Is ALG1 taxed? No, it's tax-free. Yet, you have to state it in your tax return. We explain the reason behind this and the costs you can deduct from tax during this time.
When do I have to submit a tax return?
These are tax-free, which means that no income tax is due on them. You do not have to pay tax on the unemployment benefit.
Nevertheless, you have to pay taxes if your annual income from income replacement benefits is greater than 410 euros. Here’s a list of several income-related benefits:
Why do I enter ALG1 in my tax return?
ALG1 is subject to the . This increases the tax rate on your taxable income. In other words, the tax office sees income replacement benefits as an increase in your financial strength and applies a higher tax rate to your remaining taxable income.
Example (for tax year 2020):
You have tax class 1 and have earned EUR 15,000 in 2020 as taxable income. In addition, you received EUR 9,000 in unemployment benefits from April 1st to September 30th. The unemployment benefit by itself is not taxed, but is used to determine the tax rate.
This increases your tax rate from 7.23% to 14.30%. Your 15,000 euros will be taxed with this value. This increases income tax from EUR 1,085 (without progression through ALG 1) to EUR 2,145 (with progression through ALG 1).
Prepare your own tax return
For anyone who wants to file an easy and secure tax return themselves. Free refund calculation, pay only upon submission.
Receive an advance calculation of your refund and pay only when you turn it in
Guided and intuitive process with simple questions
Automatic data retrieval: simply retrieve your income data from the tax office and have it pre-filled
The general deadline applies (September 02)
€59.99 for married couples or registered partnerships looking to file a tax return together
Our Expert Service does it for you
For those who are unsure or can't find the time – hand your taxes to an expert.
Provide a few necessary documents in minutes
An independent tax advisor will prepare and submit your tax return for you
Personalised document upload: Only submit documents that are completely necessary
Detailed check of your information
Benefit from an extended tax deadline (April 30, 2026)
Enter or state unemployment benefit in the tax return
It doesn’t matter whether you were unemployed for the whole year or just part of it: you have to enter unemployment benefits in your tax return because it is subject to the progression clause, as mentioned above.
Enter your information on unemployment benefits in the tax return as follows:
In the Form ESt 1 A(formerly ‘Mantelbogen’, also ‘Hauptform’), the amount received is included in the section on compensation benefits. The appropriate line for this is the 43 (tax form for 2022). Here, you also enter your income from other wage replacement benefits. If you have received several benefits, write down the sum of all amounts here.
Note: Unemployment benefit II (also: ALG II or Hartz IV) is not subject to the progression proviso. You do not have to enter this benefit in your income tax return.
Where can I find information about my unemployment benefit?
You can find the amounts received for wage replacement benefits on the performance record (Leistungsnachweis) that you receive from the relevant social service provider. In the case of unemployment benefit, it is on the certificate from the Employment Agency (‘Arbeitsagentur'). However, the data is also transmitted to the tax office at the same time. Embezzlement is not advised.
Tax rate for spousal-splitting (Ehegattensplitting)
If your taxes are assessed together with your spouse, your income will be added together. The tax office also takes tax-free wage replacement benefits into account. Problem: There may be a higher tax rate and thus a higher tax. The progression proviso also applies here.
If you have received high income replacement benefits, it can be cheaper if everyone does their own tax return.
Taxes without forms: Answer our easy-to-understand question-answer process.
Deductions from Hartz 4 through tax refunds
If you receive ALG 2 ("Hartz IV") and receive a tax refund from the tax office, this will be offset against your earnings. According to , everything you receive in addition to income replacement benefits counts as income. So is a tax refund. With the judgement of December 16, 2008 (Az.: B 4 AS 48/07 R) by the Federal Social Court, the crediting of the tax refund on the remuneration is considered permissible.
Tax savings through income-related expenses (Werbungskosten)
During unemployment, you will incur costs for applications and possibly further training. You can enter this in your tax return and deduct it.
With the help of the you can easily deduct your expenses for
If your costs exceed your income, you can offset the difference accordingly in the income tax return for the following year.
If, by then, you still have no taxable income, your losses (or ‘negative income’) will be shifted to the year after next. For the loss carryforward, you tick ‘Declaration on the determination of the remaining loss carryforward (Erklärung zur Feststellung des verbleibenden Verlustvortrags)’ at the top of the cover sheet of the tax return. In the electronic version with ELSTER, the tick is automatically set when you have made your entries and the minus is visible.
FAQ: Unemployment and tax returns
Unemployment benefit 1 is not subject to income tax. This means that recipients do not pay any tax on it. However, it is subject to the and thus increases the personal tax rate. The progression proviso means that certain income increases your individual tax rate, even though, for example, wage replacement benefits such as unemployment benefits are not taxed.
If, for example, you still received income from employment in the year in question, this will be taxed more heavily than if you had not received unemployment benefit or another wage replacement benefit.
You can find an example under “Why do I have to enter ALG 1 in the tax return?”
Even if you are unemployed, your marital status is one of the defining factors of your tax class. If you are single, tax class I is the right one, single parents can apply for a change to tax class 2, and for jointly assessed persons (e.g. married persons), tax classes IV, III + V or IV with a factor are possible. Tax class 6 is generally excluded for persons who are unemployed.
If you receive unemployment benefit 1, you are generally obliged to file a tax return. The reason for this is that the tax office may demand an additional payment.
In these two cases, however, a lower tax burden and a refund is quite possible:
With Taxfix, you can complete your tax returns from 2019-2022, in no time at all. No tax knowledge is necessary – simply choose to complete your Taxfix tax return yourself, or have an independent tax advisor do it for you. What are you waiting for?Start now