Ask a tax advisor on the topic of Severance pay

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September 3, 2009 | 20,00 EUR | answered by Dipl.BW/SB Ulrich Stiller

I received a severance payment and thought about paying off or reducing my mortgage. Are there better alternatives to save on taxes?

Dipl.BW/SB Ulrich Stiller

Dear client,

with the very limited information provided, it is difficult to provide advice. Repaying the mortgage would make sense if the interest does not qualify as tax-deductible expenses. This is the case, for example, if you use a house or apartment for your own residential purposes. In this situation, you generally cannot deduct any expenses for tax purposes due to lack of income. In this case, subject to a detailed examination of the facts, repaying the mortgage would indeed be advisable.

Advising you on other steps would depend on your personal situation: What would be the gross settlement amount? How much would be left after deducting taxes? Would the "Fünftelregelung" apply to the settlement? All of this would need to be evaluated before providing an assessment. I am available to assist you in this context as part of a mandate.

Best regards,

Ulrich Stiller
Tax Advisor