How much tax do I pay on my side income?

It depends on the type of side income and your main income. A Minijob up to EUR 520/month is completely tax-free for you. For all other side income, the profit is taxed at your personal marginal tax rate, which typically ranges from 14% to 42%. The higher your main salary, the higher the tax rate on your side income.

Is a Minijob tax-free?

Yes, for you as an employee, a Minijob up to EUR 520/month is completely free of taxes and social contributions. The employer pays flat-rate charges of about 30% (flat tax, pension insurance, health insurance, levies). However, you can voluntarily contribute to pension insurance to earn full pension entitlements.

Do I need to file a tax return if I have a side job?

A tax return is mandatory once your side income (excluding Minijobs) exceeds EUR 410 per year. For self-employed or rental income, filing is always required. With a second employment under tax class VI, filing almost always pays off since you frequently get back overpaid wage tax.

What is the EUR 520 Minijob limit?

The EUR 520 limit is the maximum monthly earnings for marginal employment (Minijob), equaling EUR 6,240 per year. If this limit is regularly exceeded, the employment automatically becomes subject to full social insurance. Occasional overages (maximum 2 months per year, e.g., due to covering for colleagues) are permitted.

What happens if I exceed the small business threshold?

The small business threshold is EUR 22,000 in annual revenue. If you exceed it, you must charge VAT (19% or 7%) on your invoices starting the following year and submit regular VAT advance returns. The upside: you can then also deduct input VAT from your purchases and business expenses, which reduces the net burden.

Do I have to tell my employer about my side job?

Under employment law, you are generally required to inform your employer about a side activity, especially if your employment contract includes an approval clause. Your employer may only prohibit a side job if legitimate interests are affected (e.g., competition, working time regulations). A blanket prohibition of side activities is legally invalid.

Which side income type is most tax-efficient?

A Minijob up to EUR 520/month is the most tax-efficient option since no deductions apply. For higher earnings, freelance activity is often more advantageous than employment because no social contributions are due and business expenses can be deducted directly. Use our comparison calculator to find the optimal option for your situation.

How is rental income taxed alongside a main job?

Rental income is taxed at your personal income tax rate as income from renting and leasing. However, you can deduct numerous expenses: loan interest, depreciation (typically 2% per year), maintenance costs, management fees, and property tax. Social contributions do not apply to rental income.

Do I need a trade license for my side hustle?

A trade license is only required for commercial activities (e.g., online retail, crafts, hospitality). Freelance activities such as writing, design, consulting, teaching, or art do not require a trade license. When in doubt, section 18 of the Income Tax Act (EStG) defines the liberal professions. Trade registration at the local trade office costs between EUR 20 and EUR 60.

How do I calculate my marginal tax rate?

The marginal tax rate indicates how much tax applies to the next euro earned. It results from the progressive income tax formula (section 32a EStG) and rises from 14% (above the basic allowance) to 42% (above approximately EUR 68,480 taxable income). The top rate of 45% applies above EUR 277,826. Our calculator automatically determines your exact marginal tax rate.

Rental Income Tax: What Landlords Need to Know | Side Income Tax Calculator

Basics of Rental Income Taxation

Rental income in Germany falls under income from renting and leasing (section 21 EStG) and is taxed at your personal income tax rate. Unlike employment income, no social insurance contributions apply. The actual tax burden depends heavily on deductible expenses (Werbungskosten).

What Counts as Taxable Rental Income?

Taxable income includes: monthly cold rent, allocable operating costs (if not passed through directly to utility providers), special payments from tenants, garage rent, and one-time payments such as compensation for early lease termination. The security deposit does not count as income as long as it remains held.

Deductible Expenses: The Key Deductions

Depreciation (AfA)

The depreciation of wear and tear (AfA) is often the largest single deduction. It amounts to 2% of the building value per year for buildings completed after December 31, 1924, and 2.5% for older buildings. Since 2023, new constructions with building permits from January 1, 2023 qualify for an increased rate of 3%. Important: AfA applies only to the building portion of the purchase price, not the land value.

Loan Interest

Interest payments (not principal repayment) on a mortgage are fully deductible as long as the loan was taken for the acquisition or construction of the rented property. For mixed-use loans, a clean separation must be maintained.

Maintenance Costs

Repairs and renovation work are immediately deductible if they maintain or restore the original condition: painting, plumbing repairs, roof repairs, heating maintenance, and replacement of individual defective components. Modernization expenses (new heating system, energy-efficient renovation) must be depreciated over their useful life.

Other Deductible Costs

Property tax, building insurance, property management fees, travel costs to the property (EUR 0.30 per km), advertising costs for tenant search, legal and tax advisory fees, and membership fees in landlord associations.

Anlage V in the Tax Return

Rental income is reported in Anlage V of the income tax return. A separate Anlage V must be completed for each rental property. A negative result (loss) from rental income can be offset against other income, which is a key tax advantage of real estate investment.

Special Cases

Renting to Family Members

When renting to family members, you must charge at least 50% of the local comparable rent (section 21 para. 2 EStG). Below this threshold, deductions can only be claimed proportionally. At 50% or above, full deduction is allowed.

Short-Term Rental (Airbnb)

Short-term vacation rental is generally VAT-exempt (section 4 no. 12 UStG) but subject to income tax. Deductions can only be claimed proportionally if the property is not exclusively used for guests. Many cities also require permits under misuse prohibition laws.

Vacancy

During temporary vacancy (tenant turnover, renovation), deductions remain fully claimable if you can demonstrate intent to rent. For prolonged vacancy without visible rental efforts, the tax office may deny deductions. Document all efforts (listings, agent appointments, viewing dates).

Conclusion

Rental income is an attractive side income source that can be substantially optimized through deductions. The combination of depreciation, loan interest, and operating costs often produces a tax loss in the early years, reducing overall taxable income. Use our side income tax calculator to compute the net return on your rental investment.