Werbungskosten: Who Qualifies and What You Get
Learn how you can automatically reduce your taxable income through professional expense deductions in Germany.
Werbungskosten refers to the professional expenses you can deduct from your income to reduce the total amount of tax you owe to the government.
Who it's for
This scheme is designed for anyone earning income who incurs necessary costs to earn that money. Specifically, it applies to all employees and investors who have income-related expenses. Whether you are working a traditional job or managing an investment portfolio, if you have spent money to facilitate your professional activities, you may qualify to have those costs recognized.
What you get
The benefit is a reduction in your taxable income, which can lower your overall tax burden. You receive an automatic deduction of €1,230 from your taxable income. A key advantage of this specific amount is that it is applied automatically without you needing to provide any receipts or documentation to prove the spending.
What it costs you
There is no monetary fee to access this deduction. However, it does require your time and effort to manage your records. To benefit from these deductions, you must include them as part of your annual tax return, known locally as the Einkommensteuererklärung.
The catch to know
While the first €1,230 is handled automatically without proof, there is a significant requirement if your costs are higher. If your actual professional expenses exceed the automatic deduction amount, you must provide receipts for every single cent you wish to claim. Without these supporting documents for the excess amount, you will only receive the standard automatic deduction.
How to apply
- Keep track of all professional and income-related expenses you incur throughout the year.
- Calculate whether your total expenses are higher or lower than the standard automatic deduction.
- Prepare your annual tax return, known as the Einkommensteuererklärung.
- If your expenses exceed the automatic limit, gather all necessary receipts for every cent spent.
- Submit your completed tax return to the Finanzamt.