(2024) What are income replacement benefits?

Recipients of social benefits are not always employees. Income replacement benefits, which are subject to the progression clause, are also paid to traders, self-employed persons, freelancers, or farmers.

These income replacement benefits are tax-free, like wage replacement benefits, but they still affect the amount of tax payable. This is because income replacement benefits are included in the progression clause and thus have a significant impact on the calculation of the personal tax rate.

You receive income replacement benefits as a non-employee, for example, as a freelancer or trader:

• Benefits under the Maternity Protection Act (maternity pay, parental allowance)
• Benefits from statutory health insurance (sickness benefit payments)
• Benefits under the Artists' Social Insurance Act

Income replacement benefits subject to the progression clause (e.g. unemployment benefit, parental allowance, insolvency benefit, sickness benefit, maternity pay and comparable benefits from an EU/EEA country or Switzerland) must be entered in the main tax form.