(2021) What is the progression clause?

Dieser Text bezieht sich auf die Steuererklärung 2021. Die aktuelle Version für die Steuererklärung 2025 finden Sie unter:
(2025): What is the progression clause?

Tax-free wage replacement benefits - also known as income replacement benefits for non-employees - and tax-free foreign income are included in the progression clause (§ 32b para. 1 no. 1 EStG).

The progression clause means that the tax-free replacement benefits are added to the taxable income. A special tax rate is then determined for this amount. The taxable income - without the wage replacement benefits - is then taxed at this special tax rate (§ 32b para. 2 EStG). Overall, the progression income leads to higher taxation of your other income.

Most wage replacement benefits are not found in the employer's income tax statement. According to § 32b EStG, these include:

Transitional retirement benefit
Transitional retirement benefit compensation
Unemployment benefit under the Military Pensions Act
Unemployment benefit
Integration assistance under the Employment Promotion Act
Integration assistance under the Social Code
Parental allowance under the Federal Parental Allowance and Parental Leave Act
Compensation for loss of earnings under the Infection Protection Act
Insolvency benefit
Sickness benefit from statutory health insurance
Sickness benefit under the Farmers' Health Insurance Act
Payments from the European Social Fund to supplement bridging allowances
Benefits under the Social Code that serve as livelihood support
Maternity benefit
Special support under the Maternity Protection Act
Tax-free top-up amounts or supplements under § 3 no. 28 EStG
Partial unemployment benefit
Transitional allowance
Maintenance allowance
Compensation for loss of earnings under the Federal Epidemic Act
Injury benefit
Care sickness benefit under the Federal Pensions Act
Allowance under the Maternity Protection Ordinance or corresponding state regulations
Supplement to maternity benefit

ALG II: Kein Progressionsvorbehalt

All tax-free benefits not listed in § 32b EStG are also not subject to the progression clause and therefore do not need to be declared in the tax return. This includes, for example, unemployment benefit II (Hartz IV).

Note: Currently, under the "Corona Tax Assistance Act", employer subsidies for short-time work benefits and seasonal short-time work benefits are tax-free, provided they do not exceed 80 percent of the difference between the target income and the actual income together with the short-time work benefits. This regulation was initially limited from 01.03.2020 to 31.12.2020, but was then extended until the end of 2021. The tax exemption promotes the increase of short-time work benefits by the employer, which is often agreed in collective agreements but also voluntarily due to the Corona crisis (§ 3 no. 28a EStG-new).

The top-up amounts are subject to the progression clause - like the short-time work benefits themselves (§ 32b para. 1 no. 1g EStG).

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(2021) What is the progression clause?

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