Travel allowance insurance is tax-deductible: Secure maximum benefits
3 Jun 2025
10
Minutes
Katrin Straub
CEO at nextsure
A prolonged illness can quickly lead to financial difficulties, especially for the self-employed. Find out how a daily allowance insurance is tax-deductible and ensures your financial security in case of an emergency.
The topic in brief and concise terms
Contributions to private daily sickness insurance can be deducted as precautionary expenses up to 1,900 euros (employees) or 2,800 euros (self-employed) annually, but are often already covered by basic health insurance contributions.
Benefits from a private daily sickness allowance insurance are completely tax-free and are not subject to the progression clause, unlike statutory sickness benefit.
For freelancers, sickness benefit insurance is especially important, as they often do not receive continued pay; the insured sum should not exceed the net income.
Understanding the Tax Basics of Daily Sickness Allowance Insurance
You can generally state the contributions to a private daily sickness insurance in your tax return as other precautionary expenses. These are entered in the “Vorsorgeaufwand” section, in line 27 since the year 2019, or under “Wahlleistungen und Zusatzversicherungen” when using ELSTER. For employees and pensioners, there is an annual maximum amount of 1,900 euros, and for self-employed individuals, it is 2,800 euros. However, these amounts are often already exhausted by the contributions to basic health and long-term care insurance. Therefore, an additional tax saving through the daily sickness insurance is often only possible to a limited extent. The good news, however, is that the benefits from a private daily sickness insurance are tax-free in the event of a claim. This is a significant advantage over the sickness benefits of statutory health insurance. The exact regulations and how you can make optimal use of them are crucial for your financial planning.
Deduct expenses: How to maximise your tax savings
Although the maximum amounts for precautionary expenses are quickly reached, it is worth correctly specifying the contributions to your daily allowance insurance. Every euro counted within the tax-free allowance reduces your taxable income. For married couples who file jointly, the maximum amounts double to 3,800 euros (both employed) or 5,600 euros (both self-employed). If one partner is employed and the other self-employed, the joint maximum amount is 4,700 euros. Therefore, carefully check whether your total precautionary expenses already exceed these limits. A thorough documentation of all insurance contributions is essential here. Note that contributions to the worthwhile daily sickness allowance insurance only have a tax impact if the maximum amount has not already been reached by other priority insurances like basic health insurance. The tax treatment can be complex, so it is advisable to analyze your own situation carefully.
Tax-free benefits: The great advantage of private daily allowance insurance
A significant advantage of private daily sickness allowance insurance is the tax exemption of the benefits paid out. In contrast to the sickness benefit of the statutory health insurance (GKV), which is subject to the progression proviso, the private daily sickness allowance does not affect your tax rate on other income. This means you receive the agreed sum, for example, 100 euros per day, net without deductions. This advantage can provide significant financial relief over a prolonged period of illness. The Federal Fiscal Court confirmed in its ruling (Az. III R 36/13) that this different treatment of GKV sickness benefit and private daily sickness allowance is constitutional. This regulation offers a reliable basis for calculation in the event of a claim. For comprehensive coverage, it is important to know the difference between sickness benefit and daily sickness allowance precisely. The tax-free payout ensures you up to 100 percent of your insured daily rate in case of an eventuality.
Case Study: Tax Implications in Comparison
To illustrate the difference, let’s consider an example. Suppose an employee has a taxable annual income of 40,000 euros. Without wage replacement benefits, they pay 8,976 euros in income tax (tax rate approximately 22 per cent). If they receive sickness benefit from the statutory health insurance, for example 10,000 euros annually, this remains tax-free but increases the income relevant for tax rate purposes to 50,000 euros. As a result, the tax rate for the 40,000 euros rises, leading to a higher overall tax burden. However, if they were to receive 10,000 euros from a private daily sickness allowance insurance, their tax rate for the 40,000 euros remains unchanged, as the private daily sickness allowance is not subject to the progression proviso. This difference can mean a tax saving of several hundred euros per year. The exact calculation depends on many individual factors. An insurance and tax assessment should therefore always be individualized.
Here are the key differences summarized:
Private daily sickness allowance: Payment is 100 percent tax-free and not subject to the progression proviso.
Statutory sickness benefit: Payment is tax-free but subject to the progression proviso (from 410 euros per year).
Contributions to private daily sickness allowance insurance: Deductible as other pension expenses, but often capped by upper limits.
Contributions to statutory health insurance (including sickness benefit proportion): Largely deductible as basic provision.
This distinction is particularly relevant for long-term financial planning in case of illness.
Special Case for the Self-Employed: What You Need to Consider
For the self-employed, daily sickness allowance insurance is often the only protection against loss of income due to illness, as they generally do not receive continued payment from an employer. You can claim the contributions as special expenses up to a maximum of 2,800 euros annually, provided this amount is not already covered by basic health and nursing care insurance. The key factor here is choosing the right policy that compensates for income loss from the desired point in time, often from the eighth or 15th day of illness. The amount of insured daily sickness allowance should not exceed the average net income of the last twelve months. Some insurers base this on 70 to 80 percent of pre-tax profits. Be sure to clarify this calculation basis before signing the contract. For the self-employed, daily sickness allowance is an existential safeguard. The tax-free benefits in the event of illness are an essential component of financial stability.
