Could a married couple fill two single tax returns?

19 posts in this topic

Hello „Toytowners“,

I have been living in Germany for a couple of years now and lurking the forum for quite a while… it has always been a very good source of info but I guess now it´s time to ask a very specific question about my personal situation.

 

In the last two weeks there were some changes in my life:

1)I got married

2)My wife sold an apartment, located in Italy, which she inherited in 2014 (When she was still living in Italy).

 

Let´s focus on point n.2.

As far as I understood by reading the DTA between Germany and Italy, the income generated by selling the apartment in Italy has to be taxed only in Italy.

If I got it right, It has to be added to our income in Germany because of the “progressionvorbehalt” though. Am I right so far?

 

Now, let´s go back to point n.1 and write down some rounded figures.

-My wife has been working as a Kleinunternehmer in FY 2017 and her taxable income will be by the end of the fiscal year around 5k€ (just a rounded value to get to my point).

-By selling the apartment she got another 100k€.

-I´m an eployee here in Germany and my taxable income is around 50k€.

 

As we changed our marital status before the end of the calendar year, we should be allowed to fill a joint tax declaration for FY2017… usually this should lead to a quite “interesting” tax saving because of the difference among our salaries…

The point is: I tried to do some calculations using the “Progressionvorbehalt rechner” and came to the conclusion that this year it would be better to be taxed as individuals than as a couple.  

If we filled a joint tax declaration, 100k€ would be added to our joint income so to 50+5=55k€.

The resulting Einkommensteuer would be 16.981€

If we were individually taxed, I would pay 12.432€ on my 50k€ and my wife would pay 1689€ on her 5k€+100k€, so 14121€ in total…. Basically we would save a couple of thousands of € (Not taking in account the “Soli” additional tax)!

 

Questions: Are, in your opinion, my calculations correct?

 

Would it be possible to do what I´m saying?

If we went down this road for the taxes due in FY 2017, could we switch back to a joint tax return in FY2018?

Thanks!

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Yours is a case like this one:

So she only has to tax the profit she made, i.e. the difference between the selling price now, and the historical price her parents bought it for (she also "inherits" that price).

She has to declare the profit in Anlage SO and Anlage AUS, and attach supporting documentation with the keywords translated into German, so that the clerk at the Finanzamt can understand where that profit comes from.

 

3 hours ago, Filippomg said:

As far as I understood by reading the DTA between Germany and Italy, the income generated by selling the apartment in Italy has to be taxed only in Italy.

If I got it right, It has to be added to our income in Germany because of the “progressionvorbehalt” though. Am I right so far?

 

Yes.

 

3 hours ago, Filippomg said:

If we filled a joint tax declaration, 100k€ would be added to our joint income so to 50+5=55k€.

The resulting Einkommensteuer would be 16.981€

 

Correct, this the result for joint filing from the official Progressionvorbehalt calculator for 2017.

 

The result for filing jointly including the Soli is simply:

16,981€ * 1.055 = 17,914.96€ 

 

3 hours ago, Filippomg said:

If we were individually taxed, I would pay 12.432€ on my 50k€ and my wife would pay 1689€ on her 5k€+100k€, so 14121€ in total…. Basically we would save a couple of thousands of € (Not taking in account the “Soli” additional tax)!

 

Questions: Are, in your opinion, my calculations correct?

 

By filing separately:

  1. you would pay (incl. Soli, result of the Parmentier income tax calculator): 13,251.85€
  2. your wife would pay (result of the official Progressionvorbehalt calculator): 1,689€ * 1.055 = 1,781.90€

--> together: 15,033.75€

 

Saving by filing separately: 2,881.21€.

 

3 hours ago, Filippomg said:

Would it be possible to do what I´m saying?

If we went down this road for the taxes due in FY 2017, could we switch back to a joint tax return in FY2018?

 

Yes.

Yes, no problem, you get to each every year anew whether you want to file jointly or separately.

