Maintenance payments (Unterhaltszahlungen) – How to deduct in your German tax return?

Moving to Germany but still supporting your parents back home financially? You are not alone. Do you know that you may deduct these maintenance payments (Unterhaltszahlungen) in your German tax return? It is not easy but it is worth it, especially if you are sending a lot of money and if you are in a high tax bracket.

In this article, I will share my personal experience of deducting maintenance payments in my German tax return. I will also explain how you can do the same and some tips to increase your chance of deducting your maintenance payments successfully.

My story of deducting maintenance payments in my German tax return

Since I started working in Germany, I have been sending money back to Hong Kong for my parents. Little did I know that these payments were tax-deductible. I only learned about that 6 years after I have been sending money! And I decided to give it a try as I was sending quite a lot of money every year.

Trying to deduct the maintenance payments in my German tax return was a super frustrating process. The most frustrating part for me was to find a government department in Hong Kong that was willing to put a stamp on my German form. I was sent from department to department with no success. Every department had not dealt with a request like this before and told me that it was “none of their business” and I should “try with another department”. Some even asked me to try with a government department in mainland China (which of course made no sense!). 

My parents are old and they cannot understand this kind of stuff. I had to deal with it all. I remember making a lot of international calls to different Hong Kong authorities. I spent a lot of time and money but got the wrong form in the end that was not accepted by the German tax office.

I want to help other expats to do the same

I know that many other expats are facing the same pain as me. Many have no idea that these maintenance payments are tax-deductible, while others have no idea what procedures they have to follow to deduct these expenses successfully.

In the last few years, I have been able to deduct these maintenance expenses. And it was a lot of money saved for me. Therefore, I am writing this article and I want to help you guys as well to get back the money you deserved.

For more tips and tricks about tax in Germany, make sure you check out these guides as well:

• Church Tax in Germany – How to Stop Paying It?
• Tax Return in Germany – English Guide

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Disclaimer: This article is intended to provide you with a brief overview of how to deduct maintenance payments in your German tax return. This blog is not qualified to give you any tax advice according to German law. If you need more details and specific advice on your personal situation, we would highly recommend you to consult a tax adviser or the German tax office.

The best way to transfer your maintenance payments internationally

Firstly, before we get into details about how you can deduct your maintenance payments in the German tax return, I want to share with you a big mistake I did in the first few years after I moved to Germany.

As mentioned before, I have been sending money back home to support my parents in Hong Kong since I started working in Germany. Back then, I didn’t know there was an alternative to bank transfer. I used to pay more than 30 Euros fee each time to transfer money to Hong Kong with banks.

Using a bank to make an international money transfer with different currencies is probably the worst thing you can do. Now, I always transfer money to Hong Kong using the services from CurrencyFair. With CurrencyFair, 

• • You only pay a 3 Euro fee no matter how much you transfer
  • You can use a much more favorable exchange rate compared to traditional banks
  • You can set your desired exchange rate and the transfer will only happen once this rate is reached

I would have saved so much money if I knew about CurrencyFair before! Currencyfair is also offering 10 free transfers to our readers at the moment if you want to try it out for free.

How to submit your tax return in Germany?

1. The free method

The free way to submit your tax return in Germany is to use an official tool called ELSTER (ELektronische STeuerERklärung). Using ELSTER is free. However, it can be quite complicated for beginners as there are not so many explanations. You can find more info about ELSTER on this official website.

2. The easiest way if you are familiar with the tax term in German

The easiest way (especially for beginners) to submit a tax return in Germany is to use tax software. I used Taxman to file my tax last year. Since my tax situation is quite complicated (with self-employment income and rental income), I need more guidance and explanation when filing my tax return.

Taxman provides comprehensive guidance on all the tax matters. The only drawback is that it is only in German. For me, it is okay because I work in the finance/ accounting field and I am familiar with those tax terms in German. But if you are not, it can be very challenging to understand all the terms in German (even my German husband has problems with that). In that case, I would highly recommend you to use an English online platform like steuergo to file your tax.

3. The best way if you need English guidance

If you need English guidance, the best way is to submit your tax return in Germany with Steuergo.

With Steuergo, you can

• • Complete your tax return in Germany fully in English. 
  • Get English guidance through your tax return process step-by-step. 
  • Use their hotline in case of any questions. 
  • Get this level of service with only 34.95 EUR!

Steuergo will also estimate how much tax refund you can get back so that you know if it is worth submitting your tax return at all. You don’t need to pay anything until you ask them to submit your tax return to the tax office.

With Steuergo, it really makes filing a tax return in Germany so much easier. This is the best option to file your tax return in Germany especially if you want to get help in English. 

Click here now to register for a free account!

