2024 was a hard year for everyone. The collapse of the German traffic-light coalition meant that a lot of proposed legislation never came to be. Not only that, the scope for passing laws is now very limited, at least until the federal elections in February 2025. That being said, there is some relief that will still be provided to consumers this year. We have collected a list of some of the changes they can expect.
Basic tax allowance and child tax allowance increase retroactively for 2024.
The amount of taxable income for which no tax will be charged (known as the Grundfreibetrag or basic tax allowance) increased by 180 euros in 2024, to 11,784 euros. The child tax allowance (Kinderfreibetrag) also increased. This amount was 3,306 euros in 2024, or 6,612 euros for married couples who file their taxes jointly. The changes to these tax allowances were taken into account by employers on payslips for December 2024.
The basic tax allowance and child tax allowance will also increase in 2025 and 2026
Basic tax allowance and child tax allowance will be increased once more. The basic tax allowance will increase to 12,096 euros in 2025, and then again to 12,348 euros in 2026. The child tax allowance will increase to 3,336 euros in 2025, or 6,672 euros for married couples who file their taxes jointly. It will increase again by 78 euros, for a total of 3,414 euros in 2026, or 6,828 euros for married couples who file their taxes jointly.
Increase in child benefit and immediate additional child benefit
The child benefit (Kindergeld) will be raised to 255 euros a month per child as of 1 January 2025. That means 120 euros more for the first and second born children in 2025. On 1 January 2026, the child benefit will increase by 4 euros, for a total of 259 euros per month and child.
The immediate additional child benefit (Kindersofortzuschlag) will also increase by five euros in 2025. That means that families who receive this benefit will get 25 euros per month instead of 20.
The top tax rate now applies at a higher income
The top tax rate of 42 percent, which currently applies at a taxable income of 66,760 euros, will, in 2025, apply only at a taxable income of 68,481 euros, and that number will rise again in 2026 to 69,879 euros. The progression below this amount will also rise, meaning that those with a lower taxable income will also benefit.
SEPA bank transfer update
SEPA instant credit transfers are now a standard feature of every current account and do not cost any more than a ‘normal’ bank transfer. Starting at the end of the year, the recipient must also be verified: this will allow bank clients to compare the name and IBAN of the recipient before approving the payment - which will help identify errors and fraud. Banks will provide information to their customers on how these innovations will benefit them.
New accessibility requirements take effect
The German act on improving accessibility (Barrierefreiheitsstärkungsgesetz) will come into effect on 28 June 2025. That means that for the first time, even private enterprises such as banks will be required to provide accessible electronic services and self-service terminals to their clients. There are transition periods for self-service terminals that are not yet accessible but already in operation.
Increase to the additional earning limit for reduction in earning capacity
Those drawing pensions due to a full reduction in earning capacity (volle Erwerbsminderung) will be able to make an additional 19,661.25 euros of gross yearly earnings as of 01 January 2025. The limit was set at 18,558.75 euros gross yearly earnings in 2024.
Those drawing pensions due to a partial reduction in earning capacity (teilweise Erwerbsminderung) will be able to make an additional 39,322.50 euros gross yearly.
Contact
Kathleen Altmann
press spokeswoman