The beginning of the year is a time when many changes come into force. It is no different in the case of tax law in Germany, which, due to constantly changing regulations, raises many unknowns among taxpayers. An example of such changes is the tax-free amount, which is very popular among a large group of people throughout the country. What is this the tax-free allowance? How much is the tax-free amount in 2021 in Germany and how much was it in previous years? We talk about the most important issues in today’s article – we encourage you to read it.
Ready, steady, go, what is the tax-free amount?
The tax-free amount is nothing more than the sum of your annual non-taxable income. In other words, if the money you earn during the year does not exceed the amount established in advance, you are not obliged to pay the tax to the Tax Office. However, the tax-free amounts in Germany are easier to discuss with a specific example.
Example
Mr Müller’s total income for the year was € 9,500. The German tax-free amount for singles in 2021 was € 9,744 – in this case, Mr. Müller is exempt from paying tax on the income earned.
Annual tax-free amount in Germany – basic tax-free allowance
Tax-free income from Germany is included in the so-called basic tax-free allowance. This is a type of allowance that any taxpayer can take advantage of – as long as his income is not too high. The annual German tax-free allowance is determined in accordance with the Social Welfare Act and was created to ensure a minimum subsistence level for every taxpayer. The tax-free amount from Germany is determined in the tax tables that change each year, as you will learn in the following paragraphs.
Importantly – the basic tax-free allowance is determined automatically – you do not need to do anything to get it (of course, provided that your income does not exceed the established upper limit of the deduction).
Tax-free amount 2021 in Germany – other than in previous years
What is the tax-free amount in 2021 in Germany? This is one of the most common questions taxpayers ask themselves. As we have already mentioned – it is different every year. Fortunately, it has an upward trend (as in previous years), which means that it is getting higher every year, so that more taxpayers do not have to worry about paying tax to the German Tax Office. What is the tax-free amount in 2021? We have compiled this information in the table below – for comparison, we have also included the amounts applicable in previous years.
Year | For singles | For married couples |
Tax-free amount 2021 | € 9,744 | € 19,488 |
Tax-free amount 2020 | € 9,408 | € 18,816 |
Tax-free amount 2019 | € 9,168 | € 18,336 |
Tax-free amount 2018 | € 9,000 | € 18,000 |
Tax-free amount 2017 | € 8,820 | 17 640 € |
As you can see, the free amount in 2021 in Germany is much higher than a few years ago (it increased by almost € 1,000 in five years). Even compared to 2020, it made a big jump (over € 300). However, this is not the end of good news – the tax-free amount in 2022 will also change and will be € 9,984 for singles and € 19,968 for married couples.
Basic tax-free allowance 2021, i.e. who does the tax-free income apply to?
“Tax-free amount for pensioners”, “tax-free amount for students” – these are examples of questions that are often entered in the search engine. No wonder – the tax system works in such a way that the obligation to pay taxes actually reaches everyone who earns income. So who can count on tax exemption (provided that they obtain a sufficiently low level of income)? The basic tax-free allowance applies to all taxpayers, i.e.:
- employees,
- self-employed,
- trainees,
- pensioners,
German annual tax-free allowance in 2021 – what if I exceed the tax-free amount?
As already mentioned – the basic tax-free allowance is understood as the tax-free amount. As long as your income is within the established limits, you don’t have to pay taxes. What if the income is higher? This is tantamount to the need to submit a tax declaration and settle a tax return to the Tax Office. It is worth bearing in mind, however, that employees in Germany are often taxed too much on wages than they should be. In this case, it is worth preparing a declaration, thanks to which you can expect a tax refund from Germany.
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