If you've been terminated by your employer, you may receive severance pay as compensation. However, it is fully taxable. Here's how the taxation works and where to enter the severance payment in the Taxfix app.
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Severance pay is subject to tax but not social security contributions.
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There is no legal entitlement to severance pay – it must be negotiated.
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The "one-fifth rule" can help reduce your tax burden.
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Enter your severance pay in the "Job" category using your annual payslip.
🚀 Your Guide
What is Severance Pay?
Severance pay is a one-time special payment from your employer. It is usually agreed upon as part of a termination or settlement agreement and is intended to compensate you for job loss and future income loss.
Important: Severance pay is not a retroactive payment of salary, a company car, or bonuses. There is no legal entitlement to severance pay – it must be negotiated individually. As a general rule of thumb: Half a month's salary per year of service.
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Do I Have to Pay Tax on It?
Yes. Severance pay is fully subject to income tax – just like regular wages. It is usually taxed directly by your employer and is subject to wage tax, but not to social security contributions (no payments for pension, health, care, or unemployment insurance).
⚠️ Note: Because severance payments are often large, they can significantly increase your tax rate.
What is the One-Fifth Rule?
The one-fifth rule helps reduce the tax burden by spreading the severance amount over five years for tax calculation purposes. This treats the payment as extraordinary income and can result in a lower tax rate.
In many cases, the employer already applies the one-fifth rule. If not, the tax office will automatically check your return and apply it if the conditions are met.
How Do I Declare Severance Pay in the Taxfix App?
You can find your severance pay on your annual payslip:
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If the one-fifth rule was applied, the amount appears in line 10.
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If not, it is part of your gross salary (line 3).
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Additionally, the gross severance amount may be listed in line 19 as information for the tax office.
In the app, simply enter the data from your payslip in the "Job" category.
⚠️ You do not need to enter your severance separately. The tax office receives all necessary details via the annual payslip.
Special Case: Payment in the Following Year
If your severance pay was paid in the next year – for example, after starting a new job – it will appear on the payslip for the new year and fall under tax class VI.
🗓 In this case, enter both payslips (from your former and current employers). The correct tax class is automatically recognized.
Special Case: No Payslip Available for Severance
👉 You received a severance payment but did not get a payslip from your former employer? Here are your options:
👉 You can request the payslip from your former employer's HR department. These data are also automatically sent to the tax office.
👉 If the employer cannot be reached – for example, due to insolvency – you can request a copy of the reported data from your local tax office.
👉 If no document is available at all, you can still submit your tax return. Enter "0" in all fields for the payslip. This only affects the result shown in the app – not the final calculation by the tax office.
👉 If you have an alternative document (e.g. a payment confirmation), you can email it to our support team.
🚀 Fill out the simple question-answer flow - we'll take care of the rest!
Still have questions?
We're here to help! Contact our support team: support@taxfix.de