Important changes

• ​Tax consulting fees will increase by 6% from 1 July. Tax advisors were never cheap in Germany. However, the costs will rise further by 6%.
• You can get a refund of up to 200€ from Netflix. You can read more about it on test.de.
• Meta will use your data on Facebook, Instagram, and other Meta products to train its AI. You can object to its use by 26th May. Meta will use all your publicly avaliable data. Chats where you will use Meta AI will also be added to the AI training data. Moreover, the data cannot be removed once saved in the training database.

Health Insurance Collapse

Another desperate proposal by the statutory health insurance association. They have proposed a temporary stop to health insurance spending.

The move is supposed to give the Federal government some time to devise a long-term solution to the current financial crisis of public health insurance companies.

What does “spending moratorium” mean?

According to the proposal, public health insurance companies will set a date. From this date, hospitals, doctors, or medical companies may no longer charge the health insurance company more for the same services than they did before.

Example: Suppose a hospital charged 1000€ for a particular treatment before the moratorium date. They can no longer charge more than 1000€ for the same treatment after the moratorium date.

This means that if treatment costs increase due to inflation, medical advancement, or any other reason, hospitals cannot pass this increased cost on to health insurers.

Hospitals cannot pass the costs on to the patients either. Thus, the hospital will be left with these costs.

To cover the increased costs, hospitals and doctors will be forced to cut costs elsewhere. For example, by reducing the medical staff, which can lead to even longer waiting times.

Why are public health insurers proposing it?

The costs that doctors and hospitals charge health insurance companies have increased significantly recently. Public health insurers are struggling to cover these costs with premium contributions.

So, a spending moratorium is health insurers' attempt to stabilize the struggling public healthcare system in the short term. It would also give politicians more time to develop sustainable reforms for financing health insurance funds.

How long will the moratorium last?

According to the proposal, the spending stop should last for a short time.

Making doctors and hospitals bear the rising costs is not a long-term solution and will create new problems.

What does it mean for you?

The proposal hasn't been accepted yet. So, there is no impact as of now.

However, whether spending stops or not, public health insurance companies are short on money. This means health insurance premiums will certainly go up again in 2025 or by 2026 at the latest.

What can you do about it?

Unfortunately, there isn't much you can do about the financial struggle of the public health insurers. You have three options to partially protect yourself.

• Switch to a cheaper public health insurance provider. We find HKK and TK to be the best and most cost-effective insurers for expats in Germany.
• Switch to private health insurance. However, this is only an option for high earners with stable income. Moreover, you should consult an insurance broker before making a switch.
• Set aside a fixed amount every month to cover your future medical expenses. Some options to achieve this are opening a daily account* or starting an ETF savings plan (Scalable Capital*, Finanzen.net Zero*, ​Smartbroker+*).

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Difference between tax "absetzen" and "abziehen"

Understanding the difference between "tax deduction (Steuerabsetzen)" and "tax reduction (Steuerabziehen)" is vital. In tax deduction, you reduce your taxable income and hence your taxes. In tax reduction, you directly reduce your taxes.

Let's understand them in detail.

Tax deduction (Steuerabsetzen)

In Germany, you can subtract or deduct the expenses incurred to earn an income. The income left after subtracting/deducting the expenses is the income on which you pay taxes. This income is called taxable income.

So, the less your taxable income, the less taxes you pay.

However, you can't deduct all your expenses. Only expenses related to earning an income are tax-deductible.

Example: You have a gross income of 80,000€. You bought a laptop for 2000€ and use it 60% of the time for work and 40% for private purposes.

In this case, you can deduct (absetzen) 60% of 2000€ (i.e., 1200€) from your income. This reduces your taxable income by 1200€.

However, you won't receive a refund of 1200€ from the tax office. Instead, a refund of 439€ only.

Here is how.

• The expense will reduce your total income by 1200€, to 78,800€.
• You pay 15,665€ in income tax on these 78,800€.
• If you didn't deduct the expense, the tax burden would be 16,104€ (80,000€ income).
• Thus, the tax benefit from deducting the expense is 439€ (16,104€ - 15,665€)

So, the more you earn or the higher your tax bracket, the more you can save in taxes.

Tax Reduction (Steuerabziehen)

As you saw, you don't get 100% of the expense back in tax deduction (Steuerabsetzen). You only get part of the expense back. However, in tax reduction (Steuerabziehen), you subtract the costs directly from the tax payable.

Only certain expenses qualify for tax reduction (Steuerabziehen). One of them is household expenses. You can subtract 20% of the labor costs for household help from your taxes.

However, the tax office has set a limit on the maximum labor cost for household help you can subtract, which is

• Up to 2,550€ per year for an employee on a mini-job.
• Up to 20,000€ for a self-employed cleaner.
• Up to 6,000€ for a tradesperson.

Example: Suppose you hire a self-employed household helper to clean your apartment and pay them 3,000€ per annum. In this case, you can receive a tax reduction of 600€ (20% of 3,000€). It doesn't matter how much you earn or in which tax bracket you fall.

You can use tax software to evaluate a potential tax refund for free. If you get a refund, file the tax return.

We find the following tax software the best: Wundertax*, SteuerGo*, and WisoSteuer* (German). You can also consult a tax advisor if you have doubts or if filing a tax return makes you nervous.

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Latest News

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