Apart from the main source of income, additional money is often earned in various ways, which increases the budget. In such cases, there are usually doubts – should this amount be taxed? Since penalties from authorities can be severe, it is important to find out which additional income is tax-free. We talk about this in our today’s article – welcome!
Tax-free additional income with a mini-job
In part-time work, up to 556 euros can be earned monthly without having to pay taxes or social security contributions. Occasionally, this monthly threshold may be exceeded once. However, the total annual income from such employment should not exceed 6672 euros, i.e., an average of 556 euros per month.
The German state offers various tax-free benefits that increase the family income without having to pay taxes on them. The most important include child benefit and the tax-free child bonus, which is paid out additionally under certain conditions. These benefits do not need to be declared as income in the tax return.
There are exceptions to this annual limit: Higher incomes, which are sporadic and unexpected, are permissible. “Sporadic” means that such cases may occur at most three times in twelve months. Substitutions due to illness are considered “unexpected,” while additional income from seasonal work is considered foreseeable. In such exceptional cases, the annual income must not exceed 7288 euros.
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Additional income without taxes – What is that?
Part-time work is normally a regular but less time-intensive form of employment, often performed alongside the main occupation. It can be in the same industry as the main job or in a completely different field. Income from this form of employment is subject to taxation and, in some cases, social security contributions.
Additional incomes, on the other hand, are sporadic earnings that come, for example, from rare assignments or other occasional sources. Under certain circumstances, such incomes can be tax-free, provided they do not exceed established limits.
In short, part-time work is a more regular job, while additional incomes are rather occasional financial inflows.
Tax-free additional income through self-employment
The limit for tax-free additional income in self-employment is 410 euros per year. This applies to freelance activities or commercial work, without paying taxes.
If this exemption amount is exceeded, filling out appendix S for contract work and appendix G for commercial income is required. In this case, a tax return must also be submitted.
Tax-free additional income from private sales
Occasional sales of everyday items such as clothing, books, shoes, and decorative items are tax-free. For jewelry, however, a speculation period of at least one year applies before it can be resold tax-free. Earlier sales are taxed because they are considered profit-driven resale and no longer private sales.
If a profit of more than 600 euros is made within a year from private sales, it must be taxed. Such profits fall under “other income” according to § 22 No. 2 EStG and must be indicated in annex SO of the tax return. Losses from such sales can only be offset with profits from similar transactions.
For properties not used by the owner, a ten-year speculation period applies according to § 23 Abs. 1 Nr. 1 EStG. For other valuables like gold, jewelry, art, foreign currencies, coins, or cryptocurrencies, a speculation period of one year applies according to § 23 Abs. 1 Nr. 2 EStG.
Tax-free additional income from renting and leasing movable items
Occasional rentals, such as those of a car or caravan, are generally taxable. However, the income remains tax-free if it is less than 256 euros per year (§ 22 No. 3 EStG).
What is the tax-free additional income in volunteering?
In volunteer activities, such as teaching children or helping in a shelter, up to 3000 euros can be earned annually without having to pay taxes. If the income exceeds this amount, it should be indicated in annex N of the tax return. There, costs associated with the activity can also be deducted from the income.
Voluntary work is very important in Germany, which is why the legislator increased the tax-exemption limit to 3000 euros per year in 2013 and additionally introduced a flat-rate amount of 840 euros annually for volunteer activities.
Earning opportunities for pensioners without tax payment
Income from pensions is taxed the same as income from employees or self-employed individuals. For side jobs of pensioners, taxation only occurs if the income exceeds 520 euros per month. Up to this limit, the income is treated as a mini-job and only taxed at two percent, without additional social security contributions or other taxes. This means a pensioner can earn up to 6672 euros annually without paying taxes on it.
The same limits for additional pension income without tax apply as for employees in an employment relationship.
Taxation of additional pension income
When more additional income is earned, it is subject to taxation – in this case, it must be considered in the tax return. The tax return can be conveniently handled with Taxando. Our modern app for tax accounting in Germany is very user-friendly – everything can be done quickly and effectively with just a phone or laptop.
Maciej Wawrzyniak
In his private life, Maciej enjoys sporting challenges, playing the guitar, and swimming in the lake. He is also the proud father of three sons.
