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How to Maximize Your Tax Refund in Germany
The most structured guide to tax deductions in Germany that helps you understand how the system really works, part 1.
There’s no shortage of lists online outlining tax deductions in Germany — but they rarely explain how each deduction actually works, how much it saves you, or when it makes sense to claim actual expenses instead of flat rates to maximize your tax refund in Germany.
This guide goes deeper. It breaks down how the system is structured, which tax deductions in Germany are bundled together, how much you save once your tax rate is factored in, and what’s actually worth claiming — with real numbers and clear explanations. You don’t need to understand or remember all of this if you’re using tax software like Wundertax (they do the math for you), but if you want to see what’s happening under the hood of the German tax deduction system, this one’s for you.
This is part one of a two-part guide. In this issue, we’ll go over a few key terms, explain how tax deductions in Germany work, and then walk through the biggest deduction categories. Part two — coming soon — will cover medical costs, so-called “special expenses,” insurance, donations, and some of the less obvious (but often valuable) cases.
Table of Contents
How Tax Deductions in Germany Work
Where does your tax refund come from in the first place? Tax deductions in Germany exist to make sure you're not taxed on income you had to spend on certain necessary expenses. If you're employed in Germany, you've been paying taxes all year through payroll, but those payments are calculated on your full gross salary, with no tax deductions considered. When you file your tax return in Germany, you can report eligible expenses that reduce your taxable income. And because your taxes were originally calculated without those deductions, chances are you’ve overpaid — which is why many people get a tax refund in Germany.
Before diving into the individual categories, it's worth taking a step back to understand how tax deductions in Germany actually work – and what they mean for your wallet.
First, many tax deductions in Germany come with the option of a flat-rate (Pauschale). Flat rates are fixed amounts the Finanzamt lets you deduct without needing to provide receipts or proof. They’re meant to simplify things for taxpayers and for the tax office – and in many cases, they’re surprisingly generous. However, if your actual expenses are higher than the flat rate, you can itemize (list your expenses individually) instead and claim the real amount to maximize your tax refund in Germany. That usually means you'll need to be ready to back things up with documentation – while you don’t need to submit receipts upfront, it’s smart to collect and store anything that might one day be called into question.
Another core rule that might sound obvious, but still worth repeating: you can only deduct what you actually paid out of your own pocket. If your employer covered your Deutschlandticket, or your insurance reimbursed part of your dentist bill, that’s great — but that portion isn’t tax-deductible. You can only claim the part you truly paid yourself on your tax return.
Finally, a tax deduction in Germany doesn’t mean you’re refunded the full amount – it just lowers your taxable income, not your total bill. What you save depends on your marginal tax rate – in other words, the percentage of tax you’d pay on your last euro earned. For example, if you earn €50,000 a year, your marginal tax rate is around 35%, so a €1,000 deduction would save you about €350 when you get your tax refund in Germany. If you earn over €68,000, your marginal rate jumps to 42% — that same €1,000 deduction saves you €420. Use this calculator to check your own rate and get a sense of what a deduction is actually worth to you.
For employees, income-related expenses (Werbungskosten) is one of the most important categories for tax deductions in Germany – however, a lot of these deductions also count if you’re self-employed as a freelancer or a small business owner. The basic idea: if you spent money to earn money, the Finanzamt may let you deduct it on your tax return.
By default, every employee gets a flat rate of €1,230 for income-related expenses as a tax deduction in Germany — no proof needed. But if your actual costs were higher, you can list them individually and claim the full amount. If you're using tax software like Wundertax, you don’t need to worry about comparing the two — just enter your costs, and the tool will automatically apply whichever option gives you the better refund. If you’re self-employed, the flat rate doesn’t apply to you – in this case, you can only claim your actual expenses to get your German tax refund.
Now let’s break down the different types of income-related expenses, one by one.
