The German social security law counts all those who are in training and earn a maximum of 325 euros per month as “low-income earners”. There are also people who, for example, complete an FSJ. Another criterion is that the employer pays all social security contributions alone.
Low-income earners: Whatever the definition, one thing is certain – even people on low incomes can save on taxes and benefit from some allowances. With the following 5 tips, low-income earners can save on taxes and win bonuses. Below is an overview.
1. Save income tax and contributions
Most people are familiar with the principle of a mini job: everyone can earn up to 450 euros a month tax-free. The next level is the midi job. With this you can earn up to 1,300 euros per month in the transitional area (formerly the sliding zone) and benefit from reduced social security contributions.
Your salary is taxed according to the wage tax card, but no wage tax is due for wage tax classes III (3) to IV (4), for tax classes I (1), II (2) and IV (4) at least the solidarity surcharge is waived, and only for classes V (5) and VI (6) you always have to pay income tax as an employee.
Special feature for low earners: you do not have to pay any income tax or church tax if your annual income is less than 9,984 euros (2021: 9,744 euros). That is 832 euros per month (2021: 812 euros). Double the amount of EUR 19,968 (2021: EUR 19,488) applies to married couples and registered life partners. It doesn’t matter which wage tax class you have – the basic allowance is tax-free for every taxpayer.
2. Save on the solidarity surcharge
As an employee in Germany, you had to pay a solidarity surcharge in addition to wage tax and church tax which amounted to 5.5 percent of your wage and income tax every month. However, the federal government abolished the solidarity surcharge for almost 90 percent of employees in 2021. The “solos” (moniker for Solidarity Surcharge) are now only paid by high earners from income tax of around 17,000 euros a year.
3. Use the split tariff and save on taxes
Married and registered civil partners who “can be assessed together” can save income tax with spouse splitting. As a rule, couples with spouse splitting pay less tax than couples who each have their income tax calculated individually. Above all, you will save taxes if one of you earns a lot and the other – as a low earner – earns a less.
An example: You work full-time and earn 45,000 euros a year, your partner works part-time and earns 15,000 euros a year. As a couple who are not assessed together, you have to pay taxes of around EUR 10,014 and your partner EUR 955 (calculated according to the 2022 income tax rate). You both pay 929 euros less in taxes if you can be assessed together and the tax office calculates with the splitting tariff.
4. Win housing a premium and employee savings allowance
Anyone who does not have to pay taxes of more than 35,000 euros a year is supported by the state with a housing construction premium. The prerequisite for this is that you conclude a building savings contract (What is referred to as “Bausparvertrag”). You have to pay in at least 50 euros per year, a maximum of 700 euros per year will be funded. This money is then subsidized by the state at 10 percent. For married couples, double the amounts apply, i.e. an income limit of 70,000 euros and payments of at least 100 and at most 1,400 euros per year into the building society contract. More on this in our article on building savings contracts .
Many employers encourage their employees to accumulate wealth. This can be done, for example, by transferring capital-forming benefits directly to the employee’s home savings contract. The state subsidizes these payments with a 9 percent employee savings allowance. Of the 470 euros, 9 percent are funded per year, so you as an employee can win 43 euros every year.
Interesting to know: You can also secure capital-forming benefits in the form of normal savings contracts, fund savings contracts, shares, life insurance or private pension insurance.
5. Use the mobility bonus
You can benefit from the mobility premium if your taxable income is below the starting tax rate and your one-way trip to work is longer than 20 kilometers. For each additional kilometer you will then receive 14 percent of the increased commuter flat rate – i.e. 4.9 cents. According to the German Federal Ministry of Finance, around 250,000 employees will benefit from this. If you only drive up to 20 kilometers to work, you will get nothing.