Save tax with donations

A donation not only supports the work of a charity but can also reduce your own tax burden. However, the charitable intention should be the priority. Therefore, it is important to know who receives the donation and how the money is used.

The German Central Institute for Social Issues (DZI) provides guidance in this area. It awards a donation seal to reputable organisations that must meet certain criteria. The DZI checks, among other things, how the donations are used and the costs for advertising and administration. These expenses must not be disproportionately high. As a guideline, administrative costs exceeding 35% of total expenditure are unacceptable.

Organisations with the DZI donation seal may use it on their website and in publications. The DZI currently lists around 250 organisations, from „action medeor“ to the „Zukunftsstiftung Entwicklungshilfe“. However, the absence of a donation seal does not necessarily mean that the organisation is disreputable, as participation in the voluntary „donation MOT“ involves annual fees.

In such cases, a look at the organisation's annual report can provide information on how funds are used – often more informative than a simple brochure.

In addition to a clear conscience, donors benefit from being able to claim the donation for tax purposes. Donations are deducted as special expenses in the tax return. Donations made in the assessment year 2024 are entered in the main form of the income tax return. Since 2007, for donations up to 200 Euro, a simple proof of payment, such as a bank statement or transfer slip, is sufficient. For higher amounts, a donation receipt is required, which most organisations automatically send at the beginning of the following year.

Note: Not every donation or membership fee is tax-deductible. Contributions to sports clubs, carnival clubs, local clubs, or choral societies are not recognised. On the other hand, donations and membership fees to clubs active in nature, animal protection, welfare, or monument protection are tax-deductible.

There is a special regulation for donations to political parties: Here, you receive a direct tax reduction of 50% of the donation, up to a maximum of 825 Euro (single) or 1.650 Euro (married). Amounts beyond this can be deducted as special expenses up to the maximum amounts of 1.650 Euro (single) or 3.300 Euro (married).

In addition to cash donations, donations in kind can also be claimed for tax purposes. For example, if you donate old clothes to a charitable organisation, you should request a donation receipt documenting the market value and condition of the donated items.

Save tax with donations

Donations for earthquake victims in Turkey and Syria

In February 2023, a devastating earthquake struck Turkey and Syria, causing severe suffering and infrastructure damage. The Federal Ministry of Finance has taken measures to facilitate support without tax obstacles.

Simplified donation receipt: A disaster relief decree is in effect until 31 December 2023. This decree allows, among other things, a simplified proof of donation. Instead of the usual donation receipt, a cash deposit slip or booking confirmation from a bank is sufficient (BMF letter dated 27.2.2023).

Further regulations concern measures by tax-privileged organisations helping those affected by the earthquake, the tax treatment of donations from business assets, payroll tax issues, and more.

Donations for earthquake victims in Turkey and Syria

What goodwill regulations apply to donations for refugees?

Refugees in Germany continue to seek protection from war and displacement. Thousands of dedicated citizens, companies, initiatives, and organisations continue to help the arriving refugees with personal and financial commitment to ensure their care and support.

To promote and support this societal commitment in helping refugees, the Federal Ministry of Finance introduced simplified tax regulations. They apply from 1 August 2015 to 31 December 2016 (BMF letter dated 22 September 2015).

The federal and state governments have now agreed to extend the tax relief for refugee aid beyond 2016 until 31 December 2021 (BMF letter dated 5 February 2019). Thus, as in 2016, the following regulations apply in 2018 and 2019 onwards:

• For donations to special accounts of aid organisations to support refugees, the simplified proof of donation applies - without any limit on the amount. Proof can be provided, for example, by a cash deposit slip, a bank statement, or a printout from online banking.
• Exceptionally, donations to private fundraisers for the benefit of refugees are also eligible. Often, dedicated citizens set up donation accounts on special occasions, e.g. birthdays, weddings, christenings, funerals, anniversaries, and ask for donations instead of gifts.
• All charitable associations may collect donations for refugees, regardless of their actual statutory purposes. The special campaign must be indicated.
• All charitable associations may use their free financial resources to support refugees, even if refugee aid is not regulated in the statutes. The statutorily required amendment of the statutes is not necessary. However, it must be ensured that these funds are not earmarked by the donor for another purpose.
• If employees waive parts of their wages or parts of an accumulated credit balance and the employer makes a payment to the donation account of a recognised aid organisation, this wage portion remains tax-free.

