To provide relief across all income groups in light of rising mobility costs, the distance allowance (Entfernungspauschale) was increased from 2021 onwards. Under a new draft bill from the Federal Ministry of Economic Affairs, it is set to rise even further in 2022. The increased commuter allowance can generally be assessed positively, as commuters in particular can reduce their income tax burden through a higher deduction of work-related expenses. Disadvantages arise only for individuals whose taxable income falls below the basic tax-free allowance (Grundfreibetrag: €9,984 in 2022), as they do not pay any income tax. As a result, the increased work-related expenses do not produce any relief effect. Yet it is precisely these income groups that are particularly affected by rising energy prices. To address this issue, the legislator has introduced the mobility premium (Mobilitätsprämie).
Requirements for the Mobility Premium
As a basic prerequisite, the individual must be subject to either unlimited or limited income tax liability in Germany pursuant to § 1 EStG. In addition, the person must be a commuter who travels at least 21 kilometres between their home and their primary place of work. Furthermore, the taxable income (after deduction of work-related expenses, special expenses, etc.) must fall below the basic tax-free allowance.
Calculation of the Mobility Premium – Employees
The assessment basis is the increased distance allowance from the 21st kilometre onwards (€0.35 in 2021; expected to be €0.38 in 2022), as it is in this range that lower income groups are presumed to be disadvantaged. The increased distance allowance is then multiplied by the number of kilometres travelled exceeding the 20th kilometre and by the number of days on which this distance was covered. The resulting product is then compared with the difference between the taxable income and the basic tax-free allowance. If the product of the increased distance allowance is higher, this amount is used as the assessment basis for the mobility premium. If the difference between the taxable income and the basic tax-free allowance is higher, this difference forms the assessment basis. Finally, the determined amount is multiplied by the mobility premium rate of 14%. This percentage corresponds to the entry tax rate in the income tax schedule, with the aim of achieving an effect in this income bracket comparable to a deduction of work-related expenses. However, the mobility premium is granted only if the total work-related expenses in the assessment period exceed the lump sum for work-related expenses (Werbungskosten-Pauschbetrag) of €1,000.
Given the many individual factors involved, the calculation of the mobility premium is highly complex. We therefore use the following examples for further illustration:
Example 1:
In 2021, an employee travels from her home to her primary place of work on 150 days. The one-way distance is 45 km. Her other work-related expenses in 2021 amount to €600 and her taxable income is €7,500.
Calculation of Work-Related Expenses
Amount
150 working days * 20 km * €0.30 (for the first 20 km)
€900
150 working days * 25 km * €0.35 (from the 21st km)
€1,312.50
Other work-related expenses
€600
Total
€2,812.50
After deducting the lump sum for work-related expenses, €1,812.50 remains.
Of the calculated total of work-related expenses, €1,312.50 is attributable to the increased distance allowance. The taxable income exceeds the basic tax-free allowance in 2021 (€9,744) by €2,244. The increased distance allowance of €1,312.50 thus falls below the difference between taxable income and the basic tax-free allowance, and has not produced any tax relief in the amount of this figure.
The assessment basis for the mobility premium is therefore the increased distance allowance.
€1,312.50 * 14% = €183.75
Example 2:
In 2021, an employee travels from her home to her primary place of work on 150 days. The one-way distance is 45 km. Her other work-related expenses in 2021 amount to €600 and her taxable income is €9,000.
Calculation of Work-Related Expenses
Amount
150 working days * 20 km * €0.30 (for the first 20 km)
€900
150 working days * 25 km * €0.35 (from the 21st km)
€1,312.50
Other work-related expenses
€600
Total
€2,812.50
After deducting the lump sum for work-related expenses, €1,812.50 remains.
Of the calculated total of work-related expenses, €1,312.50 is attributable to the increased distance allowance. The taxable income exceeds the basic tax-free allowance in 2021 (€9,744) by €744. The increased distance allowance of €1,312.50 thus exceeds the difference between taxable income and the basic tax-free allowance.
The assessment basis for the mobility premium is therefore the difference between taxable income and the basic tax-free allowance.
€744 * 14% = €104.16
Application and Assessment of the Mobility Premium
The mobility premium is granted by the tax office upon application. The application must be filed within the first four calendar years following the calendar year for which the mobility premium is claimed. The application form can be found in the tax return under "Mobility Premium 2021" and can be submitted together with the income tax return. The mobility premium is only assessed if it exceeds €10.
Frequently asked questions
Frequently asked questions
What is the mobility allowance and who was it created for?
The mobility allowance (Mobilitätsprämie) is a state subsidy for low-income commuters whose taxable income falls below the basic tax-free allowance (2022: €9,984). Since these individuals pay no income tax, the increased commuter allowance (Entfernungspauschale) would have no relieving effect for them. The Mobilitätsprämie provides compensation so that low earners can also benefit from the increased commuter allowance.
What requirements must be met to qualify for the commuter mobility bonus (Mobilitätsprämie)?
The applicant must be subject to unlimited or limited income tax liability in Germany under § 1 EStG and must be a commuter traveling at least 21 kilometers (one-way) between their home and primary place of work. In addition, the taxable income—after deducting work-related expenses (Werbungskosten) and special expenses (Sonderausgaben)—must fall below the basic tax-free allowance (Grundfreibetrag), and total work-related expenses must exceed the standard allowance of €1,000.
How is the mobility premium calculated?
The basis of assessment is the increased commuter allowance from the 21st kilometer onwards (2021: €0.35/km; 2022: expected €0.38/km), multiplied by the kilometers exceeding this threshold and the number of working days. This product is compared with the difference between the basic tax-free allowance and the taxable income; the lower of the two values forms the basis of assessment. A premium of 14% (corresponding to the entry-level tax rate) is granted on this amount.
How and when is the mobility premium applied for at the tax office?
The mobility premium (Mobilitätsprämie) is granted by the Finanzamt upon application; the relevant form is part of the income tax return and can be submitted together with it. The application must be filed within four calendar years following the year for which the premium is claimed. It is only assessed if the calculated premium exceeds €10.
From which kilometre does the increased commuter allowance for the mobility premium apply?
The increased commuter allowance applies from the 21st kilometre of distance and amounts to €0.35 per kilometre in 2021, and an expected €0.38 per kilometre in 2022. For the first 20 kilometres, the regular rate of €0.30/km still applies. Only the increased allowance from the 21st kilometre onwards forms the basis for calculating the mobility premium.