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Hello PandaMunich,

thanks a lot for your prompt reply!

In the meanwhile I have been wondering...

Due to the slowness of the italian bureaucracy, we are running the risk to actually close the deal not earlier than next calendar year.

The selling process is already started: a preliminary contract between my wife and the buyer has been signed, but basically some paperwork is missing and we have to wait something like 40 working days to get it.

The buyer has already paid the deposit, which is around 10% of the total amount (so around 10k€ out of the 100k€), but of course he is going to pay the remaining 90% only when everything has been sorted out and the key of the apartment is in his hands.

How should we handle this situation?

Should we declare this 10% this year and the 90% next year or just wait and declare only once the total sum next year?

Thanks

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Take care to only submit the 2017 tax return after the sale has gone through entirely, i.e. only after you have received the missing 90%, i.e. once it is sure that you don't have to return those 10% advance payment.

 

You then declare the profit exactly as it happened:

  • in your 2017 tax return: the profit generated by that 10% advance payment, i.e. 10% of the total sale profit
  • in your 2018 tax return (if that 90% payment only happens in 2018): the profit generated by that 90% advance payment, i.e. 90% of the total sale profit
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On 30/10/2017, 20:36:46, PandaMunich said:

Take care to only submit the 2017 tax return after the sale has gone through entirely, i.e. only after you have received the missing 90%, i.e. once it is sure that you don't have to return those 10% advance payment.

 

You then declare the profit exactly as it happened:

  • in your 2017 tax return: the profit generated by that 10% advance payment, i.e. 10% of the total sale profit
  • in your 2018 tax return (if that 90% payment only happens in 2018): the profit generated by that 90% advance payment, i.e. 90% of the total sale profit

Hello PandaMunich,

I forgot to say: thanks for the precious advice!

Cheers,

Filippo

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Hello,

looks like things are moving on as expected... so in the anlage AUS of the Tax assessment my wife will eventually have to declare the profit she made by selling this apartment (As all the documentation is in Italian, I fear I will have quite a lot of fun with the Finanzamt)

 

Now I´ve been wondering (or perhaps simply overthinking... but you never know...):

as my wife has been working as a low earner freelancer language teacher, she has being paying the (Not cheap) contributions to the Krankenkasse on her own (she has her own KV number). This year her business is going to dramatically shrink, so I´m trying to have her included in my Familienversicherung. 

 

The question is: Will the profit made by selling the apartment be considered as "Einkünfte" by the Krankenkasse? That being the case, should she pay the 14% and stuff over that money for "contribution" to the KV?

What do you think? Am I just going "paranoid"? Thanks

 

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You're not paranoid.

 

yes, sorry, it looks like it, since "Veräußerungsgewinne aus privaten Veräußerungsgeschäften (z.B. bei Grundstücken, Wertpapieren und Rechten)" (though they seem to have slept through the fact that since 2009, profit from selling Wertpapiere (shares, funds, bonds) is no longer in the category "private sales", but "capital income", but one way or another, still an income they charge a contribution on) is listed as "beitragspflichtig" in the table that lists all forms of income that the public health insurance charges its contributions on, see the document:

at the bottom of this text: https://www.gkv-spitzenverband.de/krankenversicherung/kv_grundprinzipien/finanzierung/beitragsbemessung/beitragsbemessung.jsp

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Hello PandaMunich,

thanks for the links!

By the way this looks really like MADNESS! I´m sure there must be a way out of it... If they calculated it this way, the contribution would be of several thousands of €!!!! 

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@Filippomg

 

You know what, this is starting to get very expensive for you, so I'm starting to think it is time that you try something:

As you know, according to §23 Absatz 1 Nr. 1 EStG, if you sell a German flat/house that was inherited from somebody who had bought it more than 10 years ago (you also "inherit" the date of purchase) is sold, the profit is free of income tax, i.e. it does not appear at all in your tax calculation (= Bescheid für Einkommensteuer) that your wife has to submit every year to her public health insurer, as proof of her income.

