Save all receipts for:

• travel and other expenses if you are searching for a job in Germany before moving
• plane tickets and other travel related expenses once you leave for your new home
• car rental expenses once you arrive and are getting settled
• moving expenses including movers, packing supplies

Assuming you are not being reimbursed by your employer for them, it’s likely you will be able to deduct at least some of them on your taxes.

Can you deduct the expenditures from your first trip to IKEA? Nope, but don’t worry we asked a professional on that one.

Do you have any suggestions for receipts to save in order to maximize deductions?  Please leave them in the comments!

• Tax preparation costs are federally legislated, not set by the individual preparers.  The amount is based on your income level. Guess there is no incentive for them to innovate.
• Expenditures for local craftsman/workman services, for example having your apartment painted, are tax-deductible if you have a receipt.  You get a tax deduction and the government keeps track of service provider income. No wonder you can often get a discount if you pay cash – and forgo the receipt!

To start with…

Einkommen ( income) + Steuer (tax) + erklärung (explanation) =

Einkommensteuererklärung (income tax return)

… if only they were all that easy! The following are some words, phrases and explanations are for the Anlage N document which are useful for expats.

Anlage N – Einkünfte aus nichtselbständiger Arbeit (Income from employment)

Jeder Ehegatte mit Einkünften aus nichtselbständiger Arbeit hat eine eigene Anlage N abzugeben - Each spouse with earned income (not from self-employment) must turn in Form N

• Bruttoarbeitslohn – gross pay
• Lohnsteuer – wage tax, the rate depends on which bracket (Lohnsteuerklasse) you are in
• Solidaritätszuschlag – literally ’solidarity supplement’, enacted  in 1991 originally to pay for costs from reunification and Gulf War I but is now used to pay for support for southern and eastern European countries.  Historically 5.5-7.5% but now seems to be about ~1% looking at a recent paystub.
• Kirchensteuer – church tax (see our earlier post on Getting the Anmeldebestätigung
• Steuerfeier Arbeitslohn nach Doppelbesteuerungsabkommen / zwischenstaatlichen Übereinkommen – tax-free wages based on double-taxation agreements (you have to declare any income you made prior to moving to Germany within the year, but you are not taxed on it

If these few words are making your head spin (as they do mine), it’s time to call an accountant.   What tax related words would you add to this list?

IBAN and BIC codes for the Lörrach Finanzamt

Disclaimer: We’re not tax accountants or lawyers over here at Tapxe just two expats trying to work and live abroad. What I offer below is just our experience and understanding of our tax situation.  This article is not a how to guide on how to avoid paying taxes, but rather is meant to help you make sure you ask the right questions and have a place to start from when you are dealing with this issue yourself.

Our situation is as follows: both of us live in Germany.  I quit my job in the States several months before moving to Germany and have been working in Basel, Switzerland starting in December.  My wife works for the German subsidiary of her small (< 20 employees) company in the States. Unlike expats coming over through large multinational companies well versed in expat transfers and tax issues we’re pretty much figuring it out ourselves.

Financially what are we preparing for? Paying taxes everywhere. But there’s good news – the US offers foreign tax credits (consult your tax advisor) and Germany and Switzerland have treaties to avoid double taxation.   For the purpose of this discussion I’m just going to focus on Germany and Switzerland. Ask me about the US in April 2009!

To be continued…