For many people in Germany, two innovations will mean more money on their payroll in December 2024. And there are further opportunities for financial help.
Every two years, the federal government presents a report on the level of the subsistence minimum for adults and children to be exempt from income tax – the so-called subsistence minimum report. The basic tax allowance and the basic child tax allowance were set for 2024 based on the 2022 report.
However, since the standard social law requirements have increased more sharply as of January 1, 2024 than predicted in the report, adjustments will now be made. This in turn means that the basic allowance and the child allowance should increase retroactively for 2024. Employees should see this on their payslip for December 2024.
Basic allowance and child allowance are increased: December plus on the payslip
A bill provides for the changes. This has already been passed by the Federal Cabinet and approved by the Bundestag. The draft will go to the Federal Council in November. The allowances are also to be increased for the years 2025 and 2026. But what does that mean financially?
Basic allowance
The basic allowance basically serves to secure the subsistence level. Taxable income that is below the subsistence level (= the basic allowance) is not subject to income tax. Income tax only has to be paid when the taxable income exceeds the defined basic allowance. The basic tax allowance is available to every taxpayer and is automatically taken into account for everyone. No separate application is required.
The basic tax-free allowance for singles or single people is currently 11,604 euros per year. For married people it is 23,208 euros. This means that income up to this amount is not taxed. Only the 11,605th. Euro or the 23,209th. Euros are taxed.
- Retroactively, the basic allowance should now increase by 180 euros to 11,784 euros for single people.
- For married people it is 360 euros.
- The child allowance should also be increased: by 228 euros to a total of 6,612 euros for both parents together.
- There will also be more child benefit for parents and children from 2025 – but the amount is heavily criticized.
What is the child allowance?
According to the definition, the child tax allowance is a tax allowance in German tax law. It is similar to the basic allowance. With the basic allowance, the subsistence level of the respective person is exempt from tax, while the child allowance is about the subsistence level of the child or children.
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The portal of the Federal Ministry for Families, Senior Citizens, Women and Youth explains how long parents can receive the allowance for a child. Normally, it says, you can receive the amounts until the child turns 18. After that, you can only get the allowances under additional conditions.
Until the child turns 21, it is possible if: The child is not employed and is registered as looking for work in Germany. In special cases you receive the child tax allowance up to the age of 25:
- if your child is doing training or studying; or
- if your child is in a transition period of a maximum of 4 months between two phases of training or training and basic military or community service; or
- if your child cannot start or continue their vocational training because they cannot find a training place; or
- if your child is doing a voluntary social year, a voluntary ecological year, a federal voluntary service or an international youth voluntary service; or
- if your child is abroad as a development worker or service provider (according to Section 14b of the Civil Service Act).
Important: If your child cannot care for themselves due to a disability, you are entitled to the allowance regardless of your child’s age. The prerequisite for this is that the disability occurred before your child reached the age of 25.
Child allowance as further help in addition to the child allowance
In addition to the basic allowance and the basic child allowance, there is another financial support for families – the child allowance.
According to that Federal Ministry for Family, Senior Citizens, Women and Youth (BMFSFJ) This supplement is intended to help working parents. If they earn enough for themselves, but it is not or only barely enough to cover all of the family’s needs. Since January 2024, the child allowance has been up to 292 euros per month per child. Together with the child benefit, the child’s needs should be covered.
The child allowance can be paid for every unmarried child up to the age of 25 if the following requirements are met according to the ministry:
- The child lives in their own household and you receive child benefit.
- According to the BMFSFJ, income must not fall below a certain minimum limit. This limit is currently 900 euros gross for couples and 600 euros gross for single parents.
- You have enough income for yourself and together with the child allowance, child benefit and any housing benefit you may be entitled to, the family’s needs can be met.
- The income that is counted towards the child allowance is not so high that the child allowance is reduced to zero.
Important: You can also receive the child allowance if your earned income, the child allowance and the housing benefit do not remain more than 100 euros below the SGB II entitlement. (The SGB is the social code. SGB II is about benefit entitlement)
Traffic light initiates tax reform: What relief is still planned?
The increase in allowances should then be noticeable on the payroll in December 2024. The employer has to take care of this. The traffic light coalition has launched a major tax reform. Taxpayers should be relieved and the consequences of inflation mitigated.
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