Currently, the BMF has issued special regulations for supporters of Ukrainian refugees. This means that the tax authorities want to help supporters with various tax relief measures. Details are regulated in the BMF letter dated 17 March 2022 (IV C 4-S 2223/19/10003).

What goodwill regulations apply to donations for refugees?

What can I deduct as donations and membership fees?

You can deduct donations and membership fees for the promotion of tax-privileged purposes. These include:

• Charitable purposes
• Benevolent purposes (e.g. workshops for the disabled, meal services or drug counselling centres)
• Church purposes
• Political parties
• Independent voters' associations
• Charitable associations and organisations
• Public institutions in Germany: e.g. universities, universities of applied sciences, research institutes, authorities, schools, state museums, state hospitals
• Legal entities under public law in Germany: e.g. city and municipal administrations, municipal associations, federal states and the federal government, as well as churches

However, donations for a club's commercial business operations are not deductible. For example, if you donate drinks for a club festival, you cannot enter this in your tax return.

To deduct donations from tax, they must be made without receiving anything in return. You can deduct not only cash donations. Donations in kind, expense donations and remuneration donations are also considered tax-relevant.

What can I deduct as donations and membership fees?

How much can I deduct for donations and membership fees?

Tax-privileged purposes include charitable, benevolent, and religious purposes, as well as the promotion of political parties and voter associations under certain conditions. Since 2007, previously specially promoted cultural and scientific purposes have been part of charitable purposes.

Donations for such privileged purposes are deductible as special expenses up to a total of 20% of the total amount of income. If donations exceed the maximum amount, the excess can be carried forward to the following year and considered within the maximum limit. This donation carryforward is unlimited in time.

Just like donations, membership fees are generally deductible as special expenses within the deductible donation limit. However, this only applies to "altruistic" purposes and organisations that do not offer benefits to the members themselves, e.g. Caritas, Lebenshilfe, DLRG. Membership fees to clubs that promote leisure-related charitable purposes with "self-interest", e.g. sports clubs, music and singing clubs, marching bands, theatre clubs, local heritage clubs, traditional costume clubs, carnival clubs, animal breeding and plant breeding clubs, model flying clubs, dog sports clubs, are not deductible.

In addition to monetary donations, you can also claim donations in kind for tax purposes. If you wish to donate your old clothes to a charitable organisation, you will need a donation receipt from them listing the market value and condition of the clothing items.

Your taxable gross income: 45.000 Euro, minus income-related expenses: 3.000 Euro, total income: 42.000 Euro

You can claim donations and membership fees of up to 8.400 Euro (20 percent of 42.000 Euro) as special expenses for tax purposes.

How much can I deduct for donations and membership fees?

How do I provide evidence of donations to the tax office?

Donations and membership fees were previously only recognised for tax reduction if the donation receipts and proof of membership fees paid were attached to the tax return or sent to the tax office after electronic submission. In certain cases, simplified proof, such as a bank statement, was sufficient.

Since 2017, the obligation to submit receipts has been changed to an obligation to retain receipts: Donation receipts or corresponding proof no longer need to be submitted with the tax return. Instead, they only need to be presented if requested by the tax office. This is possible up to one year after the tax assessment notice is issued. Therefore, the donor must keep the receipts for this period (§ 50 para. 8 EStDV 2017).

The new obligation to retain receipts applies to donations made from 1 January 2017. However, receiving a donation receipt is still a prerequisite for the donation deduction. Therefore, make sure you receive a receipt. But you no longer need to submit the receipt with the tax return, only upon request by the tax office.

The donor can authorise the donation recipient to electronically submit the donation receipt to their relevant tax office. For this purpose, they must provide the donation recipient with their identification number. The authorisation can only be revoked with future effect. The donation recipient must make the data transmitted in this way available to the donor electronically or as a printout upon request. This has the advantage for the donor of not having to keep or present a donation receipt in their own tax procedure. At the same time, the donation recipient would no longer be obliged to keep a duplicate of the donation receipt (§ 50 para. 2 EStDV).

A formal donation receipt in the official format is not always required. Proof such as a bank statement, cash deposit slip, transfer slip or direct debit slip is sufficient for

• Donations up to 300 Euro made to a charitable, benevolent, church or religious organisation or to a domestic legal entity under public law or a domestic public authority.
• Donations in disaster situations paid into a special account within a certain period. Such a special account may only be set up by officially recognised welfare associations and their member organisations, as well as a domestic legal entity under public law or a domestic public authority. The amount of these donations is not relevant.

