What counts as low income

How low earners save taxes

According to social security law, low-wage earners are all trainees who earn a maximum of 325 euros per month. Likewise all FSJler, FÖJler and Bufdis. The employer pays the entire social security contribution for you alone.

However, the term "low-wage earner" is also commonly used for employees who are marginally employed or who receive a low wage for other reasons. According to the OECD definition, low-wage earners are those who receive less than two thirds of the median earnings of all full-time employees subject to social security contributions.

1. Save income tax and contributions

Most of them are familiar with the mini-job principle: everyone can earn up to 450 euros a month tax-free. The next level is the mid-job. With this you can earn up to 1,300 euros per month in the sliding zone and benefit from reduced social security contributions. Your salary is taxed according to the wage tax card, but no wage tax is due for wage tax classes III (3) to IV (4), for tax classes I (1), II (2) and IV (4) at least the solidarity surcharge is omitted, and only For classes V (5) and VI (6), as an employee, you always have to pay wage tax.

Special feature for low wage earners: You don't have to pay any income tax or church tax if your annual income is less than 9,744 euros (2020: 9,408 euros). That's 812 euros a month (2020: 784 euros). For married couples and registered partners, double the amount of 19,488 euros applies (2020: 18,816 euros). It does not matter which income tax class you have - the basic allowance is tax-free for every taxpayer.

2. Save the solidarity surcharge

As an employee, you had to pay a monthly solidarity surcharge in addition to wage tax and church tax for many years, namely 5.5 percent of your wage and income tax. However, the federal government abolished the solidarity surcharge for almost 90 percent of employees from 2021. Whether you still have to pay the solos personally depends on your exact earnings and your personal tax rate. Your employer will calculate the amount due for you.

3. Use the splitting tariff and save taxes

Married and registered partners who "can be invested together" can save income tax with spouse splitting. As a rule, couples with spouse splitting pay less tax than couples for whom each person has income tax calculated individually. You save taxes above all if one of you earns a lot and the other - as a low-wage earner - earns little.

An example: You work full-time and earn 45,000 euros a year, your partner works part-time and earns 15,000 euros a year. As a couple not assessed together, you have to pay around 10,111 euros and your partner 1,010 euros in taxes (based on the 2021 income tax rate). You both pay 939 euros less tax if they are invested together and the tax office calculates the splitting tariff.

4. Win the home construction premium and employee savings allowance

Anyone who does not have to pay taxes on more than EUR 25,600 per year is supported by the state with a housing construction premium. The prerequisite for this is that you conclude a building society loan agreement. You have to pay in at least 50 euros per year, with a maximum of 512 euros per year being funded. This money is then subsidized by the state with 8.8 percent. For married couples, double the amounts apply, i.e. an income limit of 51,200 euros and payments of at least 100 and a maximum of 1,024 euros per year into the building society loan agreement. More on this in our article on the building society loan agreement.

Many employers encourage their employees to build up their assets. This can be done, for example, by transferring capital-forming payments directly to the employee's home loan and savings contract. The state subsidizes these payments with 9 percent employee savings allowance. Of 470 euros, 9 percent is funded per year, so you as an employee can win 43 euros every year. You can find more details on the subject in our article on capital-building benefits.

Interesting to know: You can also secure the capital-building benefits in the form of normal savings contracts, fund savings contracts, shares, life insurance or private pension insurance.

5. Secure an education bonus

The education bonus from the Federal Ministry of Education and Research (BMBF) supports low-wage earners who do further training. As an employee, you can receive the so-called premium voucher if your taxable annual income does not exceed 20,000 (single persons) or 40,000 euros (married couples and life partners).

By the way:

Do you need help with your tax return? Our advisors will be happy to help you and secure the tax advantages that you are entitled to.

This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of a membership and exclusively within the advisory authority according to § 4 No. 11 StBerG.