Top Tax Deductions Every German Employee Should Know

Every employee in Germany automatically receives an income-related expenses lump sum (Werbungskostenpauschale) of 1,230 EUR per year. The tax office deducts this amount from your taxable income without requiring proof. But those with higher work-related expenses can deduct significantly more.

Income-related expenses include all costs incurred through your work:

• Commuting costs (Pendlerpauschale)
• Work equipment (computer, office furniture, professional literature)
• Training costs (courses, seminars, certifications)
• Home office allowance
• Job application costs
• Moving costs for work-related relocations
• Double household costs

Only when your actual expenses exceed the 1,230 EUR lump sum does itemizing make sense. With a gross salary of 50,000 EUR and work-related expenses of 3,000 EUR, you save 600 to 1,200 EUR in taxes depending on your marginal tax rate.

The commuter allowance (Entfernungspauschale) is one of the most valuable tax deductions for German employees. You can claim the one-way distance between your home and workplace for each working day:

• First 20 km: 0.30 EUR per kilometer
• From 21st km: 0.38 EUR per kilometer

Example calculation: With a 30 km one-way commute and 220 working days: - First 20 km: 20 × 0.30 × 220 = 1,320 EUR - From 21st km: 10 × 0.38 × 220 = 836 EUR - Total: 2,156 EUR, this alone exceeds the standard deduction.

The allowance applies regardless of the mode of transport: car, train, bicycle, or on foot. Those who use public transport can alternatively claim actual costs if these are higher than the allowance.

Since the pandemic, the home office allowance has become a permanent part of tax planning. For 2026, the following rules apply:

• 6 EUR per home office day, maximum 1,260 EUR per year (210 days)
• No separate home office room required
• Counts toward income-related expenses

Important: On days when you work from home, you cannot claim the commuter allowance. You need to weigh which is more advantageous. For a short commute (under 20 km), the home office allowance is often more beneficial.

Those who have a separate, exclusively work-used home office room can instead deduct actual costs (proportional rent, electricity, heating, internet). This is especially worthwhile for expensive rental apartments.

Private retirement savings are strongly tax-incentivized in Germany:

Riester Pension (for employees): - Contributions up to 2,100 EUR/year deductible - Government bonus: 175 EUR (basic) + 185-300 EUR per child - Especially worthwhile for families with children and lower earners

Rürup Pension (basic pension, ideal for high earners and self-employed): - In 2026, 100% of contributions are deductible - Maximum amount: 27,566 EUR (single) or 55,132 EUR (married) - At a marginal tax rate of 42%, a contribution of 10,000 EUR means tax savings of 4,200 EUR

Tip: Especially for employees with a gross salary above 60,000 EUR (where the marginal tax rate already reaches 42%), Rürup contributions are particularly effective. Check your marginal tax rate with our tax calculator.

Beyond the big items, there are numerous other ways to reduce your tax burden:

Special expenses: - Church tax (fully deductible) - Donations to charitable organizations - Health and care insurance contributions (basic coverage) - Liability insurance, disability insurance

Extraordinary burdens: - Medical costs (after deducting the reasonable personal burden) - Care costs for family members - Disability-related additional costs

Tradesperson services and household-related services: - 20% of labor costs for tradespeople, max. 1,200 EUR tax reduction - 20% of costs for cleaning, gardening, childcare, max. 4,000 EUR

Conclusion: Most employees in Germany give away several hundred euros every year because they don't file a tax return or overlook important deductions. With an average salary of 45,000 EUR gross, optimized deductions can noticeably increase your net salary.