At what salary is a salary increase no longer worth it due to tax progression?
A salary increase is always worth it despite tax progression. Even if the maximum tax rate of 42 percent is reached, starting from a tax base of 66,761 euros gross in 2024. Because even if the magic threshold of 42% is exceeded, 42% is not paid for everything at once.
Even with a taxable income of 66,761 euros, only 26 percent income tax is paid in total. The reason is that the lowest tax rate is still maintained in the first levels of progression and only 42 percent of this amount is paid. So you can relax and wait for the salary increase.
Fabián Walter, born in 1989, is a tax expert. After successfully completing his master's degree in business taxation, he initially worked in a tax office and later in the field of continuing training for tax advisors. Since 2020, he provides German taxpayers with valuable tax knowledge on social media as “tax fabi”. More than a million people follow the author of the best-selling SPIEGEL on social media when he talks about taxes. Walter regularly exchanges information publicly with Federal Finance Minister Christian Lindner and advocates for better financial education. He also spoke about it as a guest speaker at the European Parliament in Brussels. Fabian Walter lives and works in Freiburg.
What tax-free salary bonuses can employees claim and how do they affect their net income?
Tax-free and tax-free salary extras reach the employee gross = net. Here some examples:
- 50 euros per month in kind
- 60 euro gifts for special personal occasions.
- Gifts at company events
- Donations with flat-rate taxation
- Company pension plan
- Vacation recreation subsidy.
- Employee participation
- Food coupons
- Bicycle and electric bicycle
- Company car/garage space
- Travel/work ticket subsidies
- Health promotions like certified back training.
- Child care for non-school-age children
- Money for short-term care of children under 14/family members in need of care
- 600 euros for support in emergency situations
- Staff discounts of up to 1,080 euros per year
- PC, laptop, smartphone and tablet
- Reimbursement of telephone and internet expenses.
- Financial help when moving
- Discounted apartment rental
- Additional food expenses when traveling/at vocational school
- Surcharges on Sundays, holidays and nights
What is meant by benefits in kind and how are they treated for tax purposes?
The employer can provide the employee with 50 euros in non-monetary benefits as additional salary, tax-free. Benefits in kind may not be cash benefits. Benefits in kind are, for example, fuel vouchers that do not have a cash payment option.
In practice, employers often offer reloadable debit cards that can be used to purchase goods, e.g. B. in the supermarket, where there is also no cash payment option.
In addition to the salaries already owed, the employer can even offer benefits in kind of up to 10,000 euros. This is tax-free for the employee, but the employer has to tax the amount at a flat rate of 30 percent. In addition, there is a solidarity surcharge and a flat-rate church tax, resulting in a total burden of 33.75 percent.
If the entrepreneur pays taxes, subsidies of up to 10,000 euros per year and per recipient can be granted. For employees whose annual salary does not exceed the contribution assessment limit, in addition to the flat-rate income tax, social security contributions must also be paid for donations.
What tax advantages are there for childcare, mobility and emergency situations?
Employer subsidies for non-school-aged children for daycare are exempt from taxes and social security if paid to the employee in addition to his or her salary.
The employer can reimburse at most the actual costs of the kindergarten. This also applies to company nurseries, school nurseries, nurseries, nurseries, childcare and maternity leavers, as well as full-time care places.
The employer must keep the original receipt along with other payroll documents. As an employee, you must provide these documents to the employer, for example the daycare bill.
If an employee is financially burdened by an emergency situation, the employer can help with tax-free assistance.
Emergency situations include the loss of property due to force majeure (flood, fire, etc.) or the illness or death of a family member. The tax exemption applies equally to donations in cash and in kind. These employee support benefits are tax-free up to a maximum of 600 euros per calendar year. Work bonuses, such as the Deutschlandticket, or employer-provided bicycles are also tax-free.
How can I convince my employer to offer tax-free salary supplements and what arguments are especially compelling in this case?
For salary extras to be tax-free, almost all of them must be paid in addition to salary.
First of all, you have to know that regular salary increases are completely normal to at least compensate for inflation. If inflation is four percent annually, you will need at least four percent more salary each year to maintain your level. If your salary is less than four percent higher, you can afford less than the previous year.
In my opinion, arguing with inflation is not so smart from a tactical point of view, because inflation also affects the employer. He also has to pay more for the purchase of goods and services.
In my opinion, it would be better to argue that these tax-free salary extras are also exempt from social security.
For example, if the employer has to pay the employee 50 euros more per month, he will also have to pay the employer's social security contributions, which do not apply, for example, to a tax-free benefit in kind of 50 euros. Here its cost is only 50 euros.
Additionally, it would cost the employer much more if the current employee quit because they rejected the salary increase and would therefore have to hire a new employee. This would require retraining and that usually costs much more than a salary increase.
You can also rationally explain to the employer why you need to earn more.
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