It arouses feelings like a root canal at the dentist. But it’s not as bad as its reputation. And it’s worth it for you. If you know how, your tax return will be easy and you can save a lot of money. Until then, it is important to feed your tax return with the right data in the right places. Interesting for your investments at Wattify: What is the best way to pay tax on income from capital gains?
We provide you with the answer. We also shed light on the bureaucratic darkness of tax returns and give you a tip or two on how to master them cleanly and profitably.
Please note: Our blog offers information and suggestions on the topic of taxes without guarantee. It is not tax advice and cannot replace a tax advisor.
The what-how-where of tax returns
If you are self-employed, run a business or your own farm, you are required by the state to file a tax return. If you work as an employee, income tax is automatically deducted from your salary as wage tax. If you have no other significant income, you would not have to file a tax return. Nevertheless, millions of workers voluntarily choose to do so. Why?The state uses a so-called “lump sum” to determine the amount of tax to be withheld. This is a fixed sum that the tax office offsets against your income. For your income, this is the “employee lump sum” of €1200 (retroactive from 1 January 2022). It simulates the costs, “income-related expenses”, that you might have had in connection with your profession and that reduce your taxable income. Your tax rate depends on the amount of your income, your living situation and so-called “allowances” (more on this later).
If your actual income-related expenses are higher than the flat-rate amount, you have paid too much tax. You can get a refund of this difference. To do this, you voluntarily write a tax return in which you list your expenses and income. The format for the information follows a standard. You can find the forms online, for example, and can fill them out and send them directly digitally in the ELSTER portal provided by the tax office. This saves paper and speeds up the process. The completed documents are sent to the competent tax authority, in the case of income tax the one for your district of residence. If you are obliged to file a tax return, the deadline is 31.07. of the following year (sometimes deviated by Corona). If you file your tax return voluntarily, you have four calendar years. This means you can get back money from years long gone.
But what do you have to pay attention to when filling out your tax return? Here are a few tips and tricks.
Tips for saving tax
1. check tax allowancesTax-free allowances are sums on which you do not have to pay tax. It is worth knowing where your income lies within these limits so that you can claim it on your tax return. For example, the basic tax-free amount for an annual income is €10,347 (as of 2022). Which allowances count for you depends on your living situation and the source of your income. There is a child allowance for parents, an education allowance for apprentices and students, an old-age allowance for senior citizens and much more.
2. calculate income-related expenses
Did you buy a laptop for work? Did you pay for a training course? Did you perhaps even move for your new job? All of these things fall under the category of work-related expenses and can be claimed for tax purposes. Especially the commuting allowance for your way to work pays off. Keep receipts, invoices, etc. as proof. You do not have to include them in your tax return, but the tax office can claim them up to one year later.
3. claim loss carry-forward (especially for students)
If you have made losses instead of income over many years, for example as a student during your studies, you can save a lot of tax by carrying forward losses. To do this, you summarise your income-related expenses for this period — semester fees, work equipment, travel expenses, semester abroad, etc. (keep receipts!). (Keep receipts!). You can then offset the accumulated losses against your first income in your tax return. Please note: The loss carry-forward for income-related expenses only applies to the second degree. However, this includes the Master’s programme.
4. use tax software
If Annex N and AV sound like passport A38, tax software could help you. These are computer programmes that guide you step by step through your tax return. Complicated tax cases are shown here in simplified form. The software takes your tax-relevant data and puts it into the official format in the right places for you. You even get a calculation in advance of how much your refund could be. Tax software of this kind costs about 30 euros a year, which you can deduct from your taxes.
Make the most of your Wattify return
You pay capital gains tax on the profits from your Wattify investments. Wattify automatically deducts this withholding tax of 25% for you. You can also save tax here with the help of a tax-free amount, the saver’s allowance. This is € 801, which you can claim annually in your tax return via the KAP investment income annex. It’s even easier with an exemption order. You can set this up at Wattify. This way, you directly save taxes within your exemption amount. By the way, you can divide exemption orders between several securities accounts and financial service providers. For example, you could exempt € 501 for Wattify, € 200 for shares and another € 100 for ETFs.
Another possibility to exempt yourself from taxes via the saver’s lump sum is a non-assessment certificate (NV = Nichtveranlagung) instead of an exemption order. You receive this certificate if your income, including income from capital gains, is below the basic tax-free amount. It is therefore interesting for low-income earners such as trainees and students.
A third form of assistance is the favourable taxation test. It checks whether your income tax rate is below the 25% capital gains tax and adjusts your capital gains tax rate to your income tax rate. You can also find the favourable tax treatment test in the KAP annex of your tax return.
With us, you are always informed about your earnings. With the help of the crypto register guide (ecrop), you receive documentation of your investments and interest upon registration, transfer and annually.
Invest sustainably and master your taxes — now with Wattify