The advance payment allows for a higher special expense deduction and is beneficial for individuals in years with higher income, where the deduction can lower the tax burden. People with statutory health insurance can deduct 96% of their health insurance contributions from their taxable income. The deduction is made directly from gross income. Those with private health insurance can only deduct around 80% of their health insurance premiums for tax purposes and only receive their tax refund via their income tax return. Thanks to tax-optimised advance payment of premiums for 1 + 3 years, privately insured persons benefit from a higher deduction of special expenses and a reduction in premiums of up to 4%.
How does the whole thing work exactly?
Since 2020, privately insured persons can legally save several thousand euros in income tax by making an advance payment of up to three times the annual contribution (= 36 monthly contributions). Before 2020, this prepayment was only possible in the amount of 2.5 times the annual contribution. This possibility arises from § 10 Abs. 1 Nr. 3 Satz 4 EStG.
In addition, other insurance contributions such as premiums for occupational disability insurance, term life insurance, private liability insurance or the contribution to the daily sickness allowance can be fully claimed in the next three years up to the maximum limits according to § 10 para. 4 EStG (EUR 1,900 for employees or EUR 2,800 for self-employed persons).
This "special expenditure pot" is otherwise regularly already "used up" by the private or statutory health insurance - which is cleverly prevented by the advance payment of the health insurance contribution.
The total tax benefit can be about EUR 3,000 to 5,000, depending on the amount of contributions to health insurance and other insurances and the personal tax rate. IMPORTANT: Advance payments should therefore always be made before 22 December so that the tax office recognises them as pension expenses for the year of payment.
Disclaimer: This article does not constitute tax advice and is only intended to draw attention to differences in the exercise of individual options.
verantwortlich i. S. d. TMG
Tax Hack - Advance payment of health insurance
Privately insured individuals can save taxes on their health insurance contributions and receive up to 4% discount on their PKV contribution through tax-optimized advance payments.