What happens if the 50-euro limit is exceeded by just a few euros?

The difference between the exemption threshold and the tax-free allowance is the most costly mistake in supplementary health insurance taxation.

Exemption Threshold Instead of Exemption Amount

With a tax-exempt allowance, the portion up to 50 euros would remain tax-exempt, and only the amount above that would be taxable. With a tax threshold, the tax exemption is completely lost as soon as the threshold is exceeded—even by just one cent.

• For a monthly premium of 49 euros: tax- and social security-free; employer cost: 49 euros
• With a monthly premium of 51 euros: it is not 1 euro that is taxed, but 51 euros—plus social security contributions on the entire amount

So a two-euro increase in premiums results in a jump in costs that is many times that amount.

The four variants above the boundary

• § 37b of the Income Tax Act (EStG): a flat rate of approximately 30 percent; applicable immediately without the need to file a claim, but still subject to social security contributions
• § 40(1) EStG: individual average tax rate, subject to application, but in return, exempt from social security contributions
• Net Pay Taxation: The employer pays the tax and both social security contributions
• Benefit in Kind, Such as Salary: Employees Pay Taxes and Their Own Share Themselves

Two Pitfalls

First, other non-cash benefits can also push the limit, causing the supplementary health insurance plan to become invalid even with a low premium.

Second, a premium adjustment by the insurer can cause a plan that started at 47 euros to subsequently exceed the limit. Both of these factors should be reviewed regularly, not just when the contract is signed.