Besides Steuergo, there are also many other tax return software available in Germany. Check this out: 11 Best Tax Return Software Germany – Suitable for Anyone

4. Using a tax adviser

If you don’t want to file your tax return by yourself, you can choose to get help from a tax adviser in Germany. The cost of a tax adviser depends on your income. The more money you earn, the more you will have to pay. It is usually the most expensive option. But it may be worth it if you have a very complicated tax situation.

To reduce your stress, I would suggest using a tax advisor for your first year in Germany. Once you have a feeling of how it works, you can then use a program like Taxman or Steuergo to file the tax return by yourself. This is also what we have done. We used a tax adviser for a few years (it cost us around 1,000 Euros per year). Since last year, I used Taxman and paid only 35 Euros. I just followed what my tax advisor has done in the past and did the same myself.

HOW TO FIND A TAX ADVISOR ONLINE?

If you have a specific tax question, you can use Yourxpert to get a free online initial assessment from a tax advisor. Simply write your question in the below question box. The initial assessment or recommendation is free of charge. If further actions are needed, you will get a non-binding offer with the price and you can decide if you want to take the offer.

 

 

Maintenance payments – Who can be supported?

In general, you can support your parents, grandparents, children, grandchildren, ex-spouse, etc. The supported person has to be in need, meaning that his income and asset fall below certain limits. He does not have sufficient income himself and depends on your financial support. Your maintenance payments should be used to cover the ongoing living expenses of the supported person. And the amount needs to be reasonable taking into account your own income.

To check if your maintenance amount is reasonable, the German tax office will add up all your income. And the deductible maintenance expenses amount should be within a certain percentage based on your income. This percentage differs based on the type of dependents you are supporting. So, you should make sure that your maintenance payment amount is not higher than this threshold if you want to deduct all the expenses.

So, how do we define if the person is “in need”? 

When I tried to deduct the maintenance expenses I paid to my parents the first time, my mother was 62 and my father was 68 years old. The German tax office only recognized the maintenance expense to my father, but not to my mother. 

The reason was that my mother was below 65 years old (the retirement age). So, in theory, she could go to work and support herself. Even though in reality, this would not be possible because my mother was a housewife her whole life without any work experience, meaning that she wouldn’t be able to find a job at this age.

But the reality does not matter. The German tax office supposes someone can go to work as long as they are under 65 years old. An exception is if the person can get a medical certificate, stating that they are not able to work. According to my tax adviser, it might also be possible to claim the maintenance expense if you can prove that the retirement age in your home country is below 65 years old.

Different types of dependent persons

By the way, if your family is financially dependent on you, it is highly recommended to get a life insurance policy. For more details, check here: Best Life insurance Germany – Top 4 Comparison

You can see below some general types of dependents. Note that if you make maintenance payments for people for whom you are legally obliged to support, these payments can also be tax-deductible. 

Parents or grandparents

If you support your parents or grandparents, who are married and live together in the same household, the deductible maintenance amount for both your parents or grandparents will be calculated together. 

On the other hand, if your parents or grandparents are unmarried, the deductible maintenance amount will be calculated individually for each person, even if they live in the same household.

Children or grandchildren

You can deduct maintenance payments you make to your children or grandchildren, but only if nobody gets child benefit or child allowance during the year. In case someone receives child benefits for part of the year, you can only deduct your maintenance payments for the number of months that no child benefits are received. Besides, the maximum deductible amount will also be reduced proportionately.

Spouse or marriage-like partner

The maintenance payment you make to your divorced or permanently separated partner is tax-deductible if you have not deducted this expense under “Unterhaltsleistungen an den Partner (maintenance payments to the partner)” in your tax return. 

If you live together with your married partner, you cannot deduct the maintenance expense because these expenses should be already accounted for when you file your joint tax assessment or when you choose a different tax class in your tax return.

It is also possible to claim tax if you live in Germany and your partner lives in a non-EU country. Or if you live abroad with your partner, but earn most of your income in Germany as a cross-border commuter. 

Mother or father of a child born out of wedlock

In this case, the maintenance payment is only deductible if the person being supported is legally your dependent. For example, a mother of an illegitimate child is a dependent of the father 6 weeks before and 8 weeks after birth. This period can be longer if the mother is not able to work because she is sick due to childbirth, or because she needs to take care of the child. On the other hand, the father of an illegitimate child can also be a dependent of the mother if he takes care of the kid.

Other people in your household with reduced social benefits

If someone who lives with you has reduced social benefits because of your maintenance payment or because of living with you, your maintenance payments to them may be tax-deductible. For example, social benefits such as housing benefits, child-raising benefits, unemployment benefits, or other social assistance.