Commuting & Home Office
These are some of the most widely used tax deductions in Germany, and they can really add up — especially if you commute long distances or work from home often. For commuting, you can deduct either a flat rate (Entfernungspauschale) based on distance or your actual transport costs — whichever is higher. The flat-rate amounts are €0.30/km for the first 20 km and €0.38/km for each km beyond that. This applies regardless of whether you drive, bike, walk, or take public transport — but for some reason are calculated for one direction only (the trip to work, not the return). If you’re using Wundertax or similar tax software, you won’t need to do any math — just enter your address, your workplace, and how many days per week you commute, and the tool will do the rest. In some cases your actual public transport costs may exceed the flat rate — so it’s worth comparing both to maximize this tax deduction in Germany.
Keep in mind: if your employer covers a part of your transportation ticket, you’ll need to subtract that from your tax deduction in Germany. If your ticket is fully paid by your employer or if you’re using a company car, you can’t claim either the flat rate or your actual costs for your German tax refund.
When it comes to home office, you also have two options for tax deductions here: the home-office lump sum or a separate workroom deduction. With the home-office lump sum (Homeoffice-Pauschale) you can deduct €6 per day, up to a maximum of 210 days per year — which comes out to up to €1,260. You don’t need any receipts or detailed documentation to declare this tax deduction in Germany, just a record of how often you worked from home. If asked later, you might need to send a short confirmation from your employer stating the number of home office days to the Finanzamt.
If you have a dedicated room used exclusively for work — not just a corner of your living room or a desk in your bedroom — you might be able to claim a larger deduction for your tax refund in Germany. You can deduct a proportional share of your rent, utilities and associated costs, based on the size of the workroom relative to your total living space. For example, if your workroom makes up 20% of your apartment, you can deduct 20% of the yearly costs. If you're renting, these include rent, electricity, heating, and other operating costs. If you own your home, you can deduct mortgage interest (but not the principal portion), building insurance, utilities, and maintenance costs instead. This tax deduction in Germany has a cap of €1,250 per year, unless your home office is your only place of work because your employer doesn’t provide a workspace — in that case, the deduction is uncapped.
That said, this deduction has strict conditions. The workroom must be a separate room used exclusively for professional activities, and the tax law has pretty rigid ideas about what that means — e.g., no sofa, guest bed, laundry rack, or TV. It must also not be a walk-through room. The Finanzamt may even ask for a rough sketch or floor plan to prove that the space qualifies. If your setup doesn’t meet the full requirements (what if I like working from the sofa?!) or you just don’t want the extra paperwork, the lump sum is the safest and easiest option to maximize your tax refund in Germany.
No need to do the math — Wundertax calculates your commute and home office tax deductions for you.
Work & Study Materials
Any item you use at least 10% for work purposes counts as work-related equipment for your tax deductions in Germany – that includes desks, laptops, office chairs, monitors, printers, headphones, software (like Excel or Matlab), job-related books, even special clothing or footwear required for your profession (think actual uniform, not your business casual look). If something is used partly for work and partly for personal life — like your phone or computer — you can deduct the work-related percentage (e.g. 60% of the cost of a laptop if that’s your estimate of how you use it). A higher percentage is easier to justify if you’re self-employed. If you’re an employee, be conservative with your estimate — checking Slack on weekends doesn’t make your phone a work device as far as the Finanzamt is concerned.
If the item costs less than €952 (including VAT), you can deduct the full amount in one go. If it costs more, you usually have to spread the tax deduction over several years. Curiously, PCs and laptops can now be written off fully in one year, while the useful life of a phone is considered 5 years. Go figure.
If you don’t have receipts or can’t be bothered itemizing, some tax offices accept a flat €110 deduction for work materials — no guarantee, but often worth a try if you’re trying to maximize your tax refund in Germany.
Double Household Tax Deduction in Germany
If you moved for work but kept your original home — maybe in another city, or even another country — you might be eligible for one of the most financially significant tax deductions in Germany: the double household deduction. This applies when you maintain two places of residence: one at your primary location (where your “life happens,” so to speak — family, social circle, etc.), and one near your workplace. This is especially common for people who work in a different city during the week but travel back home on weekends.