How do I provide evidence of donations to the tax office?

What donations are not tax-deductible?

The tax officer does not accept every donation and membership fee as a special expense.

Here are some examples:

The judge orders the defendant to pay a fixed amount to a charitable organisation. The convicted person cannot, of course, deduct this "involuntary" donation from their taxes, as it was not made voluntarily and without consideration.

Membership fees for sports clubs cannot be deducted by the taxpayer.

Contributions to carnival, local heritage, animal breeding or choral societies are also not recognised by the tax office.

However, there is a new development: If you belong to an organisation involved in nature, welfare, gender, animal or monument protection, you may deduct both your donations and membership fees from your taxes.

Membership fees to organisations promoting the following purposes are not deductible: Sport, cultural activities for leisure purposes (e.g. singing, music, theatre clubs), local heritage and folklore, animal and plant breeding, allotment gardening, traditional customs including carnival, soldiers' and reservists' support, amateur radio, model flying and dog sports.

Organisation A promotes science and research, while Organisation B also promotes sport according to its statutes. Donations and membership fees to Organisation A are deductible as special expenses, but for Organisation B, only donations are deductible, not membership fees. The decisive factor is the entry of the organisation's purpose in the statutes, not the actual activities of the organisation.

The Federal Fiscal Court has recently ruled that membership fees to organisations primarily serving leisure activities cannot be deducted as special expenses in income tax. This also applies if, for example, a music club promotes another purpose in addition to "cultural activities with self-interest", such as musical training, cultural and church music events, music festivals and music competitions (BFH ruling of 28.9.2022, X R 7/21).

What donations are not tax-deductible?

What is a donation carryforward?

Donations and, if applicable, membership fees to promote tax-privileged purposes can be deducted as special expenses up to 20 percent of the total income. If your donation exceeds this maximum amount, the excess amount is carried forward to the next year and considered within the maximum amount. This is known as a donation carryforward. The donation carryforward is unlimited in time and continues until the entire donation amount has been offset.

The tax office issues you with an assessment notice each year for the amount not yet taken into account.

What is a donation carryforward?

What is a donation and what are membership fees?

Donations are generally voluntary and unpaid.

A donation is free from any obligation to the organisation, which may pursue charitable purposes. The amount is determined by the donor. Donations can be made in the form of money, goods, and, to some extent, labour (time donations). In the latter case, only direct expenses such as necessary travel costs are deductible.

Membership fees, on the other hand, are defined by the organisation and have a fixed amount. They are also paid regularly. As a rule, they can only be paid in money. If a member pays more than the membership fee to a tax-privileged organisation, the difference is considered a donation.

Membership fees to clubs with "leisure-related" charitable purposes are not deductible. The club may not issue a donation receipt for the fees. This applies to:

• Sports clubs
• Music clubs
• Choir clubs
• Local heritage clubs
• Customs clubs
• Animal breeding clubs
• Dog sports clubs
• Carnival clubs

The Federal Fiscal Court recently ruled that membership fees to clubs primarily serving leisure activities cannot be claimed as special expenses in income tax. This applies even if the club pursues other purposes alongside leisure activities, such as musical training or cultural events (BFH ruling of 28.9.2022, X R 7/21).

What is a donation and what are membership fees?

What are donations to a charity's capital reserves?

If a donation is made to the capital reserves of a foundation, up to 1 million Euro can be deducted as special expenses in the year of the donation and the following nine years. The tax office issues an assessment notice each year for the donation amount not yet taken into account.

The donation limit of 1 million Euro can only be claimed once within 10 years, but can be distributed as desired within this period. For larger donations, the amount of 1 million Euro can be treated as a foundation donation and the excess amount can be deducted as "normal" donations within the limit of 20% of the total income.

For jointly assessed spouses, a donation limit of 2 million Euro has applied since 2013. It is no longer necessary to prove which spouse made the donation and from which assets the donation was taken.

Since 2013, the increased special expense deduction of 1 million Euro only applies to donations "into the capital to be preserved" of a foundation. It must therefore be a "capital reserve donation".

The situation is different for consumable foundations for donations "into the consumable assets" of the foundation. These are tax-deductible only up to 20% of the total income or up to 4 per mille of the sum of turnover, wages and salaries. Any remaining amount can be carried forward indefinitely, i.e. it is considered as special expenses each year up to 20% of the total income until it is used up.

What are donations to a charity's capital reserves?