December allowances for employees. Benefits in Germany. Great news for all workers. The Bundestag has decided to raise the basic income tax allowance. Starting from the beginning of 2024, it will increase by 180 euros. This means that the amount of income that is not taxed will be 11,784 euros. However, the traffic light coalition’s bill still needs to be approved by the Federal Council in November before it can take effect.
Retroactive Increase in Basic Allowance Announced
Along with raising the basic tax allowance, the proposal also includes a higher tax allowance for children. This will increase retroactively to January 2024 by €228, bringing it to €6,612. Generally, each parent is entitled to half of the child benefit (tax classes 4/4). However, depending on the tax bracket, the full amount may be claimed by one parent (tax brackets 3/5).
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If the Federal Council approves, the tax exemption for payroll accounting will be applied retroactively for the entire year in December. This means that the €180 increase will be credited all at once. The process is automatic, and employers will handle the calculations. As a result, you can expect a higher net amount in your account. The German Institute of Taxpayers has done the calculations, according to Merkur.de.
As a result, single individuals earning a gross monthly salary between €2,000 and €7,000 will receive an exemption of about €34. Families with two children earning a gross monthly salary of €3,000 will benefit from an exemption of around €62. For those with a gross monthly salary between €3,500 and €8,000, the exemption will amount to an additional €68 in net income.
Finance 2025/26: Allowance Changes for the Next Two Years
In general, tax deductions are regularly increased to keep up with the cost of living. The government recalculates the subsistence level and adjusts tax deductions accordingly. The Federal Ministry of Finance plans to raise the allowances over the next two years. The basic allowance is set to increase by an additional €312 next year, bringing it to €12,096. In 2026, there will be another increase of €288, raising it to €12,348.
The child allowance has already been raised by €60 to €6,672 for 2025. For 2026, Federal Finance Minister Christian Lindner plans to increase it by €156 to €6,828. However, there is a downside: while the allowances are rising, health insurance contributions are also expected to be higher than initially anticipated next year.