These people may include your fiancée, siblings, uncle and aunt, nephew and niece, son or daughter-in-law, brother or sister-in-law, stepchildren or stepparents.

People in a special emergency

If you are supporting a person who has a special emergency such as illness or who is in need after a natural disaster, your support payment may be tax-deductible as well.

Maintenance payments – How much is tax-deductible?

The maximum tax-deductible amount on your maintenance payment is 11,604 Euros per year, or 967 Euros per month (in 2024). This number is per supported person. Depending on the country your dependent lives in, this number can be reduced to 3/4, 2/4, or 1/4 only. 

The German tax office grouped the different countries into 4 different categories. If your dependents live in a country that is under the first category, you can claim the full 11,604 Euros per year maximum. The grouping of the countries may change every year. You can see the most updated grouping for the year 2024 here.

Luckily, Hong Kong is under category 1. So, I am eligible to claim the full maximum amount as my parents live in Hong Kong. Note that China is under category 3. So, you are only eligible to claim half of the maximum amount if your dependents live in China.

The German tax office does not take into account the city where your dependents are living in. For example, the cost of living in China can have a huge difference among different cities. However, the German tax office will only look at China as a whole and classify it into category 3. So, if your dependents happen to live in one of the most expensive cities in China such as Shanghai, you can still only claim half of the maximum deductible amount (5,802 € in 2024).

Read also: Cost of living in Germany – How to save money?

Maintenance payments – The timing

The timing of the first maintenance payment in the year is very important. The best is to make the first payment at the beginning of the year. It is because the tax office defines the time of the first payment as the start of the support period.

As mentioned before, the maximum tax-deductible amount is 967 Euros per month (in 2024). If you transfer 9,000 Euros to your father in March 2024, the German tax office will assume that you started supporting your father in March 2024. It will not care that you have supported your father in 2023 or earlier. Instead, the German tax office will think that you only supported your father from March to December 2024 (10 months). So, the maximum tax-deductible amount will be 967 Euros x 10 = 9,670 Euros for the year 2024. It means that you will lose 2 months of the maximum tax-deductible amount (967 Euros x 2 = 1,934 Euros).

So, the worst thing you can do is to make a big maintenance payment to your father at the end of the year. For example, if you send 5,000 Euros in December 2024 and no other payment throughout the year 2024, the German tax office will consider December 2024 as the time you started supporting your father. It means that you only supported your father for one month in the year 2024. And the maximum monthly deductible amount is 967 Euros. Even though you paid 5,000 Euros, you can only claim 967 Euros and the rest of the amount cannot be used for a tax deduction in 2024.

How to claim maintenance payments in the tax return?

To claim the maintenance expense, you have to prepare the below documents:

1. Anlage Unterhalt

This is the tax form you should complete in your tax return if you want to claim back your maintenance payments. This form states some basic information about your dependents, such as their names and address, birthday, job, relationship with you, and so on. You also need to state the amount of money you transferred, and the date of the first transfer in the year. You can find this tax form here.

2. Maintenance form (Unterhaltserklärung)

This is a form you should ask your dependents to fill in. The good thing about this form is that it is in many different languages. So, you can choose the one that your dependents can read and understand. You can download the form via this link.

In my case, my parents only know Chinese. They cannot read English or German. So, I download the forms in Chinese for them. You can click on your desired language on the first page of the PDF and jump to the form you need.

In this form, your dependents need to fill in their basic information such as their names, address, birthday, marital status, jobs, their relationship with you, and also who they are living with. Besides, your dependents also need to list all their income and expenses during the year, and the value of their assets. 

Note that each supported person needs to complete one form. So, even though my parents live together in the same household, they still need to complete one form per person.

The tricky part of this form is that your dependents need to find a local authority who stamps on this form, certifying that all the info stated in this form is true and correct. Note also that in case the info put in the form is not correct, you will be legally responsible too and may have to pay a penalty.

How I got my maintenance form stamped in Hong Kong

This is the form that I spent most of my time on. I called many Hong Kong authorities and no department was willing to stamp on this external form. Every department asked me to ask another department. In the end, I realized that government just won’t stamp on external forms and I was told to use a form provided by the Hong Kong government instead, which lists more or less the same details about my parents.

I spent loads of time and money on making this form provided by the Hong Kong government. Finally, I made it and sent that form to the German tax office. Unfortunately, I was told that it wouldn’t recognize this form as proof that my parents did exist because it was not a form provided by the German tax office.

I was about to lose hope and gave up on this whole process when someone on Facebook told me the trick. In Hong Kong, the Home Affairs Department provides a free service for people to administer declarations or oaths/ affirmations. 

