Which health and nursing insurance contributions can I claim?
You can enter your full health and nursing insurance contributions for basic cover as special expenses in your tax return. The tax office deducts a flat rate of four per cent for sickness benefit from the contributions paid to statutory health insurance.
For those privately insured: Costs for health and nursing insurance are only recognised up to the amount of the basic contribution of the private health insurance. Optional benefits, such as treatment by the head physician or a two-bed room in hospital, are considered under "other insurance contributions" if there is still room within the deductible maximum amount.
If you have a more comprehensive contract, the private health insurance company will determine the exact proportion of basic cover. If your health insurance contributions do not exceed the maximum amount of 1.900 Euro (2.800 Euro for self-employed), you can claim contributions for other insurance. Favourable contributions include those for unemployment insurance, additional health or nursing insurance, private disability insurance, accident or liability insurance, or term life insurance. Endowment and pension insurance policies can be considered as special expenses if the policies were taken out before 2005.
A married couple pays a total of 4.600 Euro in contributions for health and nursing insurance in a year without sickness benefit. This means the contributions exceed the joint maximum amount of 3.800 Euro (twice 1.900 Euro). Nevertheless, they are deductible as special expenses to this extent, but further insurance contributions, such as accident or motor vehicle liability insurance, can no longer be deducted.
Since the general contribution rate for those with statutory insurance covers sickness benefit, contributions are reduced by 4% on a flat-rate basis. The reduction only applies if there is an entitlement to sickness benefit in the event of illness. The reduction is made by the tax office. Until 2014, the reduction did not apply to the income-independent additional contribution. Since 2015, the following legal situation applies: The newly designed, income-dependent additional contribution specific to each health insurance fund is now considered an integral part of the health insurance contribution and is therefore included in the assessment basis for calculating the four per cent reduction amount. The contribution is no longer differentiated into a basic contribution and the additional contribution.
(2022): Which health and nursing insurance contributions can I claim?
Should contributions to foreign health insurance also be declared in the tax return?
It is not necessary for the subsidised health insurance to be German.
Subsidised "pension contributions" also include contributions to foreign statutory pension insurance providers (§ 10 para. 2 no. 2c EStG).
Contributions to "other insurance" from foreign companies can also be deducted (provided there is still room within the maximum insurance amount). However, the company must have its registered office or management in an EU or EEA state or have permission to operate in Germany (§ 10 para. 2 no. 2a EStG).
In principle: If the social security contributions paid abroad are economically related to tax-free income, they cannot be deducted as special expenses in Germany. This is the case if the wages earned abroad are tax-free in Germany and are only included in the progression clause (§ 10 para. 2 no. 1 EStG).
However: Since 2019, a legal regulation has been introduced for the improved deduction of special expenses for contributions paid in EU/EEA countries to statutory pension, health, nursing care, and unemployment insurance (§ 10 para. 2 no. 1 EStG, amended by the "Act to Avoid VAT Losses in the Trade of Goods on the Internet and to Amend Other Tax Regulations").
The new regulation applies to all open tax cases (§ 52 para. 18 sentence 4 EStG).
Accordingly: Pension expenses are now deductible as special expenses in the German tax return, provided that
- they are directly economically related to income from employment in a member state of the European Union or a contracting state of the European Economic Area,
- this income is tax-free in Germany under a double taxation agreement, and
- the state of employment does not allow any tax consideration of pension expenses in the taxation of this income.
This regulation applies to basic pension expenses (§ 10 para. 1 no. 2 EStG), contributions to basic health insurance and statutory nursing care insurance (§ 10 para. 1 no. 3 EStG), as well as other pension expenses (§ 10 para. 1 no. 3a EStG).
Currently, the Federal Fiscal Court has ruled in several cases against the tax authorities and in favour of cross-border commuters to Luxembourg that the contributions paid there to the Luxembourg nursing care insurance are deductible as special expenses in Germany because there is "no tax consideration" for them in Luxembourg (BFH rulings of 27.10.2021, X R 28/20 and X R 11/20; BFH rulings of 10.11.2021, X R 13/20 and X R 14-16/20).
Note: Pension expenses related to income earned in a so-called third country, such as China, Brazil, or India, remain excluded. However, the Federal Fiscal Court will soon have to clarify whether this is lawful. The Hamburg Fiscal Court did not allow a deduction (ruling of 14.6.2021, 1 K 73/19). However, it allowed an appeal to the Federal Fiscal Court (Ref. X R 25/21; previously I R 31/21).
The claimant worked for a German-Chinese joint venture and spent a total of 224 working days in China in the year in question, 2016. He received wages in both Germany and China. However, he continued to pay his pension insurance contributions in Germany. In his income tax return, he wanted to deduct the pension insurance contributions in full as special expenses, even though around 88 per cent of his wages were tax-free under the DTA with China.
The tax office refused to allow the full deduction of the pension expenses and only considered the part attributable to the taxable German wages, i.e. around 12 per cent. A further consideration of the declared pension expenses was excluded, as they were directly economically related to tax-free income and therefore did not constitute deductible special expenses. The action against this decision was unsuccessful.
(2022): Should contributions to foreign health insurance also be declared in the tax return?
