What things are not taxed in Wisconsin

Income Tax Act: This taxable and tax-free income exists

In principle, all people who earn money in Germany are subject to the Income Tax Act and have to pay income tax. However, there are numerous allowances, deductions and even income that is not subject to income tax. Here you can find out more about taxable and tax-free income in Germany.


In this post you will learn:


  • what income is taxable

  • when an income tax return is worthwhile

  • what tax-free income there is.


Income Tax Act: These 7 types of income are taxable

The Income Tax Act knows 7 so-called types of income that are taken into account when calculating income tax. For laypeople it is always surprising that there are quite a lot of income on which a taxpayer - despite enormous sums - does not have to pay income tax. The best-known example is winning the lottery: winning the lottery is usually a decent sum - and still not a case for the tax office, as it does not fall under any of the following 7 types of income that are subject to income tax:


  1. Income from employed or self-employed work

  2. Income from a commercial enterprise

  3. Income from capital assets (interest, dividends, price gains on share sales, etc.)

  4. Rental and leasing income

  5. Income from statutory or company pensions, etc.

  6. Income from agriculture and forestry

  7. Other income within the meaning of the catch-all paragraph 22 in the Income Tax Act


Income from inheritances and gifts are not a type of income within the meaning of the Income Tax Act, but are subject to inheritance and gift tax.

"Other income" within the meaning of Paragraphs 22 and 23 of the Income Tax Act include v. a. Income from certain recurring payments, for example retirement provision contracts, but also maintenance payments, diets from members of parliament, and various income from private sales transactions.


Tip: An income tax return is always worthwhile! Especially if you are not required to submit an income tax return, you should think about a so-called application assessment. The reason: In 9 out of 10 cases you will get your money back!


Income Tax Act: There is this tax-free income


The Income Tax Act defines tax-free income as inflows in money or monetary value that are not taxable under the Income Tax Act. A distinction must be made between completely tax-free income and tax-free income, which are, however, subject to the progression proviso. The latter means that the income itself is tax-free, but has an effect on the tax rate of the other, taxable income. These types include, for example, sick pay, care allowance, short-time work allowance, unemployment allowance, parental allowance etc. In addition, the tax exemption of income in the Income Tax Act is very often limited to maximum limits, so-called tax allowances. In this case, the relevant income is tax-free up to a certain limit (the tax exemption), all income above this must be taxed.

In the Income Tax Act (Paragraphs 3, 3b and 3c), some income is listed that is explicitly not subject to income tax. We have listed the most important ones for you here:

  • Maternity allowance, education or parental allowance

  • Child benefit

  • Health, long-term care and statutory accident insurance benefits

  • Social assistance, unemployment benefits and wage replacement benefits according to the Employment Promotion Act

  • Housing benefit

  • Income according to the Training Assistance Act (especially BAföG)

  • Certain grants for company and private pension schemes

  • Surcharges for Sunday, public holiday and night work

  • Expense allowances for voluntary work