Reduce health insurance contributions: tax tricks save thousands of euros

legal leeway

Tax tricks save thousands of euros on health insurance

With smart planning, you can save a lot on taxes. There are legal concessions for those with private and voluntary mandatory health insurance.

Rising premiums, higher additional contributions – the insured face higher costs in both private and mandatory health insurance. But at least some of them can get tax benefits. Depending on your personal situation, there are thousands of euros more for you. This is what the Bavarian Payroll Tax Aid shows.

Therefore, privately or voluntarily insured employees, self-employed people, freelancers and civil servants can pay health insurance and care contributions in advance of up to three times the annual amount. This brings two tax saving effects at once:

The tax trick is to separate basic health and care insurance contributions from other pension contributions. The latter is only deductible as a special expense up to a certain maximum amount, which usually won’t do you any good since you’re already over that amount with just basic health insurance.

For employees and civil servants, the maximum amount is 1,900 euros per year, and for self-employed people and freelancers it is 2,800 euros. Other pension contributions include all insurance that affects life and limb – for example liability, accident, occupational disability, additional care, additional health, dental insurance or term life insurance.

According to Bavarian Income Tax Assistance, how much tax you save depends on your personal tax rate, your assessment type, the health insurance contribution model you choose, and the number of additional insurance policies you have.

However, this trick is only suitable for insured people who have enough spare cash. After all, you first have to be able to pay three years’ worth of basic contributions up front. Additionally, you must pay employer contributions first. If you can’t afford it, you can reduce the upfront payments to one or two years – but this will also reduce the tax benefits.

For couples who file a joint tax return, that is, using what is called a joint assessment, this model will only be beneficial if both have private health insurance. Otherwise, the insured’s valid contributions will prevent the reduction of other pension contributions because they themselves have already reached the maximum limit.

But prepayment is still beneficial for these households as well. That is, if you received a severance payment or other type of special payment in the year in which you collected contributions. Because this increases your tax rate. The cost of bundled contributions, in turn, reduces your taxable income – and therefore the tax rate.

If you are considering prepayment, you should contact your health insurance company first, advises the Bavarian Income Tax Agency: “In the best case scenario, you can save even more. Some health insurance companies offer insureds reduced premiums or discounts for prepayment. Depending on the private health insurance, the amount can be up to five percent.”