 

A normal clerk at the Finanzamt will know about this 10 year rule, and may simply sign off that your profit from your wife's Italian flat should also be free of income tax, i.e. may just apply the standard rule, and not bother researching this.

 

So try this algorithm and you might slip through the cracks:

  1. do a joint income tax return together with your wife (= mark "Zusammenveranlagung" in the Mantelbogen ESt1A, line 24)
     
  2. declare in Anlage SO (2018 version of Anlage SO not yet available):
    - line 31: Gewinn aus Verkauf geerbter Wohnung in Italien, Kaufdatum vor über 10 Jahren
    - line 32: "Zeitpunkt der Anschaffung": date her parents bought the flat  / "Zeitpunkt der Veräußerung": date your wife sold the flat
    - line 33: if the flat wasn't rented out, mark "zu eigenen Wohnzwecken" / period ("from"-date, "to"-date) it was used by her family for living in it, even if she only visited it on holidays / area of flat used for own living purposes
    or: line 33: if the flat was rented out: mark "zu anderen Zwecken" / period it was rented out / area of flat that was rented out
    line 34: selling price
    line 35: purchase price, in her case what her parents had paid for that flat
    line 37: costs incurred because of the sale, i.e.: cost of her having to travel to Italy to sell it + cost of notary + cost of real estate agent + ...
    line 38: resulting profit from the sale
    line 39: also fill that resulting profit amount into the column "Ehefrau"

    Attach paper copies of the sales contract (pencil in "Verkaufsdatum" next to the date of sale, and "Verkaufspreis" next to the selling price), the old purchase contract when her parents had bought the flat (mark the purchase date on the copy of the purchase contract, and pencil in "Kaufdatum" in German. Pencil in "Verkaufspreis" next to the purchase price), and of all the costs incurred because of the sale.
     
  3. wait for the Bescheid, and see whether the Finanzamt completely ignored that profit from the sale of the Italian flat.
    - If yes, i.e. if they did not use it as progression income, you are in luck and now have a "clean" Bescheid to forward to your wife's Krankenkasse.
    - If no, i.e. if they did use it as progression income, immediately (it has to reach them within a month of the date written on the Bescheid!) do an Einspruch with which you ask them to change the taxation to "filing separately", i.e. send the Finanzamt the following letter, which both of you have to sign:

    *******************************

    Betrifft: Einspruch gegen Einkommensteuer-Bescheid. Antrag auf Einzelveranlagung

    Sehr geehrte Damen und Herren,

    hiermit erheben wir Einspruch gegen den obigen Einkommensteuer-Bescheid.

    Wir hatten aus Versehen "Zusammenveranlagung" angekreuzt, wollten aber "Einzelveranlagung".
    Aus diesem Grunde bitten wir sie, den alten Bescheid aufzuheben und den Bescheid erneut zu erlassen, aber diesmal mit "Einzelveranlagung".

    Mit freundlichen Grüßen
    your signature
    (Giuseppe Verdi)

    your wife's signature
    (Giuseppina Verdi)
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Dear PandaMunich,

thanks, you´re always too kind :rolleyes:!

 

What I do not understand is: if the Finanzamt considered the additional profit as progression income, filling a split tax assessment would help us to save some money in terms of taxes...  it would have no impact on the calculation of the KV contribution though! Or I missed your point?

 

Honestly if she had to pay 14% for the KV + "Einkommensteuer" over the profit she made, perhaps it would make more sense for her to deregister from Germany and go back to Italy :angry:

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What I don't undesrtand is, if she inherited from her parents wouldn't she have a high Freibetrag?

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2 minutes ago, Filippomg said:

What I do not understand is: if the Finanzamt considered the additional profit as progression income, filling a split tax assessment would help us to save some money in terms of taxes...  it would have no impact on the calculation of the KV contribution though! Or I missed your point?

 

Yes, but at least you would minimise the income tax.

