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Is Alimony Tax-Deductible in Germany?

Is alimony tax deductible? In most cases, YES! In this article, we explore what counts as tax-deductible alimony, what are its limitations and how it can benefit your tax return. Read on to find out.
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Alimony for Spouses

If you are married, you are obligated to support your spouse (§ 1360 BGB) (German reference). As long as you’re married, this law dictates your tax situation by means of spousal splitting (Ehegattensplittings). The higher-earning spouse may use the more favourable tax class III, provided that the lower-earning partner accepts tax class V.

If you live permanently separated or are divorced, the rules for alimony payments also change regarding taxes. Income tax class III is then no longer available to you. However, you can at least partially claim the alimony you pay as special expenses (Sonderausgaben) or extraordinary expenses (außergewöhnliche Belastungen).

Living Permanently Separated:

As defined in Section 1567 (1) of the German Civil Code (BGB) (German reference), the spouses live separate if there is no domestic communion between them and one spouse recognisably does not want to establish it because they reject the partnership. The domestic community also ceases to exist if the spouses live separately within the marital home.

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Realsplitting

As the paying spouse, if you claim separation maintenance or post-marital maintenance as special expenses, your case counts as Realsplitting ( § 10 para 1a no.1 EStG) (German reference).

Like espousal splitting, Realsplitting is based on the ‘ability-to-pay’ principle (Leistungsfähigkeitsprinzip). The economic capacity of the spouse paying maintenance reduces, while that of the spouse receiving maintenance increases.

Therefore, the paying spouse can deduct the alimony expenses from tax, while the receiving spouse is taxed on the received alimony. Realsplitting allows the (former) partners to continue spousal splitting at least partially beyond the existence of the marriage.

This option is suitable for all (former) couples where the partner obligated to pay alimony earns significantly more than the beneficiary. In this case, the tax progression ensures that the paying spouse saves more tax than the supported spouse.

Realsplitting is subject to several conditions and works best for couples who have separated amicably and are not hostile to each other.

According to Section 10 (1a) No.1 EStG, Realsplitting requires the consent of the beneficiary. However, the beneficiary spouse is not obligated to consent to Realsplitting, but does so voluntarily.
The situation is different if Realsplitting was stipulated in the marriage contract or the divorce agreement. In this case, the giver can sue the taker for consent. The judgment then replaces the spouse’s consent (Section 894 of the Code of Civil Procedure) (German reference).
The couple must apply for Realsplitting every calendar year. The consent of the recipient must be given each year anew and may be revoked at any time. The maintenance provider must state the tax identification number of the recipient in his tax return. The alimony recipient is obliged to provide this information if they have agreed to Realsplitting.
If you pay the alimony and cannot obtain the tax ID of your partner, you may ask the responsible tax authority for the identification number (§ 10 para. 1a no. 1 p. 9 EStG) (German reference) .

Deducting Alimony When Realsplitting

Within the framework of Realsplitting, you cannot deduct unlimited alimony from tax. There’s a ceiling of 13,805 euros per calendar year.

The ceiling also applies if you have contractually agreed to pay higher alimony or have been ordered by a court to pay higher alimony. If you pay alimony to more than one (ex-) spouse, you can claim this amount for each alimony recipient. In case you also pay health and long-term care insurance contributions for your (ex-) spouse in addition to the alimony, you can deduct these expenses from your taxes in addition to the maximum amount of 13,805 euros.

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Deduction of Spousal Support as Extraordinary Expenses

If Realsplitting is out of the question, you still have the option of deducting what you pay as alimony under extraordinary expenses (außergewöhnliche Belastungen). The annual maximum amount here is 9,408 euros (2020) per calendar year (Section 33a (1) EStG) (German reference). For the 2021 assessment, this amount will be increased to 9,744 euros.

You can enter health and long-term care insurance contributions in your tax return if you do not already claim them as special expenses (Sonderausgaben).

When alimony is considered an extraordinary expense option, the recipient is not taxed. Your ex-partner, therefore, does not have to agree if you want to use this option.

Duty to Provide Information

Nevertheless, this alternative also has a catch. Within the framework of § 33a EStG, you can only declare alimony payments if you are legally obligated to do so and the recipient is needy. Therefore, the tax office regularly enquires about the recipient’s income to check the value of deductible maintenance payments. However, the recipient may refuse to provide information on this.

The only exception to this rule is if the obligation to provide information has been stipulated by contract or court order. For this reason alone, it is worthwhile to conclude a marriage contract and to take tax aspects into account.

Claiming Child Support in Your Tax Returns

In the event of a separation or divorce, spousal support is usually paid for the joint children. If you want to claim child support for tax purposes, this is also done in accordance with § 33a EStG as an extraordinary burden. The maximum limit is 9,408 euros in 2020 or 9,744 euros from 2021 per child each calendar year. Here, too, you may additionally enter contributions to health and long-term care insurance in your tax return.

However, you can only deduct your child support payments from your tax return if the child is not entitled to child benefit (Kindergeld) or a child allowance (Kinderfreibetrag). It does not matter with whom your child lives.

According to a BGH ruling from 1991 (BFH ruling of 20.9.1991, III R 91/89, BStBl. 1992 II p. 137) (German reference), you may not voluntarily waive reimbursement options if you want to claim child support expenses as extraordinary expenses.

Therefore, alimony support for children is only possible for children over the age of 25, for whom there is no longer any entitlement to child benefit. What if your child hasn’t yet completed their education by 25 and needs your financial support? No problem. You can deduct these expenses from your taxes as extraordinary expenses. There are several ways you can save from taxes as parents of adult children. We look at these cases in detail in this article.

If, however, your child has income (a job while studying or a paid internship), you can only deduct from tax the maintenance to which your child is still entitled after considering the income they earn for themselves. The annual allowance which is not taken into account is 624 euros (2018).

Maintenance For Your Partner and Other Family Members

You can only deduct these maintenance payments from your taxes if you are legally obligated to do so. According to Section 1601 of the German Civil Code, this only applies to relatives in the direct line, i.e. for (great-) grandparents, parents, children, and (great-) grandchildren, as well as for (former) spouses.

A partner with whom you live in a consensual union is treated the same way as persons with legal maintenance claims for tax purposes.

If you support your parents or grandparents because they can’t afford institutional care and the reimbursements from insurance are insufficient, you can also deduct the associated expenses from your taxes as extraordinary expenses. Alimony paid for extended family (e.g. for siblings or their children) cannot be claimed against tax. The only exception is if the beneficiary lives in the same household as you and, therefore, does not receive any transfer payments (e.g. Hartz IV, social assistance, housing benefit, BAföG, etc.) or if these payments have been reduced for this reason.

Deduct your alimony costs with the Taxfix app and save more.
Pooja Ghosh
by Pooja Ghosh
published on: 18.08.2022
updated on: 16.11.2022

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