To qualify, these conditions must be met:
Your second home (or a room in a shared flat) must be because of your work
The commute from your original home to your workplace must be at least 30 minutes longer than from your second residence
You must contribute at least 10% of the costs of your main home
Your primary residence must remain your actual centre of life — where your family lives or where your social life is rooted.
If those conditions are in place, you can deduct:
Rent and utilities for the second residence
Furnishings and household goods needed to set it up
Zweitwohnsitzsteuer (secondary residence tax), if applicable
Costs of traveling back (maximum once weekly) to your primary residence (e.g. train, car, or flight costs)
Moving costs for setting up the second household
If you’re a foreigner in Germany with family still living in your home country, this can be especially relevant. For example, if your family lives in Spain and you’re working in Germany, and you maintain a permanent home back in Spain, double household could be one of the largest tax deductions in Germany for you. The tax benefits here can be huge — in some cases, it means your entire rent and living expenses at your work location are tax-deductible. Just keep in mind: for this tax deduction, the Finanzamt usually asks for solid proof. That includes rent contracts for both addresses, utility bills, and sometimes even a written explanation or evidence of where your social and family life is centered.
Once you've handled the big categories above, you can also deduct a variety of smaller — but still meaningful — work-related costs to maximize your tax refund in Germany:
Job application costs: €2.50 per online application is often accepted as a lump sum; if you’d like, you can itemize for things like passport photos, printing, postage, travel to interviews, resume design software, LinkedIn Premium etc.
Professional training and courses: Includes fees for seminars, certifications, online classes, required materials and travel costs. Work- or study-related books can also go here if you didn’t already declare them in study and work materials.
Career coaching / job interview prep: Training, counseling, and coaching to support your current work or employment prospects. General life coaching or personal development coaching doesn’t qualify as a tax deduction in Germany unless it’s clearly tied to your profession.
Professional associations and alumni networks: Membership fees and dues.
Tax advice and tax software: You can deduct tax software or tax advisor fees you spent on preparing your previous tax return in Germany.
Work-related insurance: Includes professional liability insurance, accident insurance and employment-related legal protection. If your policy (i.e. for legal insurance) covers both private and professional matters and doesn’t separate the two, the Finanzamt typically allows you to declare 45% of the premium as an employment-related tax deduction in Germany.
Internet and phone: You can deduct 20% of your actual costs, up to a maximum of €20 per month (€240 per year) – but unfortunately, there is no guarantee that this deduction will be accepted. If your work usage is higher (e.g. frequent work calls, Zoom meetings), you can deduct up to 50%, but you'll need to document it. To do that, track your usage over a 3-month period , then apply the average percentage to the whole year.
Bank account fees: You can deduct up to €16 per year – many tax offices accept this amount without asking questions, though it’s not legally guaranteed.
Lawyer costs: If the legal fees are tied to your job — like contract disputes — they can be deducted.
Business travel: If your employer didn’t reimburse you or you are self-employed, you can deduct transportation, accommodation, and meal allowances for work-related trips.
Interest on loans taken out for income-generating purposes (e.g. for rental renovations or starting a business) is deductible — but this applies only to self-employed or rental income, not to personal loans.
Wundertax automatically picks the better option to maximize your tax refund in Germany — in this case, the flat rate makes more sense than listing individual expenses.
Household services
If you pay for any help around the house or building maintenance, you can deduct part of the cost to maximize your tax refund in Germany. Unlike most other deductions, which reduce your taxable income, this one reduces your actual tax bill. In practical terms, that just means the benefit kicks in at the end of your tax return, as a credit applied directly to what you owe — not earlier in the calculation. The effect is essentially the same though: you pay less tax if you get this tax deduction.