 

2 minutes ago, Filippomg said:

Honestly if she had to pay 14% for the KV + "Einkommensteuer" over the profit she made, perhaps it would make more sense for her to deregister from Germany and go back to Italy :angry:

 

It isn't actually 14%, it's 18.x%, but capped at 18.x% of the yearly Beitragsbemessungsgrenze of 53,100€ (in 2018) , i.e. it would be capped at around 10,000€.

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17 minutes ago, arunadasi said:

What I don't understand is, if she inherited from her parents wouldn't she have a high Freibetrag?

 

Regarding German inheritance tax, yes. 

Which is anyway moot, since she inherited the flat in a year when she was still resident only in Italy, i.e. she's not subject to German inheritance tax.

 

This is about the German income tax on the profit she made selling the Italian flat while being resident in Germany, and there the double taxation agreement (DTA) between Germany and Italy allocates in article 13 (1) the taxation right on that income to the state the flat is located in, i.e. to Italy:

5a7060153472f_2018-01-3013_07_34-Start.p

 

But it allows for the lesser evil of Progressionsvorbehalt in article 24 (3) a) of the DTA:

5a705eb6be0fb_2018-01-3013_01_33-Start.p

 

So their case is like this case:

and:

 

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On 30/1/2018, 11:47:57, PandaMunich said:

You're not paranoid.

 

yes, sorry, it looks like it, since "Veräußerungsgewinne aus privaten Veräußerungsgeschäften (z.B. bei Grundstücken, Wertpapieren und Rechten)" (though they seem to have slept through the fact that since 2009, profit from selling Wertpapiere (shares, funds, bonds) is no longer in the category "private sales", but "capital income", but one way or another, still an income they charge a contribution on) is listed as "beitragspflichtig" in the table that lists all forms of income that the public health insurance charges its contributions on, see the document:

at the bottom of this text: https://www.gkv-spitzenverband.de/krankenversicherung/kv_grundprinzipien/finanzierung/beitragsbemessung/beitragsbemessung.jsp

Dear PandaMunic,

is it possible that this document applies to the "Freiwillig Mitglied" only? I mean: if my wife will be included in my insurance as a family memeber, in principle the Krankenkasse should look only at the regular income.... and seling an apartment is not really "regular"!

Not to take in account that the "profit" should be tax free because of the DTA (Actually this is a weak point, because of the preogression... but still!)

I can´t really believe it yet... no tax to be paid neither in Italy nor in Germany,  but around 10k€ contribution to the KV... madness!!!!

 

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19 minutes ago, Filippomg said:

is it possible that this document applies to the "Freiwillig Mitglied" only? I mean: if my wife will be included in my insurance as a family memeber, in principle the Krankenkasse should look only at the regular income... and seling an apartment is not really "regular"!

 

Yes, that might work (but ask your public health insurance first, to be sure!), since it says "regelmäßig" (= regularly) in §10 (1) Nr. 5 SGB V, i.e. that her monthly income would have to regularly exceed 435€ a month (= 1/7 * Bezugsgröße = 1/7 * 3,045€):

 

(1) Versichert sind der Ehegatte, der Lebenspartner und die Kinder von Mitgliedern sowie die Kinder von familienversicherten Kindern, wenn diese Familienangehörigen

1.
ihren Wohnsitz oder gewöhnlichen Aufenthalt im Inland haben,
2.
nicht nach § 5 Abs. 1 Nr. 1, 2, 2a, 3 bis 8, 11 bis 12 oder nicht freiwillig versichert sind,
3.
nicht versicherungsfrei oder nicht von der Versicherungspflicht befreit sind; dabei bleibt die Versicherungsfreiheit nach § 7 außer Betracht,
4.
nicht hauptberuflich selbständig erwerbstätig sind und
5.
kein Gesamteinkommen haben, das regelmäßig im Monat ein Siebtel der monatlichen Bezugsgröße nach § 18 des Vierten Buches überschreitet; bei Renten wird der Zahlbetrag ohne den auf Entgeltpunkte für Kindererziehungszeiten entfallenden Teil berücksichtigt; für geringfügig Beschäftigte nach § 8 Abs. 1 Nr. 1, § 8a des Vierten Buches beträgt das zulässige Gesamteinkommen 450 Euro.

