The draft of the new annual tax law has some pitfalls. The adjusting screws of the new tax rules are being tightened in some places. However, there are also reliefs for taxpayers. What they are and where expensive changes are hiding between the lines.

On Friday, the Bundestag discussed a number of planned tax cuts. The changes contained in the Annual Tax Act 2022 affect both individuals and companies. The collective law, which is intended to bring more structure to the tax jungle, has existed since 1995. It is intended to bundle all tax measures of a year. A look at the current draft from October 10 reveals how well that could work this year. Adjustments to the Income Tax Act, Value Added Tax Act and other tax laws can be found on 165 pages.

Among other things, changes to the home office flat rate in a positive sense and to the tax rules for the home office in a negative sense are planned. Innovations are also planned for the operation of photovoltaic systems. It could also be particularly expensive for many with a view to inheritance and gift tax on real estate, criticize experts.

Overall, the Federal Government plans to relieve taxpayers by 3.16 billion euros in 2023 by increasing the lump sums and tax exemptions. By 2026, there should be around 6.9 billion euros in relief. FOCUS online shows which changes are coming with the Annual Tax Act 2022, where tax increases are hiding between the lines and what experts are criticizing. The main measures at a glance:

The eleven-digit number of citizens registered in Germany is used for tax purposes and was introduced, among other things, to simplify taxation procedures and reduce bureaucracy. With the new law, the tax identification number could have an additional function.

What changes? The tax identification number retains all its functions and is also to be used in the future to set up a direct payment method. This means that public services such as climate money or emergency aid should be able to be paid out directly. For this purpose, an IBAN with a narrow earmarking is to be stored in the identification number database.

The draft law provides for the account numbers of all citizens to be stored at the Federal Central Tax Office in order to be linked there with the tax identification number. So in order to bring together the account number, tax ID and the registration address, the draft envisages that the process takes place via the banks. “Adult natural persons” should therefore be able to go to their bank in the future and instruct them to report the account to which state benefits are to flow to the Federal Central Tax Office. The “appropriate procedure” for this should be provided by the banks, it is said.

What do experts say? The probability of this procedure being implemented is rather low. Data protection officers and also account-managing banks are likely to resist the federal government’s plans to collect the necessary data. “The German banking industry speaks out against the planned obligation of German banks and savings banks to such a reporting procedure,” the central organization of the banks told the “world”.

The basic pension has been available since 2021. This means a supplement to your own pension. In order to receive the basic pension, it is a prerequisite that you have paid contributions for many years and can only look back on a small pension in the end. The basic pension notice should go to everyone who retired before 2021 by the end of 2022.

The supplement is calculated from all basic pension periods in which earnings amounted to at least 30 percent of average earnings in Germany. In 2021, this was around 1039 euros gross per month. If you have earned less, this time will not be counted.

What changes? The basic pension surcharge should remain unaffected by the tax in the future. The change is intended to ensure that the surcharge can be used in full and can contribute to securing the livelihood untouched by the tax authorities.

Expenses for old-age provision, for health and long-term care insurance are tax-privileged by the legislator. They are special editions. Many contributions paid can be deducted as so-called pension expenses. So far, the full deduction of special expenses for old-age provision was planned for 2023 at 96 percent and then for 2024 at 98 percent.

What changes? As can be seen from the draft of the annual tax law, the complete deduction of special expenses for pension expenses is to be implemented from 2023 instead of for the first time in 2025. Judgments by the Federal Fiscal Court have made this change necessary. The purpose of the adjustment is to avoid “double taxation” of pensions from the basic provision.

The FOCUS Online Guide answers all important questions about pensions on 135 pages. Plus 65 pages of forms.

With the deduction for wear and tear, or AfA for short, real estate investors can benefit from tax breaks in addition to rental income. Previously, straight-line depreciation generally applied to new buildings. The depreciation rate was two percent per year. A home builder can therefore deduct two percent of the production costs from tax for 50 years. The depreciation of real estate is to be improved with the new omnibus law.

What changes? For residential buildings completed after December 31, 2023, the straight-line AFA rate for depreciation will increase to three percent if the law passes the Bundestag and Bundesrat. This means that in future all buildings would generally be depreciated over a period of 33 years.

In many succession planning, real estate is relevant. To do this, real estate must be valued. If you want to inherit these, you should start planning early. Because: The legal succession is often unfavorable for the descendants, especially in the case of larger assets that are difficult to divide. If the exempt amount is exceeded, high inheritance and gift taxes are quickly incurred. Experts now fear that the new annual tax law will result in a significant increase in inheritance and gift tax for many properties.

What changes? According to experts, the new law could increase inheritance and gift taxes by 20, 30 or even 50 percent. The background: Behind the impending increase is a change in the tax assessment of condominiums and single-family homes, i.e. an “amendment to the assessment law”.

The draft states: “With the amendments to the Valuation Act that have now been made, the income and material value method for the valuation of developed land and the method for the valuation in leasehold cases and cases with buildings on third-party land are adapted to the amended Real Estate Valuation Ordinance.”

What do experts say? Properties that were valued using the income capitalization method (rental properties) and the material value method (single-family homes) would be particularly affected. Sibylle Barent, head of tax and financial policy at the Haus und Grund Germany owners’ association, explained to WirtschaftsWoche that these are “inconspicuous adjustment screws”. However, these could in turn cause the values ​​used by the tax authorities to rise sharply. “If you take all the adjustment screws together, there can easily be a 20 to 30 percent increase in taxable values.” Some properties could even double, according to the expert.

