely receive a tax refund.
- If you haven’t paid enough taxes or any taxes at all, you’ll receive a tax loss carry forward statement (Verlustbescheinigung). This statement confirms that you’ve incurred losses in the previous year, which can be offset against your future tax liabilities.
Stay Informed and Seek Assistance
Tax laws and regulations can be complex, so it’s essential to stay informed about any updates or changes. If you have specific questions or encounter difficulties, consult official tax resources, seek assistance from tax professionals, or reach out to student advisory services for guidance.
Remember, the process of submitting a tax return may seem overwhelming, but it’s worth the effort. By taking advantage of available deductions, you can optimize your tax situation and potentially receive financial benefits as a student in Germany.
Don’t hesitate to share this guide with fellow students, as understanding tax returns can be challenging for many. Together, let’s unlock the potential of tax returns and make the most of our hard-earned euros!
Note: If you have any additional questions or need further clarification on specific topics, feel free to ask in the comments section below. I’ll do my best to provide helpful answers.
