If you are required to file a tax return, you must file it by July 31st of the following year or you will receive a lateness penalty fee (Verspätungszuschlag). As July 31st, 2022 falls on a Sunday, there is an extension and your 2021 tax return for tax year 2021 must be received by your local tax office by August 1st, 2022.
Exception for 2020 tax returns: Due to the Corona crisis, there was an exception for 2020 tax returns which extended the usual deadline to October 31st, 2021.
If you file a voluntary tax return, you have up to December 31st 4 years later to do so, meaning you have until the end of 2025 to file a voluntary 2021 tax return.
There are many reasons to file a voluntary tax return and according to the German Federal Statistical Office, the average tax refund for employees who voluntarily file a tax return is 1.072 euros. You can’t go wrong!
Am I required to file a tax return?
You are required to file a tax return if you receive more than 410 euros in wage replacement benefits (Lohnersatzleistungen) within a calendar year. These benefits can include:
- Short-term work benefits (Kurzarbeitergeld)
- Unemployment benefits (Arbeitslosengeld)
- Parental and maternity allowance (Elterngeld and Mutterschaftsgeld)
- Compensation for wage loss under the Infection Protection Act (Verdienstausfallentschädigung nach dem Infektionsschutzgesetz)
Although these benefits are tax-free, they are subject to the Progressionsvorbehalt which can increase your tax rate under certain circumstances. Therefore, it is important to include as many deductible expenses as possible in your tax return. Our guide will provide you with detailed information.
Have you earned additional income of more than 410 euros without deducting income tax? Are you married and are assessed in income tax classes 3/5 or 4 with a factor? Then you are obliged to submit a tax return. You can find a list of all things that require you to file a tax return here.
An overview of changes for the 2021 tax year
Basic tax-free allowance
The basic tax-free allowance (Grundfreibetrag) is being increased to 9,744 euros in 2021. It is automatically deducted from your income - only what you earn above this amount must be taxed.
Commuter allowance (Entfernungspauschale)
The commuter allowance will increase from EUR 0.30 to EUR 0.35 from the 21st kilometer of one-way travel in 2021. The commuting allowance applies to each full kilometer - regardless of the means of transportation. You can also deduct it if you ride your bike to work. As of January 2024, the allowance will be raised once again to 0.38 cents per kilometer from the 21st kilometer.
Mobility Premium (Mobilitätsprämie)
The mobility bonus was created for those who have a daily one-way commute exceeding 21 kilometers and whose taxable income is below the basic tax-free allowance (9,744 in 2021, 19,844 for joint assessment). If not for the mobility premium, those in this situation would not benefit from the increase in the commuter allowance: If one doesn’t have to pay income tax, then there are naturally no tax savings. Just like the increase in the commuter allowance, the mobility bonus is initially valid for the years 2021-2026. You must claim it on your tax return and it will be deposited directly into your account.
A bonus of 14 percent of the increased commuter allowance (4.9 cents/kilometer) will be received from the 21st kilometer of one-way travel. The assessment basis for the mobility bonus is limited to the amount that your taxable income falls below the basic tax-free allowance.
Simplified proof of donations (vereinfachter Spendennachweis) is now possible for donations up to 300 euros (previously only 200 euros) - a bank statement is sufficient. Charity organizations for climate protection, free radio or local beautification are now included in tax-deductible donations.
The home office lump sum (Home-Office-Pauschale) that was introduced in December 2020 also applies to 2021. This lump sum allows you to deduct 5 euros for each day worked remotely from your taxes. A maximum of 120 days can be claimed.
You can also claim up to 600 euros per year as income-related expenses. So continue keeping track of your home office days!
Income tax rate (Einkommensteuertarif)
The income tax rate will be adjusted in 2021: The income limits that switch to the next higher tax rate will shift by 1.25% for each tax rate section.
Lump sums increases
The long-term care lump sum (Pflege-Pauschbetrag) is doubling this year, rising to 1,800 euros for care levels 4 and 5. In addition, lump sums have been added for the 2nd and 3rd care degree: 600 and 1,100 euros respectively.
