Figuring out your "Monatlicher Freibetrag"

Hi All,

I've recently been offered an IT job in the Münster area with starting salary of €55K. It's a fair bit less than what I currently get paid in Ireland, but I'm trying to weigh up cost of living, quality of life and a bunch of other stuff (my wife is German and has been trying to get me to try living there for years!) while negotiating a bit.

Anyhoo, I've been trying to use the calculator on this page to work out what kind of take home pay I'd be expecting, and so far it's pretty grim compared to Ireland (even using the same salary figures), but I'm missing some key information that I hope someone might be able to advise me on. While I can fill out pretty much everything, I have no idea what the Monatlicher Freibetrag should be. I've been told I'd have to talk to a tax advisor, but as I don't know any I was wondering if anyone could give me an idea of what typical values would go in here just for general guidance. I don't know what factors deterine this number, so if I need to supply more information let me know (I'm sure someone will let me know!).

Hopefully this isn't too stupid a question! (I'll leave the stupid ones about whether the offered salary is reasonable and the cost of living etc. for another thread )

Many thanks,

Z

As far as I know:
As an employee the tax gets deducted every month directly from your salary. At the end of the year you would do your tax return and declare all kinds of income-related expenses that diminish your income and therefor the tax you are liable to pay. As you did already pay your taxes (without including your expenses), you would normally get some money back.

Instead you could ask the "Finanzamt" to already include this expenses on a monthly basis in their calculation (and therefor deduct less tax from your monthly salary). There is a six page form to fill out of course. And you have to provide proof. The calculated "monatliche Freibetrag" will then be inluded in your "Lohnsteuerkarte".

In your case your "monatlicher Freibetrag" is nothing until you decide it´s necessary and find a tax advisor to fill out this form for you.
It only makes sense if:
- you have job-related expenses much higher than 920€ per year (for example a very long way to work every day)
- you have other negative income (renting out an appartement?)

Many thanks for that Freising. I thought it was a kind of monthly tax credit or something, but now it makes sense. My wife had told me about the yearly submission of receipts, but as she hasn't worked in Germany for about 15 years, she wasn't even sure what the Monatlicher Freibetrag was! I'll have to look into what kind of things are deductable so. But essentially, the take-home salary is as grim as I thought!

Now I have to figure out whether the cost of living and apparently better quality of life is worth a pay cut of over 10K

Another reason for the freibetrag is if you have some sort of finantial loss (e.g. capital loss on some sort of investment) in the year that you want to use to offset against your taxes.

The value of the "loss" is divided by the remaining months in the year, and given as a Monatlicher Freibetrag. If the loss is equal to, or more than your outstanding taxes, you'll end up with no tax to pay on subsequent month's earnings. Indeed, if the loss is still higher, and you already paid taxes earlier in the year before you got the freibetrag, you get a tax rebate once you submitted your tax return.

Certain investments used to be designed in such away as to make a loss (in the first year at least) which allowed you to offset much of the investment "loss" as a tax rebate. They finally changed the law a couple of years ago to stop such schemes, so don't get excited about this idea!

Looks like I'll have to wait till I move over (if I decide to that is!) to figure out the details, but that's good information to have in the back of my head. Thanks.

On an aside, this concept of a thirteenth month applies in the job offer, but I was wondering if this is normally included in the yearly salary figure, or would it be something "on top" like a bonus?