If you fall ill or are no longer able to work for other reasons, you will most likely be dependent on wage replacement benefits (Einkommensersatzleistungen). Here we explain what this means and how you can declare these benefits in the Taxfix app.
Content:
- What are wage replacement benefits?
- What is not included?
- How do wage replacement benefits affect tax? Do I have to file a tax return?
- How do I declare wage replacement benefits in the Taxfix app?
What are wage replacement benefits?
As the name suggests, these benefits are intended to replace income. In most cases, this is not done in full and must be applied for in advance.
Common wage replacement benefits include:
- Unemployment benefit I (Arbeitslosengeld I)
- Short-time work benefits (Kurzarbeitergeld)
- Insolvency benefit (Replaces outstanding wages if the employer is insolvent. Taxed similarly to Unemployment Benefit I or Parental Allowance and subject to the progression clause, which can increase your tax burden.)
- Sickness benefit (Krankengeld)
- Parental allowance (Elterngeld)
- Maternity benefit (incl. supplement) (Mutterschaftsgeld)
- Transitional allowance (Übergangsgeld)
- Supplement to wages
- Integration allowance (Eingliederungshilfe)
- Injury benefit (Verletztengeld)
- Compensation for loss of earnings under the Infection Protection Act
What is not included?
The following benefits do not belong to wage replacement benefits and are therefore treated differently for tax purposes:
- Unemployment benefit II (Hartz IV) (Arbeitslosengeld II) / Bürgergeld
- Housing benefit (Wohngeld)
- Child benefit (Kindergeld)
- Social assistance
- Strike benefits
- Daily sickness benefits from a private insurance company
How do wage replacement benefits affect tax? Do I have to file a tax return?
Wage replacement benefits are tax-free, i.e. no income tax is payable on them. However, they are subject to the progression clause (Progressionsvorbehalt). This increases the tax rate on your taxable income. In other words, the tax office regards wage replacement benefits as an increase in your financial strength and applies a higher tax rate to the rest of your taxable income.
Since wage replacement benefits are subject to the progression clause, you are obliged to file a tax return if your total annual income from wage replacement benefits exceeds 410 euros.
If you are obliged to file a tax return, there is a general deadline of 31 July of the following year.
How do I declare wage replacement benefits in the Taxfix app?
Most wage replacement benefits are entered in the “Income” category. Select the relevant benefit here and enter the amounts received in the tax year.
You will receive a certificate from the paying office or institution stating the amount of benefits received. If you have received sickness benefit, for example, your health insurance will usually issue you with a certificate showing the total amount of sickness benefit. If you can no longer find the certificate, you can contact the responsible office directly.
Sometimes it can happen that wage replacement benefits have to be paid back. The repayment can also be entered in the Taxfix app in the category "Income".
Some wage replacement benefits, such as short-time work benefits, are paid directly by the employer. In this case, the amount of the benefit received is shown on your annual payslip in line 15. In the Taxfix app, you simply enter these amounts via your annual payslip in the "Income" category.