Tax Treatment of € 1 Jobs

"Hartz IV" seekts to accomplish the seemingly impossible task of reducing the numbers of unemployed. One of its instruments is the so-called € 1 job, obligating physically healthy people to work for charitable or public activities. Since these unemployed persons are receiving an income, is this subject to taxation?

Employees working for municipalities, statutory body (Anstalt des öffentlichen Rechts) public foundations (Stiftungen des öffentlichen Rechts) or other charitable [gemeinnützige or charitable] employers (gGmbH [Charitable Limited Liability Company], e.V. [= registered association, very often but necessarily charitable]) will not pay a cent of taxes on that income.

The next question is: How is this income treated in relation to taxation? The state tax office in Hanover says that € 1 jobs, unlike unemployment benefits, are not subject to the reservation of tax progression. Reservation of tax progression means that such income itself will not be taxed, but only increases the sum of taxable income, which leads to higher taxation. The bad news is that you cannot deduct any expenses related to € 1 jobs. Even if the labor office orders you to work on the opposite end of town, you may not deduct your travel costs.




Published on the old CMS: 2007/2/9
Read on the old CMS till November 2008: 1,299 reads