 

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On 31/1/2018, 19:44:55, PandaMunich said:
 
On 31/1/2018, 19:44:55, PandaMunich said:

 

Yes, that might work (but ask your public health insurance first, to be sure!), since it says "regelmäßig" (= regularly) in §10 (1) Nr. 5 SGB V, i.e. that her monthly income would have to regularly exceed 435€ a month (= 1/7 * Bezugsgröße = 1/7 * 3,045€):

 

(1) Versichert sind der Ehegatte, der Lebenspartner und die Kinder von Mitgliedern sowie die Kinder von familienversicherten Kindern, wenn diese Familienangehörigen

1.
ihren Wohnsitz oder gewöhnlichen Aufenthalt im Inland haben,
2.
nicht nach § 5 Abs. 1 Nr. 1, 2, 2a, 3 bis 8, 11 bis 12 oder nicht freiwillig versichert sind,
3.
nicht versicherungsfrei oder nicht von der Versicherungspflicht befreit sind; dabei bleibt die Versicherungsfreiheit nach § 7 außer Betracht,
4.
nicht hauptberuflich selbständig erwerbstätig sind und
5.
kein Gesamteinkommen haben, das regelmäßig im Monat ein Siebtel der monatlichen Bezugsgröße nach § 18 des Vierten Buches überschreitet; bei Renten wird der Zahlbetrag ohne den auf Entgeltpunkte für Kindererziehungszeiten entfallenden Teil berücksichtigt; für geringfügig Beschäftigte nach § 8 Abs. 1 Nr. 1, § 8a des Vierten Buches beträgt das zulässige Gesamteinkommen 450 Euro.

 

 

Hello,

I discussed this topic (in written form..) with the customer service of the Krankenkasse.

Looks like they had to think about it for good, but eventually the answer was that, as it is only "generated once", the additional income due to the sale of the apartment is not taken into account for the calculation of the health insurance rr

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Hello,

eventually the time to fill the Tax Declaration in is arrived...

As usual I´m using the Elster "offline" Software.

As recommended, I selected the Anlage SO and filled the "Private Veräußerungsgeschäfte" section in with the information about the sale of the italian apartment... I tried to run a calculation of the tax burden and got surprised by the results: the software is simply adding the profit from the sale to our (my and my wife´s) income and calculating the taxes accordingly... shoiudn´t this kind of  "Gewinn" be tax free/ignored (assuming we were actually talking about a german real estate)? By the way, the apartment was bought in April 2008 and sold in November 2018...so more than 10 years later (Anyway I tried with different dates and the result does not change).

Should I trust the Elster calculation?

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The ElsterFormular software doesn't know about the 10 year rule.

 

Good news, I have some new information:

There is a last step the Finanzamt performs in the case of international cases. In the last step, they go back to the German income tax code (EStG), and if an income that would fall under Progressionsvorbehalt because of a double taxation agreement would not cause tax if it was German income, they don't apply the Progressionsvorbehalt.

 

So you're in the clear, the profit from the sale does not cause any tax, not even through Progressionsvorbehalt, since the flat was bought more than 10 years before the sale.

 

So it's your choice:

  • don't fill in Anlage SO at all, or
  • fill it in, but also fill in on the Mantelbogen ESt1A in line 98 that you have additional details to tell them, i.e. that you will send them by snail mail the copies of the proof that more than 10 years gave elapsed. Marking line 98 will mean that your tax return will be processed by an actual person who will "know" about the 10-year-rule and not automatically by a computer, which may not have been programmed with this rule.

When the Bescheid comes, check that this profit didn't raise your tax!

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