From 2021, 90 percent of taxpayers will no longer have to pay the solidarity contribution on their income tax. We show why it makes sense to invest the extra money cleverly. After all, the soli, as the solidarity surcharge is called for short, which was originally limited to one year, has been in effect since 1991. Many taxpayers don't even know their pay slip without this levy, and those who belong to the rest have probably long since got used to the lower net amount after almost 30 years. So it makes sense to invest the unaccustomed additional income - as a nest egg or as part of your old-age provision.
What is the solidarity surcharge?
The solidarity surcharge was introduced in 1991 to finance the burdens of the Gulf War and reunification as well as to support countries in Southern, Eastern and Central Europe. Originally, the Soli provided for a levy of 7.5 per cent of income and corporation tax. The levy from summer 1991 to 1992 resulted in a real burden of 3.5 per cent per year. In the two following years there was no Solibeitrag.
This changed in 1995: the soli was reintroduced - and for an unlimited period. The reason this time was solely the financial costs of German unification. In the first two years, the tax rate was 7.5 percent, then it dropped to 5.5 percent. This rate is still in force today.
How is the solidarity contribution calculated?
The solidarity contribution does not apply to the entire taxable income. It is levied on wage and income tax or on corporation tax. This means that you pay 5.5 percent tax on the tax burden calculated by the tax office.
Until 2020, the following thresholds applied:
- Up to 972 euros in wage and income tax, no soli is due.
- From 972.01 euros to 1,340 euros tax burden, the solidarity contribution increases gradually until the full rate applies from 1,340 euros wage and income tax.
- For married couples assessed jointly, the double limits apply. Up to a tax burden of 1,944 euros, they pay no solidarity surcharge at all. Above that, the tax rate increases until the full 5.5 percent is due from 2,680 euros.
- The solidarity surcharge is also levied on investment income that exceeds the saver's allowance of 801 euros. This contribution remains in place.
Soli abolition: your chance to save
With the abolition of the solidarity contribution for most income groups, a new opportunity arises. You can save without noticing a restriction. Simply invest the plus on your pay slip in a savings plan. Whether it's old-age provision, home ownership, children, financial independence - there are many reasons to save. One of the most effective and at the same time simplest forms for building up your assets is a securities savings plan. This works like a standing order: invest once, pay into your investment automatically and pause or change your instalment at any time if necessary.
Or invest in other investment options:
- ETFs: Perfect for those who want to specifically choose their own investment strategy and keep an eye on prices, while focusing on low costs.
- Funds: Here the investments are put together professionally, so you can sit back and relax, although the fees are somewhat higher.
- Shares: Shares are also possible in a savings plan - perfect for those who are familiar with the stock markets in exness broker singapore and prefer to invest in specific individual stocks.
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