The Simple (& Proven Way) to Pay LESS Tax in Germany (Legally) | Daniel Hannemann CEO of Wundertax
Video Overview & Insights
Daniel Hanemann is the founder and CEO of Wundertax, and one of the most experienced voices when it comes to the German tax system. In this episode, we sit down with Daniel to explain taxes in Germany in a clear, practical way — especially for expats, international students, and professionals working in Germany.
Very nice
We talk about how Germany taxes income, why so many people feel they are paying high taxes in Germany, and how the system actually works behind the scenes. Daniel breaks down income tax in Germany, how tax deductions work, and why filing a Steuererklärung is often the easiest way to get money back.
This conversation covers:
🧾 Key Takeaways: How Taxes Work (and How to Pay Less Legally)
1. ⚖ First Principle: Don’t evade — optimize legally
• Tax evasion = illegal and risky
• The goal is:
👉 “Pay what you owe, but also get back what you’re entitled to”
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2. 🧠 Biggest mistake most people make
• Not understanding the system
• Not filing taxes at all
• Especially in first year, many people:
o Overpay tax (because payroll assumes full-year income)
o Miss large refunds
👉 Example:
• If you worked only 6 months, tax was deducted as if you worked 12 months
• You can reclaim the difference
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3. 💸 Common legal deductions (normal employees)
You can deduct costs needed to earn income:
Typical examples:
• Commute (≈ €0.30/km)
• Home office allowance
• Work-related education/courses
• Moving costs (even relocation from abroad!)
• Private insurance contributions
👉 Simple rule:
“Did I need this expense to earn income?” → then it’s likely deductible
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4. 📊 Why Germany is called a “tax paradise” (for some)
• Highly complex system (one of the most complex globally)
• But:
o Many legal ways to reduce taxable income
o Incentives built into the system (education, relocation, investment, etc.)
👉 If you don’t benefit:
You probably just don’t understand or plan for it yet
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5. 🔑 Advanced strategies (less known)
A. Income shifting (very powerful)
• Prepay expenses in high-income years
• Example:
o Prepay 3 years of private health insurance
o Deduct entire amount in one year
o Huge tax reduction
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B. Freelancer/business strategy (investment deduction)
• Declare future business investments
• Reduce current taxable income
• Later actually invest (e.g., equipment, solar panels)
👉 Effect:
• Move tax burden across years strategically
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C. Real estate advantages
• Deduct:
o Mortgage interest
o Repairs
o Depreciation (~2% yearly)
• Sell after 10 years → no tax on profit
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D. Company/holding structures (used by wealthy)
• Keep money inside company → lower tax
• Avoid personal taxation until withdrawal
👉 But:
• Only worth it at scale (large income/wealth)
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6. ⚠ Important rules people miss
Exit tax (very important)
• If you leave Germany with significant assets:
o You may be taxed as if you sold them
• Applies to:
o Company shares
o Large ETF holdings (>€500k in one ETF)
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7. 💡 Behavioral insight (very important)
Most people:
• Think about taxes after earning
• Instead of planning before decisions
👉 Smart approach:
• Plan:
o Education timing
o Investments
o Relocation
o Big expenses
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8. 🧮 Why wealthy people pay less (structurally)
• Wealth isn’t taxed directly
• Only:
o Income
o Capital gains (when realized)
So they:
• Keep assets growing
• Avoid “realizing” gains
• Use structures to defer taxes
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9. 📉 Inequality insight (big-picture point)
• Much wealth comes from inheritance
• Example:
o Up to €800k tax-free from parents
o Can repeat every 10 years
👉 Result:
• Wealth accumulates across generations
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🧠 Final Insight (Most Important)
👉 The system rewards:
• Planning
• Knowledge
• Timing
👉 It punishes:
• Ignorance
• Fear of taxes
• Last-minute thinking
* How the German tax system works and why it’s so complex
* Common mistakes expats make when filing taxes in Germany
BS
* How to legally pay less tax in Germany
* What counts as a tax deduction in Germany
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* How commuting, education, moving costs, and home office expenses reduce taxes
* Why many expats and international students in Germany overpay
The first year tax discount is misleading. You need to declare the money you earned before moving to Germany during that year and it gets added to calculate your tax base.
* How to plan ahead instead of scrambling at tax season
* The truth about wealth, inequality, and who really benefits from the system
thank you for insightful discussions. One comment though, people living on passive income are not just lazy or/and lucky ones who just inherit and don’t wanna work. There are people who know how to adjust their life style and costs and to be satisfied with a simple life. Also, passive income is mostly from investments, and these are not just spending or waste. These capital investments help companies and innovation too.
If you work in Germany, plan to move there, or want the German tax system explained in simple terms, this episode will help you understand how much taxes in Germany you actually owe — and how to avoid paying more than necessary.
🎧 Whether you’re an employee, freelancer, expat, or international student, this episode explains how to pay less taxes in Germany — legally.
I came expecting to learn legal ways to pay less taxes in Germany, I left inspired to share and care more about each other in our society. Great podcast!
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00:00 – Intro
01:10 – How to Pay Less Tax in Germany (Legally)
03:05 – How the German Progressive Tax System Works
05:30 – “Germany Is a Tax Paradise” – Who Benefits?
08:20 – The Biggest Tax Mistake Expats Make in Their First Year
10:45 – Why You Often Get a Huge Tax Refund in Year One
13:30 – What You Can Actually Deduct (Education, Commute, Home Office)
17:40 – Why Filing a Tax Return Is Usually Worth It
21:00 – How to Plan Ahead Instead of Scrambling at Tax Season
25:10 – Legal Ways to Shift Income Between Years
29:30 – How the Wealthy Pay Less Tax (And Why It’s Legal)
34:40 – Real Estate, Depreciation, and Tax Advantages Explained
39:50 – Why Billionaires Don’t “Feel” Higher Taxes
44:30 – Wealth, Inheritance, and Inequality in Germany
49:30 – Will the Rich Leave Germany If Taxes Increase?
54:10 – What Expats Should Know Before Leaving Germany
58:40 – Final Advice: Understand the System, Don’t Fight It
🎧 If you live in Germany, plan to move there, or simply want to understand how taxes, wealth, and incentives really work — this episode is for you.
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💰 * Start your tax declaration and claim your tax refund with WUNDERTAX. GET ADDITIONAL DISCOUN HERE 👉🏽 https://bit.ly/3SSgKel
Background music by HawkOne: https://soundcloud.com/hawkoner