More about the tax assessment of real estate:

Roland Graf, partner of the Munich tax and legal boutique Peters Schönberger

Anything that contributes to one’s own income or profit is subject to income taxes. These include, in particular, income tax (natural persons, partnerships) and corporation tax (GmbH, stock corporation). Revenue can also be generated from the operation of photovoltaic systems. An income tax exemption is to take effect here from 2023 in order to improve the expansion of renewable energies in the building sector – with some caveats.

What changes? An income tax exemption is to be introduced for income from the operation of photovoltaic systems. The tax exemption should apply both to a single system and to multiple systems up to a maximum of 100 kilowatts (peak). This is of particular interest to private individuals. According to the draft, the exemption should also be independent of the use of the electricity generated. This means that in the future everything will be exempt from income tax, from self-consumption to the resale of generated electricity.

In addition, according to the draft, a “zero tax rate with input tax deduction for the delivery and installation of photovoltaic systems” is provided. In the future, therefore, there will be no sales tax on everything that is part of the construction of a photovoltaic system.

However, this only applies up to a gross nominal power of:

These thresholds are too low for companies with larger photovoltaic systems. Experts still see a step in the right direction on the part of the federal government with regard to the energy shortage.

What do experts say? Hans Volkert Volckens, Chairman of the Tax Committee of the Central Real Estate Committee (ZIA), said to “”: “The planned adjustments are important, but not relevant for institutional real estate investors. Current tax obstacles will not be removed for them.” In his opinion, the operation of photovoltaic systems in buildings is associated with considerable and “completely excessive tax risks”.

“This applies to trade tax and in the area of ​​investment tax law. In the case of real estate funds in particular, which are subject to investment tax law, an imminent loss of status plus regulatory barriers mean that no photovoltaic systems are installed and operated,” says Volckens. Great potential on the way to the desired climate neutrality and energy independence therefore remains “unfortunately unused”.

The home office flat rate was introduced because of the corona pandemic for everyone who cannot afford their own so-called home office. For many people who do not have a proper study at home that corresponds to the type term and work at the kitchen table or in the living room, the still young regulation has proven its worth from a tax point of view. So far, each person has been able to sell a maximum of 600 euros per year. Here comes good news with the new draft law.

What changes? The annual tax law plans to extend the fixed-term home office flat rate. Taxpayers can now permanently claim an amount of 5 euros for every day that they work exclusively from home.

In addition, the maximum deductible amount is to increase from 600 euros to 1000 euros in 2023, regardless of whether the activity takes place in a work corner or in the home office and whether it is the focus of the professional activity or another workplace exists. Accordingly, 200 instead of 120 home office days will be favored in the future. But beware: the home office flat rate must be offset against the flat rate for employees.

The reform for the new property tax is complex – and this year it will require owners. You have to submit some data to the tax office. You have to be very precise and observe special deadlines. In our large guide you will find all the information you need to know in a compact form.

Let’s get to the bad news. While the flat-rate home office allowance will be extended and increased, the draft of the annual tax law for the home office, i.e. a separate room in the house or apartment of the taxpayer that may only be used for professional purposes, provides for a tightening of the tax rules.

So far, the following has applied: If the home office is the focus of all operational and professional activities, the associated expenses can be deducted in full as income-related expenses. If the “central point” is not the case, the expenses can be deducted in the amount actually incurred (up to 1250 euros) if no other job is available. The following applies: If qualitatively equivalent activities are carried out in the office and in the home study, the focus of the activity is in the study as soon as more than half of the working time is spent there. This means that if you work five days a week, you must regularly spend three or more days in your home office.

What has changed? The draft law states: “In contrast to the previous regulation, from a sustainability point of view for the full deduction of expenses, even in central cases, it is now a prerequisite that the taxpayer has no other permanent job available for this activity.”

The bottom line is that costs for the home office can only be deducted if there is no other permanent job available. Only then can taxpayers from 2023 deduct the expenses for their home office amounting to a flat rate of 1250 euros per year. And if the “professional middle point” occurs, the entire costs can be claimed. Here, for many, things can get really expensive in the future, for example with regard to rental prices and rising energy prices.

What do experts say? Stefan Renger, tax advisor from the Steuerkiller law firm, told the FAZ: “The possibility of desk sharing in the office would then be harmful.” He also raises the question of whether the change could be due to the fact that the financial administration does not want to share in the ever-increasing heating costs. Because one thing is clear: Expenditures for electricity and gas will rise sharply in the coming year due to the energy crisis.

In the new draft, the federal government makes it clear: “Full tax consideration of additional jobs should be ruled out in future.” On the other hand, employees whose apartment is too small to set up their own office in it should be subsidised. “A large number of taxpayers cannot afford to set up a home office,” it says. With the new home office flat rate, these people should now be helped.

The saver’s allowance is an exempt amount that is anchored in the German Income Tax Act. If each spouse or life partner submits their own income tax return, income of up to EUR 801 is tax-exempt. In the case of a joint tax return, i.e. for people who are assessed together, up to 1602 euros per year are tax-free. That was the rule before.

What changes? As can be seen from the draft law, the amounts of the tax-exempt amounts are to change. Accordingly, the saver’s allowance for single people should be increased to 1,000 euros and for married couples and life partners to 2,000 euros. In order to be able to process this more easily from a technical point of view, exemption orders that have already been issued are to be increased as a percentage.

If a child is of legal age, the parents are entitled to child benefit or a child allowance and the child is housed elsewhere and is in vocational training, the training allowance is granted. So if a taxpayer incurs costs for the child’s education, an allowance of 924 euros per calendar year can be deducted from the total amount of income.

What changes? The draft provides for an increase in the training allowance. Children who are of legal age, are in vocational training and cannot be accommodated at home will in future be granted an allowance of 1,200 euros.

Our tax-related reading tips: