All those who prepare their own income tax return for the 2020 calendar year can submit their tax forms online to the tax office via ELSTER by July 31, 2021. However, German tax law contains changes almost every year that must be taken into account when assessing income tax and can even be positive for the taxpayer in the form of income tax refunds.
Since not everyone is aware of the latest tax law changes for their income tax return, this article is intended to provide information. Here you can find out what changes need to be taken into account for the 2020 income tax return this year.
1. Solidarity surcharge
There has been a lot of discussion in recent years about the legality of the solidarity surcharge. The (partial) end of the supplementary levy to finance costs is now approaching.
From January 1, 2021, around 90 % of all employees will no longer have to pay the solidarity surcharge. For about 6.5 % this will partly be the case. An exception are the top earners, for whom the full solidarity rate remains.
2. Basic allowance
For the 2020 calendar year, the basic tax allowance has increased to 9,408 euros for all taxpayers. All income remains tax-free up to this amount.
3. Children
The child tax allowance will be increased for the 2020 calendar year. For the joint assessment this amounts to 7,812 euros and increased by 192 euros per child. As part of the individual assessment of the income tax return, an increase of 96 euros was recorded. In this case, the child allowance is 2,586 euros per parent.
The child benefit is offset against the child allowance. Taxpayers who benefited from the Corona aid package and the associated family bonus of 300 euros will be charged further. As a result, the allowance and possible refunds fall Income tax less.
4. Home office
If you, like many other employees, worked from home during the Corona year, you can no longer claim work-related travel costs as before. Taxpayers are therefore recommended to check whether the home office meets all the requirements to be declared as a workspace for tax purposes. If this is not the case, a flat rate of 5 euros can be deducted daily as business expenses. The maximum deductible flat rate is 600 euros annually.
5. Commuter allowance
Anyone who has to accept longer journeys to work benefits from a higher commuter allowance. In this respect, from the 21st kilometer onwards, this will be 35 cents from 2021 and will rise to 38 cents from 2024.
6. Short-time work
Due to the payment of short-time employer benefits of more than 410 euros, which counts as wage replacement benefits, employees are required to submit an income tax return, even if this has previously been submitted to the tax office on a voluntary basis. Furthermore, the short-time working allowance paid is sent to the tax authorities automatically. The deadline of July 31, 2021 should still be adhered to in order not to risk late fees.
7. Retirement expenses
The more favorable test previously carried out by the tax office to determine whether the old legal situation from 2004 or the new one is more favorable will no longer exist from 2020. For the assessment year 2020, however, a maximum of 90 % of all expenses can be recognized as special expenses. As a result, the maximum amount for special expenses deduction increases to 25,046 euros for individuals (for spouses and life partners to a maximum of 50,092 euros) as part of the basic pension.
8. Pensioners
The Retirement Income Act enacted in 2005 states that in 2020 only 20 % of the pension received is to be treated tax-free. Conversely, this means taxation on pension benefits amounting to 80 %. The applicable flat rate for advertising costs is 102 euros. If the taxable portion of the annual pension (gross) exceeds the basic allowance, pensioners are obliged to file an assessment and must also submit their income tax return to the tax authorities by July 31st at the latest.
9. Pensioners
Those who receive a pension or company pension receive so-called pension benefits. These are assessed as income from employment (Appendix N of the income tax return). In addition to the advertising allowance of 102 euros, pensioners have a pension allowance. This has fallen for the assessment year 2020 and is now 16 % of the remuneration received and a maximum of 1,200 euros. For 2020, the surcharge was reduced to 360 euros. For everyone who retired in 2020, their salaries are permanently tax-free up to a maximum of 1,662 euros.
