If you have high deductible costs during the year, you can have a payroll tax allowance (Lohnsteuer-Freibetrag) entered by the tax office. The allowance reduces the salary on which your employer calculates payroll tax and so raises your take-home pay during the year. This concerns career starters and working students who carry, for example, high commuting or training costs. This guide explains the conditions, deadline and procedure under section 39a of the Income Tax Act (Einkommensteuergesetz, EStG).
In short: You apply for a payroll tax allowance at the tax office under section 39a EStG, from 1 November of the previous year at the earliest and by 30 November of the year in which it is to apply. The deductible expenses must exceed 600 euros. The application runs through ELSTER or an official form. Last updated: November 2026.
Key points
- The allowance affects only ongoing payroll tax withholding. The final tax is set by the income tax return.
- The application window runs from 1 November of the previous year to 30 November of the year concerned (section 39a(2) EStG).
- An application is inadmissible if the claimed expenses do not exceed 600 euros in total.
- Work expenses count only above the employee lump sum of 1,230 euros, special expenses only above 36 euros.
- Anyone who applies for an allowance generally has to file a tax return.
What is a payroll tax allowance and how does it work?
Under section 39a(1) EStG, the tax office determines on request an allowance that is deducted from salary. It is stored as an electronic payroll tax deduction attribute that your employer retrieves. Under section 39a(2) EStG the allowance is spread evenly across the months of its validity. An application made in January can apply retroactively from 1 January.
The difference from a refund matters. The allowance shifts relief into your monthly pay, but it does not fix the tax finally. How you recover overpaid payroll tax afterwards through a tax return is explained in our German guide on reclaiming payroll tax during studies.
Which costs can the tax office enter as an allowance?
Section 39a(1) EStG lists several items. For career starters and working students, work expenses, special expenses and extraordinary burdens are the main ones. The North Rhine-Westphalia tax offices name commuting, travel and training costs, childcare costs, special expenses other than pension and insurance contributions, and illness costs as examples.
| Item | What counts | Threshold |
|---|---|---|
| Work expenses (Werbungskosten) | Only the part above the employee lump sum of 1,230 euros (section 9a EStG) | The total of all items must exceed 600 euros |
| Special expenses (Sonderausgaben) | For example donations or church tax, but not insurance contributions | Only the part above the lump sum of 36 euros |
| Extraordinary burdens | For example illness costs under sections 33 ff. EStG | The total of all items must exceed 600 euros |
| Addition amount | For several employments, depending on tax class | Own rule in section 39a(1) no. 7 EStG, maximum amount depends on the tax class |
| Child allowances | For children without a child benefit claim | Number of allowances is entered |
Students face a special rule. Costs of a first degree are not work expenses under section 9(6) EStG unless a completed first vocational training exists or the degree takes place within an employment relationship. They are then not suitable for an allowance based on work expenses. Details are in our German guide on deducting study costs: first and second degree.
When is the application worthwhile?
It pays off if you expect to be clearly above the lump sums during the year and want the money earlier instead of waiting for the refund the following year. Typical cases are long commutes with high travel costs, a part-time second degree or a fee-based training course.
An example of the threshold (assumption: work expenses only, no other items). You expect commuting costs of 1,600 euros and training costs of 800 euros, 2,400 euros in total. Of this, 1,230 euros falls under the employee lump sum, leaving 1,170 euros. Because that is above 600 euros, the application is admissible. The allowance would be spread evenly across the months. How it affects your net pay can be calculated for your case with the Federal Ministry of Finance tax calculator at bmf-steuerrechner.de.
The application makes less sense if your costs are only just over the threshold or uncertain. If the amount turns out lower, the tax return may result in a back payment. Students without a work expense deduction in a first degree should apply only if genuinely deductible items exist, such as costs from an ongoing side job or from a completed first vocational training. The tax office reviews the application on the basis of the information submitted and asks for receipts where needed.
How do you apply step by step?
- Estimate your costs for the year and back them with receipts or contracts.
- Apply through ELSTER or use the official form from the Federal Ministry of Finance form centre.
- Attach the relevant annexes, for example for work expenses, special expenses or extraordinary burdens.
- Sign personally if you file on paper (section 39a(2) EStG requires the official form).
- Apply as early in the year as possible. The allowance is spread over the months from the application onwards, and for an application in January it can be taken into account from 1 January.
If you apply for the same or a lower amount than the previous year and your circumstances have not changed materially, the law allows a simplified application. On request, the allowance can apply for two calendar years.
What should you consider before applying?
- Filing obligation: anyone who applies for an allowance generally has to file an income tax return.
- Report worse circumstances: if your situation changes to your disadvantage, you must tell the tax office.
- Several jobs: with more than one employment, an addition amount can be entered to offset the effect.
- Annual payroll tax adjustment: if your employer applied an allowance, the employer-run annual adjustment is excluded. See our German guide on the annual payroll tax adjustment by the employer.
Frequently asked questions
By when do I have to apply for the allowance?
For the current year, the application must reach the tax office by 30 November at the latest under section 39a(2) EStG. For 2027, an application is possible from 1 November 2026 at the earliest.
Does the allowance apply retroactively?
As a rule it is spread evenly over the months from the application onwards under section 39a(2) EStG. The exception is applications made in January, which can be taken into account from 1 January.
Do I need the allowance as a working student?
Not necessarily. Many working students have costs below the threshold. With high commuting or training costs the application can pay off. For tax class and other details see our German guide on working students and tax.
Do I have to file a tax return after applying?
Generally yes. The North Rhine-Westphalia tax offices name exceptions, for example with only low salary or when only certain lump sums were entered.
Can I change the allowance later?
Yes. If circumstances improve in your favour, you can apply for a change. If they worsen, you must report this (section 39a(1) EStG).
What to do now
- Estimate your deductible costs for 2027 and check whether they exceed 600 euros in the sense of the law.
- Collect receipts, contracts and travel records.
- Apply from 1 November 2026 through ELSTER or by form.
- After a few weeks, check your payslip for the entered allowance.
- Plan the tax return for the year, because that is when the final tax is set.
Related guides
- Taxes 2027 for students and career starters: overview
- Work expense lump sum for students
- Tax Return for Students: How to Get Your Money Back
- Tax Benefits for Students in Germany: What You Can Claim
- Tax class when starting your career
Sources: Section 39a Einkommensteuergesetz, gesetze-im-internet.de (in German), retrieved 2 November 2026, wording of subsections 1 and 2 checked and Application for payroll tax relief, tax offices of North Rhine-Westphalia (in German), accessed November 2026.
Last updated: November 2026. This guide is general information, not individual advice. The tax office calculates your actual tax.