Basically, what my parents have to do was to bring the completed maintenance form to the Home Affairs Department and make an affirmation there, saying that all the info written in the form is true and correct. An officer will then stamp on each page of the form to verify that my parents have made this affirmation. Note that the officer will not care what is written in the form and will not verify any content on your form.

This is the stamped form that the German tax office accepts. I just couldn’t believe how fast and easy it was. And it was free!

3. Proof of money transfer

The German tax office also needs to see proof of money transfer. In my case, the tax office is happy with my bank statement which shows the transferred amount and the recipient name in Hong Kong.

Read also: Opening a Bank Account in Germany – Compare English Banking Options

4. Proof of my parents’ income

My parents have no other income besides the “Old Age Living Allowance” provided by the Social Welfare Department in Hong Kong. All the elderly people whose income and assets are below a certain threshold are qualified to receive this allowance. And the allowance amount is the same for everyone in the same scheme.

Nevertheless, the German tax office wanted to see an official paper issued by the Social Welfare Department to prove the amount that my parents received monthly. It was again a lot of work for me because my parents normally do not receive any letter from the Social Welfare Department about the allowance amount (since it is a standard amount for everyone). 

I had to make a lot of calls to the Social Welfare Department. Fortunately, the officer there agreed to send a letter to my parents to prove how much allowance they had received in the last year. The German tax office accepted this letter as proof of the income amount received by my parents.

When someone else also supports your dependents

In the tax return, you have to enter all the people who live in the same household as your dependent. It is because the tax office assumes that your maintenance payments are distributed equally to all the people living in the same household, even if these people are not financially dependent on you.

For example, let’s assume your father lives together with your sister. Your sister pays 1,000 Euros to your father, while you pay 3,000 Euros per year. So, your father received 4,000 Euros in total. This sum will be divided equally between your father and your sister, each getting 2,000 Euros. Since your sister is not your dependent, you can only deduct 2,000 Euros of maintenance expense to your father, even though you have paid 3,000 Euros.

Tips to deduct your maintenance payments in the German tax return

Tip #1: Send money early in the year

If you transfer a lot of money to your dependents, make sure you do the transfer early in the year so that you don’t lose the maximum deductible amount.

Tip #2: Be consistent

Someone told me that from their experience, it is better to be consistent and send a similar amount of money every year at a similar time in the year. 

Even though I cannot verify if that is true, I think it makes sense because if I tell the German tax office that my parents need my 9,000 Euros per year to survive, it will be strange if I send them only 2,000 Euros in another year when I state that they have no other income.

Tip #3: It may get easier in the future if the tax office approves your expenses once

It took me years of trying until I could successfully deduct my maintenance payment in the tax return. The great thing is that once these deductible expenses are approved, the German tax office is not asking more questions about it again in the following years. 

For example, in the following 2 years, the tax office didn’t even ask me for the Maintenance form, the bank transfer, and the income proof from my parents (even though I have them ready). The only thing I submitted was the Anlage Unterhalt. The tax office did not ask for additional proof for any number stated there.

I heard that when the tax officer is checking the tax return, they will normally compare this year’s tax return with the one from the previous year. And they will focus on asking for more proof if there is any variance. So, once you get your deductible expenses approved, there is a good chance that the tax office is not chasing for more proof in the coming years, especially if you are transferring a similar amount to the same people every year.

So, even though it was a lot of money and work to get the expenses approved the first time, it is worth it as you will probably be able to deduct your future expenses much easier.

Tip #4: You don’t have to agree with the German tax office

Do you know you can sue the German tax office? After filing your tax return in Germany, you will receive your tax assessment from the tax office, telling you how much tax you can get back, or how much you have to pay.

The fact is that the tax office is not always right. If you do not agree with the tax assessment, you should file an objection. I did this a few times now and got back thousands of Euros. 

There were different reasons why I filed an objection. Sometimes, it was just a human error (the German tax office is also run by humans). Sometimes, I just did not agree on why I couldn’t claim certain expenses.

But if the tax office did not agree with my argument and if I was confident that these expenses should be deductible, I could have sued the tax office. That is why it is important to have a legal insurance policy in Germany. Your insurance may pay for the legal cost. Find out more here: Legal Insurance Germany – Expat Guide (+ 3 Best Offers)

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Disclaimer

Please be aware that this article is intended to provide you with a brief overview of how to deduct maintenance payments in your German tax return. The information and tips in this article are based on personal experiences and thorough research.

This blog is not qualified to give you any tax advice according to German law and we do not accept any form of liability resulting from reading this article. Our blog makes no guarantee as to the accuracy or timeliness of the information in this article. If you need more details and specific advice on your personal situation, we would highly recommend you to consult a tax adviser or the German tax office.

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Have you successfully deducted maintenance payments in your German tax return? Leave a comment below and share your experience or any tips you have on this topic!