How is parental benefit treated for tax purposes?
September 24, 2022 | 40,00 EUR | answered by Ralf Otten
Dear tax advisor,
My name is Theodor Fröhlich and I have a question regarding the tax treatment of parental leave benefits. Last year, I received parental leave benefits as I was able to stay at home for a period of time after the birth of my child to take care of them. Now I am faced with the question of how I must declare the parental leave benefits in my income tax return and whether it is relevant for tax purposes.
I am concerned that I may make mistakes in reporting the parental leave benefits, leading to potential repayments or issues with the tax office. Therefore, I want to ensure that I correctly declare and handle the parental leave benefits in my tax return.
Could you please explain to me how parental leave benefits are treated for tax purposes and what information I need to provide in my income tax return? Are there any special regulations or exemptions that I should be aware of? What impact does parental leave benefits have on my tax burden and how can I ensure that I report everything correctly and transparently?
Thank you in advance for your support and assistance with this question.
Sincerely,
Theodor Fröhlich
Dear Mr. Fröhlich,
Thank you for your question regarding the tax treatment of parental allowance. It is understandable that you are concerned and want to ensure that you report everything correctly in your income tax return. I will gladly explain in detail how parental allowance is treated for tax purposes and what information you need to provide.
In principle, parental allowance is tax-free according to § 3 No. 67 EStG. This means that you do not have to report parental allowance as income in your tax return. There are no direct tax implications on your tax burden from receiving parental allowance. Therefore, you do not need to report parental allowance in Annex N (income from employment) or in any other annex.
However, there is an exception: If you have other taxable income in addition to parental allowance, these income can be increased by the parental allowance, as parental allowance is taken into account under the progression clause. This means that your tax rate on other income can increase, even though parental allowance itself is tax-free.
Therefore, you do not have to explicitly report parental allowance in your income tax return, unless requested by the tax office. In this case, you should report parental allowance as tax-free income. There are no special regulations or allowances that you need to consider.
To ensure that you report everything correctly and transparently, I recommend that you have all relevant documents such as the certificate of parental allowance and your other income readily available. If you are unsure, you can also consult a tax advisor who can assist you in preparing your tax return.
I hope that this information has been helpful to you. If you have any further questions, please do not hesitate to contact me.
Sincerely,
Ralf Otten