The disability lump sums (Behinderten-Pauschbetrag) will increase in 2021 for the first time in 45 years - it will be doubled. A disability of 20 degrees will now receive a lump sum of 384 euros. The system runs in steps of 10 up to 100 degrees with 2,840 euros. People who are severly disabled people according to § 33b (6) EStG as well as blind and deaf people receive the doubled disability lump sum of 7,400 euros.
To strengthen associations and volunteers, the volunteering lump sum (Ehrenamtspauschale) will be increased to 840 euros and the exercise leader lump sum (Übungsleiterpauschale) to 3,000 euros.
Relief for families
The child allowance (allowance for educational, care and training needs, Kinderfreibetrag und Freibetrag für Erziehungs-, Betreuungs- und Ausbildungsbedarf) will increase to 8,388 euros for parents with joint taxation, 4,194 euros per parent.
As of January 1st, 2021 Child benefits (Kindergeld) will also increase by 15 euros per month per child:
For your first and second child, you will now each receive 219 euros per month, for the third child 225 euros, and from the fourth child, 250 euros.
The relief amount for single parents (Entlastungsbetrag für Alleinerziehende) has already been increased to 4,008 euros for 2020 and 2021. In the Annual Tax Act of 2020 (Jahressteuergesetz 2020), it was decided that this increased amount will also apply beyond 2021! 240 euros will be added for each additional child.
The German government passed a renewed Child Bonus (Kinderbonus) for 2021 in the third Corona Tax Relief Act: If your child was entitled to child benefits (Kindergeld) for at least one month in 2021, you will automatically receive a child bonus of 150 euros.
Retirement provisions (Altersvorsorge)
The sum of deductible contributions for old-age provision increases by 2% per year. In 2021, you will already be able to deduct 92% of your pension contributions.
Short-term work (Kurzarbeit)
In 2020, the regulations for short-term work were adjusted several times to consider the effects of the Corona crisis and most of these regulations will also apply in 2021 and (as of 2022) even up to the end of June 2022. You can now receive short-term work benefits (Kurzarbeitergeld) for up to 28 months, but at the latest until the end of June 2022. The staggered increase in short-term work benefits - depending on the period for which you receive them - will also remain in place until the end of June 2022.
If your employer tops up your short-term work benefits, this remains tax-free until the end of December 2021. Your employer is also permitted to award you with a tax-free Corona bonus of up to 1,500 euros until March 31th, 2022.
Note: As of 2021, any additional income earned during short-term work will again be counted against your short-term work benefits - with the exception of mini-jobs: a 450-euro job in addition to short-term work will remain completely tax-free until the end of June 2022.
Good to know for those working in mini-jobs: This year, the minimum wage will increase twice: It will rise to 9.50 euros per hour from January 1st, 2021, and to 9.60 euros per hour from July 1st, 2021.
Tip: If you are married and receive short-term work benefits, it may make sense to change your tax class. In tax class 3, the lowest deductions are made during the year. For parents, short-term work benefits increase by 7%. This happens automatically in tax class 3 (the child allowance [Kinderfreibetrag] is entered here, not in tax class 5).
As of January 2020, taxpayers can change their tax class several times a year.
Solidarity surcharge (Solidaritätszuschlag)
After almost 30 years, 9 out of 10 taxpayers will no longer have to pay the 5.5% solidarity surcharge: There is no longer solidarity surcharges for income up to 61,717 euros. The new exemption limit is followed by a so-called mitigation zone. This prevents the solidarity surcharge from being levied immediately on the full tax amount. Within the mitigation zone, the solidarity surcharge may not exceed 11.9% of the difference between the income tax and the exemption limit.
Only top earners with income exceeding 96,409 euros and capital investors continue to pay the full solidarity surcharge of 5.5% of their income tax.
Value added tax (Mehrwertsteuer)
The Corona-related reduction in VAT from July to December 2020 will be lifted as of January 1st, 2021. The old VAT rates of 19% (regular tax rate) and 7% (reduced tax rate) will be reinstated.
Exception in the food industry: A special reduced tax rate of 7% applies to all meals until December 31st, 2022.
Wage tax reduction (Lohnsteuerermäßigung)
If you apply to the tax office for a reduction in income tax, you will be required to file a tax return in the following year - unless your income in the calendar year does not exceed the limit of 12,250 euros in 2021. For married couples who are assessed together (Zusammenveranlagung), a new limit of 23,350 euros will apply.
Save taxes now!
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