Which donations can I claim as tax-exempt?
You can deduct donations (either money donations or donations in kind) if they meet the following criteria:
- They’re beneficial to non-profit organizations
- They support tax-advantaged (steuerbegünstigt) organizations
- You do not receive a reward for them/they are voluntary
- They can be proven via confirmation
According to §10b Paragraph 1 of the Income Tax Act (EStG), tax-advantaged organizations include:
- Legal entities under public law (e.g. municipalities, parishes, universities)
- Public service organisations (e.g. state museums, state theaters)
- Non-profit organizations, charitable organizations and foundations (charity purposes)
The list of charitable donation purposes that can be deducted from your taxes was expanded in January 2021. This list now includes donations for climate protection, local improvement, free radio and wireless connections, cemetery maintenance, and protection of those who are discriminated against based on gender identity.
How do I declare donations on my tax return?
Donations for charitable purposes (e.g. church) can be entered on the special expenses form (Anlage Sonderausgaben) of your tax return. Donations and membership fees amounting up to 20% of your total annual income can be deducted as special expenses, thus reducing your taxable income and income tax due.
Proving your donations
The tax office (Finanzamt) requires you to provide an official confirmation for all donations that you wish to claim on your tax return. In German, this can be called “Spendenbescheinigung” or by the technical name “Zuwendungsbestätigung.“ The confirmation must comply with one of the specific models provided by the tax office.
If you are unable to obtain a confirmation that complies with the provided models, you can only deduct up to 300 euros in donations. But don’t worry – charities typically send confirmations without being asked to do so.
Exceptions: When you don’t need an official confirmation
As of January 1st, 2021, donations up to 300 euros (previously 200) for non-profit organizations, state authorities, and political parties don’t require an official confirmation. You can simply provide a bank statement to prove these donations (vereinfachter Spendennachweis) as long as it shows the date as well as the account number and name for both charity and donor. For online donations, a booking confirmation from a third-party provider (such as a PayPal statement with transaction details) is acceptable.
Donations to political parties
You can deduct 50% of donations or membership fees to political parties (including independent voters’ associations) from your taxes. The maximum amount that can be deducted is 1,650 euros for single people or 3,300 for married couples that are assessed together. For example, if you donate 1,650 euros to a political party, you can pay 825 euros less in tax burdens.
Please note: You will need an official confirmation to deduct more than 300 euros in donations or membership fees.
Deducting membership fees
Admission or membership fees can also be deducted as special expenses (Sonderausgaben). There are a few exceptions to this rule:
- Sports memberships
- Cultural activities (e.g. museum, theater admission fees)
- Corporations that serve the preservation of local history or leisure activities
A membership fee for a soccer, volleyball, or music club would therefore not be able to be deducted; however, donations to these organizations could be.
Information on donations in kind
Many are unaware that donations in kind are also tax-deductible. The donations must be exclusively intended for tax-advantaged purposes. The donations must be used for:
- The idealistic tax-advantageous purposes of the organization or
- Special-purpose enterprises (raffles, lotteries to raise money, etc.)
Support for an association’s economic operations is excluded (festivals, etc.)
The value of a donation in kind depends on its fair market value. If the object is brand new, the brand-new price will be applied, and if the object is used, its discounted price will be applied. Aspects such as the item’s quality, condition, and demand also play a role and are considered when determining the price.
Some more information about donations and taxes:
- Companies that wish to deduct donations to tax-advantaged organizations from their taxes must base the deduction on their annual sales. A company can deduct a maximum of 20% of its annual sales.
- The official confirmation that is required to prove your donations must be issued by the charity and must be in accordance with one of the 18 samples that the tax office has provided, depending on the type of donation.
- If you pay money into the assets of a tax-advantaged foundation, you can deduct up to one million euros once every ten years. You can distribute this large deduction over the course of the decade and use it strategically in years with a high tax burden.
- If you provide long-term financial support to people in need, you can declare it as an extraordinary expenses (außergewöhnliche Belastung) on your tax return.
- Typically, donations are deducted in the year that they are made, but if you donate so much that the donation cannot be completely deducted in one tax year, the remaining amount can be deducted in the following year. This is called a donation carryforward (Spendenvortrag).