Expert Depth: Recent Judgments and Regulations
The tax treatment of daily sickness benefits insurance is based on various legal foundations and court rulings. Key for the deductibility of contributions as insurance expenses is § 10 of the Income Tax Act (EStG). The tax exemption of benefits from private daily sickness benefits insurance and the non-application of the progression clause arise from § 3 No. 1a EStG in conjunction with case law, particularly the Federal Fiscal Court (BFH) ruling of 13 November 2014 (III R 36/13). This ruling confirms that the unequal treatment of statutory sickness benefits (subject to progression pursuant to § 32b Para. 1 No. 1b EStG) and private daily sickness benefits (without progression) is constitutional. Our expert tip: Keep an eye on current legislative changes and court rulings, as these may affect your tax return. When you have questions regarding the deductibility of insurances, expert advice is often helpful. It is important to know how long sickness benefits are paid and what tax implications this has.
Key aspects from case law and legislation:
§ 10 EStG regulates the deductibility of insurance expenses.
§ 3 No. 1a EStG covers tax-free income, which also includes private daily sickness benefits.
§ 32b EStG defines the progression clause, which does not apply to private daily sickness benefits.
The BFH ruling III R 36/13 confirms the differing tax treatment of statutory and private daily sickness benefits.
The maximum limits for insurance expenses (1,900 euros / 2,800 euros) often limit the deductibility of daily sickness benefits contributions.
These points illustrate the complexity but also the clear advantages of the private solution.
Design Tips: How to Optimize Your Coverage and Tax Benefits
To make the most of your daily allowance insurance for tax purposes, there are a few points to consider. Choose an appropriate amount of daily sickness benefit; this should cover your net income but not exceed it to avoid issues with the so-called prohibition of enrichment. Pay attention to the waiting period: A longer waiting period (e.g. payout from the 43rd day) can reduce premiums, which is particularly sensible if you initially receive six weeks of continued salary payment as an employee. Our expert tip: Regularly review your contracts and adjust them as needed to reflect changes in your life circumstances or income situation. This is especially important if your private health insurance doesn't pay the daily sickness benefit or if there are reductions. Combining this with an occupational disability insurance can also be prudent to cover long-term income losses. A well-thought-out strategy ensures you have the necessary financial flexibility in the event of a claim and makes the most of potential tax advantages.
Conclusion: Thoughtfully create financial security
More useful links
Bundesfinanzministerium provides insights into tax fundamentals and annexes relevant to daily sickness allowance insurance.
Gesetze im Internet offers the exact wording of § 10 of the Income Tax Act (EStG), which governs the deductibility of provision expenses.
Bundesgesundheitsministerium provides comprehensive information on the sickness benefits of statutory health insurance.
Statistisches Bundesamt (Destatis) provides detailed data on health expenditures in Germany.
Statistisches Bundesamt (Destatis) offers current statistical data and insights in a press release.
Gesetze im Internet provides the Insurance Contracts Act (VVG) of 2008, which regulates the legal framework for insurance.
VLH (Vereinigte Lohnsteuerhilfe e.V.) informs about which insurances are tax-deductible.
FAQ
How much tax do I have to pay on sickness benefit?
You do not pay taxes on sickness benefits from private insurance. It is completely tax-free and also does not affect your tax rate for other income.
Is a daily allowance insurance worth it for tax purposes?
The tax deductibility of contributions is often limited by maximum amounts, which are usually already exhausted by the basic health insurance. The main advantage lies in the tax-free benefits in the event of illness, which are not subject to the progression clause.
What is the progression proviso regarding sick pay?
The progression clause means that tax-free income (such as statutory sickness benefits) is not taxed itself, but increases the taxable income used to determine the tax rate. This can cause the tax rate for your other taxable income to rise. Private sickness benefits are not subject to this clause.
Do self-employed people need to pay taxes on sick pay?
No, even self-employed individuals do not have to pay taxes on daily sickness benefits from a private insurance plan. The benefits are tax-free. Contributions can be deducted as precautionary expenditures within the maximum limits (€2,800), provided these limits are not otherwise fully utilized.
Which types of insurance can I deduct besides the daily allowance insurance?
In addition to contributions to basic health and long-term care insurance, contributions to other types of insurance (e.g. accident, liability, disability insurance) can also be deducted within the maximum limits for special expenses. The actual impact depends on whether the maximum limits have already been reached.
Is there a difference in the tax treatment of sickness benefit for employees and civil servants?
The tax treatment of the contributions and benefits of a private daily sickness benefit insurance is basically the same for employees and civil servants. For both groups, the maximum deductible amount for insurance contributions is 1,900 euros. The benefits are tax-free for both groups.