There are two types of services that qualify here. The first is general household services (haushaltsnahe Dienstleistungen): things like apartment cleaning, garden maintenance, snow removal, window cleaning, even pet care or in-home elder care. You can deduct 20% of the total cost, up to €4,000 per year. If you rent, some of these services might already be included in your yearly utility bill (Nebenkostenabrechnung) – get this paper from your landlord if you want to claim this tax deduction in Germany.
The second category is skilled labor (Handwerkerleistungen), which covers things like plumbing, painting, heating repair, and renovation work. Again, you can deduct 20% of the labor costs, up to a maximum of €1,200 per year. Materials don’t count — so make sure your invoice clearly separates labor from goods.
The key requirement for both categories is that the work happens in or around your home, and that it’s properly invoiced and paid by bank transfer. Cash payments, even with a receipt, won’t qualify. As long as those conditions are met, these deductions are easy to claim — and they effectively give you a 20% discount on these services through your final tax bill.
Childcare tax deductions
Raising kids isn’t cheap — but fortunately, there are a few tax benefits that can help. Let’s start with the one you actively claim on your tax return in Germany: childcare costs. You can deduct two-thirds of your childcare expenses, up to a maximum of €4,000 per child, per year. This applies to things like kindergarten or daycare fees (but not school tuition), after-school care, nanny services or babysitters.
This tax deduction in Germany only covers costs related to actual care (not food, activities, or education), and it only applies to children under 14 (or older children with a disability). Just like with household services, you must pay by bank transfer, and keep the invoices — no cash payments allowed.
The tax deduction of childcare costs is not to be confused with Kinderfreibetrag (a tax-free allowance that exists to cover a child’s basic living and education needs) or Kindergeld (a monthly cash benefit paid directly to your bank account). These are handled automatically by the Finanzamt. You don’t have to choose it or calculate anything — just fill out Anlage Kind in your tax return (any tax software will easily do that for you), and they’ll run a comparison to see whether the Kinderfreibetrag or Kindergeld gives you the better deal. You always get one or the other, whichever saves you more. If you’re a single parent, you also get an additional allowance of €4,260 per year, plus €240 for each additional child. Actual, out-of-pocket childcare costs are a separate tax deduction you can claim on top of these benefits to maximize your tax refund in Germany.
Best software to help you maximize your tax refund in Germany
There are many options for filing your tax return in Germany — from free ELSTER to professional tax advisors. I put together a full comparison of the main methods here, explaining who they’re suited for and what to expect from each. For most people, using tax software like Wundertax, Taxfix or SteuerGo is the most practical choice and well worth the €35–40 fee they charge for submitting a tax declaration. These tools guide you through the process in plain English, calculate best tax deductions automatically (no need to decide between flat rate or actual costs), and estimate your tax refund before you hit submit. For things like commuting and home office, you don’t need to know the rates or rules – just enter your addresses and work pattern, and the software does the rest to maximize your tax refund in Germany.
Personally, I’ve had a good experience filing with Wundertax (also known as germantaxes.de), and I’m planning to use it again this year. It supports a wide range of income types — including freelance work, side jobs, and rental income — and the interface is straightforward and quick to navigate. It does a great job of walking you through all the relevant tax deductions in Germany — not just the obvious ones — and offers short explanations as you go, so you know what each one means and whether it applies to you. That way, you’re less likely to skip something that could actually save you money.
I also like that, unlike many other tools, Wundertax shows the full line-by-line calculation behind your estimated refund. Seeing the full calculation helps you maximize your tax refund in Germany and understand whether each of the expenses you declared actually made a difference in your final tax refund amount. The cost for submitting your tax declaration is €34.99, but you don’t have to pay anything until you’ve filled everything out and seen your refund estimate — if you’re not obligated to file a tax return, you can decide at the end whether it’s worth submitting at all.
This was part one — there are still more tax deductions to cover, but that would have made this article way too long. In part two (coming soon), I’ll go through medical costs, special expenses, insurance, donations, and a few other interesting possibilities to maximize your tax refund in Germany.
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