Glossary

In tax law, an allowance is a monetary amount that is deducted from your gross income to calculate your taxable income. The taxes you owe each year are calculated based on your taxable income.

Also known as “income tax certificate” or “wage tax certificate”, the annual payslip is a form your employer(s) will give you at the beginning of each year. It gives a full outline of the previous tax year’s financial information; including your gross income, paid taxes, or social security charges.

The basic allowance makes all income up to a certain amount tax-free; based on the subsistence level (minimum amount of money a person needs to live) in Germany. This amount can potentially change each year.

Parents are also granted a child allowance for each child. This allowance can be deducted from your gross income to ensure that the basic needs for survival and education of your child(ren) are met.

The child benefit is a monthly payment from the government that parents in Germany can apply for, regardless of their income – this is meant to ensure that every child’s basic needs are covered. The conditions and the overall amount vary depending on age, current education, and the number of children in the household. Child benefits are relevant to your tax return because the tax authorities will consider them regardless of whether or not you applied for them.

A civil partnership is a legally recognized relationship between two people offering the same tax benefits as conventional marriage.

ELSTER is the tax offices’ interface for receiving and handling digital tax returns. When you handle your digital tax return with Taxfix, we use this official hub for the paper-free transmission of your tax declaration to the responsible tax office (Finanzamt).

The Bundesausbildungsförderungsgesetz (usually referred to as BAföG) is a law which – among other things – regulates federal student grants and loans. For that reason, BAföG has also become a synonym for these types of student loans.

Any expenses incurred in the acquisition, securing, and maintenance of income – meaning expenses directly connected with your work. They are deducted from your taxable income and therefore reduce your overall tax liability.

Income-splitting is the process by which a partnered couple (married or in a civil partnership) can take advantage of the progressive tax system by adding their income together, dividing it by two, and then using the resulting monetary average to determine a potentially more favorable tax rate.

Also known as loss carryover, a loss carryforward allows losses from one tax year to be carried forward into the following year(s). This can reduce taxable income, and therefore your overall tax liability as job situations change, and losses are off-set in a future tax return.

A lump sum or flat-rate amount is a minimum amount that gets deducted as expenses when calculating your taxes. This lump sum reduces your overall tax liability without the need to provide evidence of individual expenses.

The legal filing status you have based on your current relationship state. Possible options include single, married/civil partnership, divorced, separated permanently, or widowed.

A politically exposed person within the meaning of the Money Laundering Act is any person who exercises or has exercised a high-ranking important public office. In principle, only functions at international, European and national level come into consideration.

The first degree (apprenticeship or higher education) you are working towards after graduating from high school or secondary school.

The saver’s allowance is a tax-free amount that allows you to save taxes on your investment income. The saver’s allowance applies to all income from capital gains.

Any other degree (apprenticeship or higher education) that you are pursuing after finishing your primary degree (Erstausbildung).

In contrast to income-related expenses, special expenses are various costs that are legally considered to be related to your private life management – for example pension expenses, health insurance, or donations.

A lump sum that is granted to every employee in Germany that is considered an income-related expense. This lump sum reduces your overall tax liability without the need to provide evidence of individual expenses.

The tax class (or tax range) that you are assigned is based on your personal circumstances, including your marital status and your living situation during any given tax year. It determines the wage tax withheld by your employer throughout the year(tax rate ). Wage tax is a tax pre-payment on your final annual tax liability.

Parental leave, prolonged periods of illness, or unemployment can result in the payment of financial aids known as wage-replacement benefits. Although parental allowance, sick pay, and unemployment benefits are all tax-free, they do have an impact on the overall tax liability. They increase the tax rate that is applied to your taxable income.