Ask a tax advisor on the topic of Severance pay

Severance pay and sick pay in 2017

July 27, 2018 | 50,00 EUR | answered by

Subject: Severance pay and sickness benefits / Separate assessment advisable?

Dear Sir or Madam,

For the upcoming tax return for 2017, I have a question regarding my severance pay and sickness benefit payments. The severance pay was paid out in January 2017, due to the termination of my employment contract for operational reasons on December 31, 2016, totaling €120,000; and the sickness benefit payments amounted to approximately €32,400 from January to December 2017 (€2,700/month). I am particularly interested in whether a separate assessment would be advisable for 2017. In previous years, a joint assessment has always been carried out. My wife's income is approximately €10,000 per year (state pension, including company pension).

Other personal details: married, no children, no church tax, no other income/revenues, no significant advertising costs, etc.; previous taxable income in 2016: approximately €64,000 (husband) and the above-mentioned pension, approximately €10,000 (wife), with a tax rate of approximately 19.5% according to the splitting table. The severance pay in January 2017 was almost tax-free from the employer (approximately €117,000), due to the 5-tel regulation, tax class 3, and because there was no other employment income. The application of the 5-tel regulation was or is correct according to the tax office, as the requirements were met.

Since the progression clause will now likely come into play due to the sickness benefits, and my wife's pension income (€10,000) would be taken into account in a joint assessment, I am wondering whether a separate assessment according to the basic table would be more advantageous than continuing to use the splitting table as before. The tax calculation software programs do not provide me with clear answers. Therefore, my question is, what would be approximately my tax burden in the case of a separate assessment according to the basic table for 2017 (for the severance pay and sickness benefits)?

Thank you for your support and clarification! Best regards