Do employees in Germany have to declare tax on a side job?

The tax return deadline for 2023 in Germany is coming up on September 2nd. Filing a tax return (Einkommensteuererklärung) is mandatory for people who are self-employed or freelance. 

Declaring tax is not an obligation for most regularly employed workers, although many people do so they can take advantage of deductions. 

READ ALSO: The top tax deductions often overlooked by employees in Germany

However, people in employment with a side hustle - such as freelance work - or other sources of income do have to file a tax return. 

Whether you're in this position already, or you're thinking about taking on a side hustle along with your main employment in future, we spoke to a specialist to find out the tax rules. 

How is it taxed?

So you will have to fill out a tax declaration to declare extra income you earn - but how much tax will you face?

It can be a significant hit, at least in terms of tax you might have to pay back after filing your declaration. 

The income from your main job is taxed according to the rules of Tax Classes 1-5. Which one you belong to depends on your situation such as whether you're single, married or have children. In these Tax Classes, a portion of your income - €10.908 in 2023 - is not subject to tax.

Taxes on a second job fall into a special category known as Tax Class 6 - where there is no tax free basic allowance.

READ ALSO: Can I have a freelance gig as an employee in Germany?

Munich-based tax advisor Thomas Zitzelsberger told The Local: "Such extra freelance income is treated in exactly the same way as if you got a pay rise on your normal salary or a bonus.

"The tax rate depends on how much you make already and what your tax rate is already. So, if you are making €60,000 plus per annum as a single person in Tax Class 1, then your pay raise, your bonus or your extra freelance income is taxed at the top tax rate."

But there are ways to reduce the amount you have to pay to the tax man.

"The good news is you can claim expenses related to your freelance income," said Zitzelsberger.

That means you can offset the tax owed with any expenses you incurred, like if you bought equipment for the job, for example. 

READ ALSO: The 2024 deadlines to submit your tax return

What if it's a mini-job?

If you've lived in Germany a while, you're no doubt familiar with the concept of 'mini-jobs'.

Introduced in 2002 as a way for employers to bring on part-time workers more easily, they have certain rules along with tax exemptions.

Workers can’t earn more that €538 per month from their mini-job. If you take on work on the side that is classed as a mini-job then you won't face a tax bill.

Regarding mini-jobs "the employer pays the tax in the background and you have no deductions", said Zitzelsberger. "Your net is your gross."

But if it isn't a mini-job, there's no way round it. Even if you earn, for example €500 in a year - you'll be paying full tax on it. 

"If a side job is not a mini-job, it is taxed in Tax Class 6, no matter what the amount is," said Zitzelsberger.

For this reason, it is worth checking before you sign a contract or do work for an employer on the side to ask if it is a mini-job or can be classed as one. 

Please be aware that this article is general advice and you should seek out a specialist for individual queries.