What is the Grundfreibetrag (basic tax-free allowance) for the income tax?

It is compulsory to submit an Einkommensteuererklärung (income tax) if you are registered as self-employed. However, whether you are required to pay tax depends upon if your income exceeded the Grundfreibetrag. If your income is below the Grundfreibetrag you are not required to pay any tax on your earnings.

Read on to find out what the Grundfreibetrag is and what it means for your yearly Einkommensteuer amount.

How much is Germany’s Grundfreibetrag?

As of 2022, all German taxpayers have a basic tax-free amount of €10,347. If you are married and have chosen to do a joint tax assessment as a married couple, the amount is doubled, i.e. €20,694. The allowance is reevaluated yearly according to the Existenzminimum (living wage) and increases with the cost of living, for example in 2020 it was € 9408 and rose to €9744 in 2021.

How does the Grundfreibetrag work?

As mentioned above, should your total yearly income be below the Grundfreibetrag, you aren’t required to pay a cent of Einkommensteuer: this counts for whether you are employed or self-employed. If you are both employed and self-employed, your separate incomes calculated together, with the Grundfreibetrag deducted from the total amount.

Example: In 2021, your self-employment income was €3,000. In addition, you earned an extra €450 a month from a mini-job, giving you an annual income of €9,400. The annual amount is below the 2021 Grundfreibetrag threshold, therefore you are not required to pay any Einkommensteuer.

💡Important side note: Irrelevant of whether you exceed the basic tax-free amount, you are self-employed it is mandatory to file an income tax return.

What happens if I exceed the Grundfreibetrag?

If you (or your spouse) have earned more than the Grundfreibetrag, you are required to pay Einkommensteuer. The good news is that you only have to pay tax on the amount that exceeds the Grundfreibetrag. So for the tax year of 2022, €10,347 (or €20,694) of your income is completely tax-free!

Once you exceed the Grundfreibetrag, the tax rate, which starts at 14%, increases with your income all the way up to the highest rate of 45%. 

Example: In 2022 your income comes to €10,348 sending you over the Grundfreibetrag by €1. This means that you are only required to pay income tax on the one euro at the lowest tax rate of 14% whilst the amount earned up to this limit of €10,347 remains tax-free.

💡Accountable Tip: Download the Accountable app now to calculate how much income tax you are expected to pay and submit your tax return to your local Finanzamt today.

How do I claim the Grundfreibetrag?

The Grundfreibetrag is generated automatically, all you have to do is to remember to submit your Einkommensteuererklärung by the 31st of July each year (in 2022, the deadline for the income tax is exceptionally the 31st of October). 

💡Accountable Tip: When filing your Einkommenteurerklärung with the Accountable app the Grundfreibetrag is included. Once submitted, Accountable will keep you informed on the process and any resulting tax obligations you are required to pay for that period.

⬇️ Check out our video tutorial. Just select English subtitles and learn all about taxes as a freelancer in Germany.