Children can be included in your income tax return under certain conditions. The German tax law provides some benefits for parents as well as for single parents. The rules are quite complex and many requirements have to be fulfilled to get a tax benefit for your children in the German tax return. The most important benefits are child benefit (in German “Kindergeld”) or tax-free child allowance (in German “Kinderfreibetrag”). The following article written by Christian Schmidt (Founder, Tax Advisor and Lawyer at Rechts- und Steuerberatung Schmidt in Düsseldorf) informs us all about the requirements for considering a child in the German tax return and discusses the main benefits.
When can I consider my child in the German tax return?
Children generally can be considered from the month of their birth up to and including the month in which they reach the age of 18. Basically, children under the age of 18 are entitled to child benefit or child allowance, usually without further requirements.
Note: Not only your biological children, but also foster children as well as adopted children can be eligible children.
Full age children (over 18)
If your child fulfills certain conditions, it still can be considered for tax purposes after the age of 18. The following limits apply:
- A child can be deductible until the age of 21 if he/she is not employed and/or registered with the employment agency seeking work
In addition, your child may even be considered until the age of 25 if it fulfills one of the following conditions:
- Your child is a trainee (school education, a vocational training or a study)
- Your child is in transitional periods of no more than four months between two stages of training
- Your child is doing a voluntary social or environmental year, volunteer service or other services abroad
- Your child is unable to take care of themselves due to a physical, mental or emotional disability that occurred before the age of 25
The above-mentioned are only applicable for children who have not already completed a vocational training or a study. However, you can also include a child in your tax return after completing a vocational training or a study. The condition for that case is that the child does not pursue any activity after the completion of the vocational training. An activity with a weekly working time of a maximum of 20 hours is harmless. The same applies to apprenticeships and mini jobs, as long as only one single activity is performed.
What is the difference between child benefit and a tax-free child allowance?
You might have heard about German “Kindergeld” and “Kinderfreibetrag”. But what exactly is the difference?
The child benefit is paid out by the “Familienkasse” and will be paid after filing an application. Everybody fulfilling the above-mentioned requirements can apply for it.
Note: As of 2018, you can apply for child benefit retroactively only for the last 6 months so that you should take care of it at an early stage.
The tax-free child allowance is granted under certain conditions as part of your income tax assessment at the tax office. After submitting your tax return to the tax authorities, the tax office will calculate whether the consideration of child benefit or the tax-free child allowance is more favorable for you. If the deduction of child allowances proves to be the more favorable option for you, an amount of 3.714 (for single parents) will be deducted.
If you are assessed as spouses and your child is in a biological or other above-mentioned relationship with both parents, the child allowance will be doubled to 7.428 €.
Note: Under certain conditions you can also claim double tax-free child allowance e.g. when your spouse died.
Benefits for single parents
Single parents are able to receive an additional benefit of 1.908 €. For each additional child, you receive a surcharge of 240 €.
Note: The German tax law has a special definition for “single parent”. Thus, if you form a household community with another person of legal age you can lose your claim for this benefit.
For children of full age who are in vocational training or studying and not living at their parents’ house, you can claim the so-called education allowance (“Ausbildungsfreibetrag”) with an amount of 924 € per year. This allowance is linked to the condition that you are eligible for child benefit or the tax-free child allowance. For each month in which the conditions have not been fulfilled, the tax authorities will reduce the allowance by 1/12.
Provided that your child is registered in your household and has not reached the age of 14, you may consider 2/3 of the child care costs as extraordinary expenses in your tax return. The deduction is possible up to a maximum of 4.000 €.
For example, you can deduct the following expenses:
- Costs for Kita (for more information about Kita’s and Kindergarten’s, check out “The Guide for Expats with Children in Düsseldorf“)
- Costs for a nanny, etc.
Note: The deduction excludes costs for leisure activities or meals. The deduction is also denied if you cannot prove the payment of the costs with an invoice and the corresponding bank statement. Cash payments are not accepted by the tax office.
If your child attends a private school you can deduct 30% of the school fees, up to a maximum of 5.000 €. However, costs for accommodation, childcare and meals may not be taken into account. The costs for accommodation and childcare are already included in the above-mentioned education allowance and childcare costs. The deduction of meals costs is not possible under any circumstances.
If you continue paying for your child’s vocational training or maintenance, but you are no longer entitled to child benefit or child allowance, you are still able to deduct this costs in your tax return. Your child will be considered as a dependent and the costs are deductible up to an amount of 9.000 €. The amount increases by the amount you spend on your child’s health and long-term care insurance. Your child may earn 624 € per year so that the maximum deductible amount won’t be influenced.
Special features for children abroad
If your child is living abroad, it does not immediately mean that you are losing the right to receive German child benefit, child allowance or the deduction of costs regarding your child. However, determining the deductible costs the tax authorities take into account the circumstances of the country in which your child is resident and reduces the contributions accordingly.
Note: If you receive foreign child benefit, you might not receive child benefit in Germany or German child benefit will be set off with the child benefit paid abroad.
Have any additional questions related to taxes and claiming work expenses? Contact Christian Schmidt and his team at Rechts- und Steuerberatung Schmidt.
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