Tax estimates when your income changes: parental leave, bonuses and part-time work

A rental property's tax saving is not a fixed number. A rental loss reduces your tax at your marginal rate in the year it arises, and that rate moves with your income. For the fictional households in the example below, one apartment's €1,995 loss is worth €938 in a bonus year, €763 in an ordinary full-time year, €616 in a parental-leave year and €577 after a move to part-time work. A single figure for every year assumes your income never changes.

This guide covers how the value and timing of the relief change. What you can deduct is in our guide to rental property tax benefits in Germany.

German income tax is progressive. Above the basic tax-free allowance (Grundfreibetrag) of €12,348 for 2026, the rate rises steadily, reaching 42 per cent at €69,879 of taxable income and 45 per cent at €277,826 (§ 32a(1) EStG). A rental loss is set against your other income in the same year and removes euros from the top of it, so its value depends on where that top sits: higher after a bonus, lower during parental leave or part-time work.

The loss itself also changes as interest falls, rents rise and temporary allowances end (see what happens when Sonder-AfA ends); the example holds it constant.

Three numbers are easily confused.

• Average rate: total income tax divided by taxable income. A single filer with €60,000 of taxable income pays €14,233 for 2026, an average of 23.7 per cent.
• Marginal rate: the rate on the next euro, 38.6 per cent at €60,000. A deduction is worth roughly this rate.
• Tax class (Steuerklasse): sets your employer's monthly withholding, not your final tax or your marginal rate.

Married couples and registered partners can choose joint assessment (Zusammenveranlagung) (§ 26 EStG): their incomes are added together (§ 26b EStG) and taxed at twice the tax on half the joint income, the splitting method (§ 32a(5) EStG). One rate then applies to both incomes, whatever the tax classes. Unmarried co-owners are assessed separately, each on their own share; see buying a rental property as a couple. The Finance Ministry's income-tax calculator (German) shows the tariff tax for any taxable income.

Illustrative example. Fictional figures, not tax advice; a tax adviser (Steuerberater) should validate scenarios like these. The loss is the 2027 result of Apartment A, the Leipzig flat from our cash-flow guide, bought for €240,000 with benefits and burdens passing on 1 April 2026; 2027 is its first full calendar year. Cold rent €10,800, less interest €7,794.53 (€216,000 at an assumed 3.7 per cent, payments from April 2026), owner-paid costs €1,020 and depreciation (AfA) €3,980.52: a loss of €1,995.05. Incomes are taxable incomes after all other deductions. 2026 tariff, the latest in the statute at the time of writing; income tax and solidarity surcharge included, church tax excluded; child benefit and allowances not modelled.

Couples' marginal rates use the splitting method; row 3b's is before the Elterngeld effect. Savings are tax without the loss minus tax with it, to the euro; row 2's surcharge saving is €99.72.

The deduction is identical in every row; the cash benefit ranges from €577 to €938. For the single person, bonus year against part-time year, that is €361, about €30 a month. Against Apartment A's before-tax shortfall of about €341 a month (cash-flow guide assumptions), the saving offsets €48 to €78. A flat 42 per cent would overstate the part-time year by €261.

Parental allowance (Elterngeld) is tax-free (§ 3 no. 67(b) EStG) but subject to the progression proviso (Progressionsvorbehalt): the tax office calculates the average rate as if the Elterngeld were taxable, then applies it to your taxable income (§ 32b(1) no. 1(j) and (2) EStG). Unemployment, sickness, short-time work and maternity benefits are treated the same way.

In scenario 3b, the couple's tax on €75,000 would be €12,858 without the Elterngeld and is €14,563 with it: €1,705 more tax on their other income. Yet it barely changes the value of the rental loss, €616 against €612 if the Elterngeld were ignored. The loss is worth less than in the couple's normal year mainly because B earned less. Other combinations give different results, so this calculation belongs with a tax adviser.

For employees, benefits above €410 under the Progressionsvorbehalt make a tax return mandatory (§ 46(2) no. 1 EStG). No Elterngeld is paid where taxable income in the last assessed year before the birth exceeded €175,000, for a couple combined (§ 1(8) BEEG).

A bonus moves more income into the 42 per cent band and can bring in the solidarity surcharge (Solidaritätszuschlag). For 2026 it applies only once income tax exceeds €20,350, or €40,700 under joint assessment (§ 3(3) SolzG): for a single filer, from about €75,000 of taxable income. Just above that point it is limited to 11.9 per cent of the excess, rising to the full 5.5 per cent of income tax (§ 4 SolzG). In scenario 2, the loss therefore also saves about €100 of surcharge.

Fewer hours mean a lower marginal rate: 29.2 per cent in scenario 4, against 38.6 per cent full time. At €13,000 of taxable income, the loss saves just €95: most of it only reduces income the basic allowance would have left untaxed, and nothing carries over, because total income stays positive.

If the loss exceeds all your other income for the year, for example a year on Elterngeld with no salary under single assessment, the unused part is carried back to the previous year, then the year before, up to €1 million (€2 million jointly), and the earlier assessment is amended (§ 10d(1) EStG). Anything left is carried forward (§ 10d(2) EStG). You can apply to skip the carry-back, but only in full. Carried back into a year like scenario 1, the loss would be worth €763.

Without any application, the relief arrives with the assessment: Apartment A's 2027 loss reduces the 2027 tax, settled after you file in 2028. Until then, you fund the full shortfall.

A wage-tax reduction (Lohnsteuerermäßigung) moves the relief into monthly pay through an allowance (Freibetrag); for Apartment A, from 2027 at the earliest (how the Lohnsteuerermäßigung works; § 37(3) EStG). It changes timing, not size, and changing income brings two risks:

• Benefits are not in payroll. No tax is withheld from Elterngeld, so the €1,705 in scenario 3b appears only at assessment, reducing a refund or creating a bill. Rental relief already received through your salary is not there to offset it. In months without salary, the allowance has nothing to reduce; that relief comes with the assessment instead.
• A smaller loss than forecast (higher rent, lower interest, a sale) means the tax office reclaims relief received too early (§ 39a(5) EStG). A registered allowance also makes a return mandatory (§ 46(2) no. 4 EStG).

A lower salary on its own usually works the other way: monthly withholding assumes each month's pay continues all year, so a mid-year drop tends to produce a refund. If leave or reduced hours are planned, decide with your adviser whether an allowance suits that year, and keep cash aside for a possible back-payment.

If a purchase works only at your bonus-year rate, it does not work. Budget the before-tax shortfall from your own income, treat the tax saving as a later, variable reduction, and test the year you expect to earn least.

Alpha Minoris's Buyer's Agent service starts there, before any property search, with your budget, borrowing capacity and readiness. If your circumstances have changed or are about to, it can rework those figures on the lower income, and waiting can be the outcome. It covers purchases in Berlin, Dresden and Leipzig; you need not live there. It does not prepare or advise on tax returns: your Steuerberater confirms the tax figures.

Before buying, put the apartment's before-tax shortfall next to your income in your lowest expected year. Discuss your first rental property with Alpha Minoris.