What does tax without tax mean

Basic tax allowance - what is it?

There are things that everyone needs to live. This includes at least food, clothing, housing and emergency medical care. So that every German can really afford these things, the state has set a so-called subsistence level. This means that when you go to work, there must be enough money left over at the end of the month that you can afford the essentials.

What is the subsistence level?

In 2021, the state assumes that singles will need 9,744 euros a year to secure the subsistence level - that is 812 euros per month. Double the amount of 19,488 euros is available to married couples. So that every German really has this money safe, there is the so-called basic tax allowance.

How does it work with the basic tax credit?

The state says: Anyone who earns money should be able to keep part of their salary a year without having to pay taxes on it. This part of the salary is the basic allowance of 9,744 euros. Many people earn more than 9,744 euros, but certain expenses such as advertising expenses can depress income.

An example: Marie is a trainee and earns 840 euros per month - i.e. 10,080 euros per year. But she also has costs for gasoline and specialist books in the amount of 1,500 euros - for this reason she should definitely file a tax return and enter these costs as income-related expenses. The tax office deducts the business expenses from Marie's salary. This leaves Marie with a so-called taxable income of 8,580 euros. This means that Marie is below the basic tax allowance and does not have to pay any taxes.

What if my income exceeds the basic tax credit?

If you still earn more than 9,744 euros after deducting business expenses, special expenses and extraordinary expenses, then you are still guaranteed the basic tax-free allowance. You only have to pay taxes from the 9,745th euro. Our Tax ABC explains in detail how much taxes are due. How does our income tax system work?

By the way:

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Do I have to apply for the basic tax credit?

No, every taxpayer is automatically entitled to the basic tax allowance. You neither have to submit an application nor tick a tick anywhere in your tax return.

Is the basic allowance increased regularly?

The Federal Cabinet has to deal with the topic of subsistence wages every two years and submit a report. Politicians then determine whether and, if so, how much the basic tax credit must increase. As a rule, the basic tax-free allowance is then increased, since essential things such as food are also becoming more and more expensive.

The development of the basic tax credit:

 SingleMarried
Basic tax allowance 20229,984 euros19,968 euros
Basic tax allowance 20219,744 euros19,488 euros
Basic tax allowance 20209,408 euros18,816 euros
Basic tax allowance 20199,168 euros18,336 euros
Basic tax allowance 20189,000 euros18,000 euros
Basic tax allowance 20178,820 euros17,640 euros
Basic tax allowance 20168,652 euros17,304 euros
Basic tax allowance 20158,472 euros16,944 euros
Basic tax allowance 20148,354 euros16,708 euros
Basic tax allowance 20138,130 euros16,260 euros
Basic tax allowance 20128,004 euros16,008 euros
Basic tax allowance 20118,004 euros16,008 euros
Basic tax allowance 20108,004 euros16,008 euros
Basic tax allowance 20097,834 euros15,668 euros
Basic tax allowance 20087,664 euros15,328 euros
Basic tax allowance 20077,664 euros15,328 euros

This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of membership and exclusively within the advisory authority according to ยง 4 No. 11 StBerG.