Increase in the Basic Tax-Free Allowance

The basic tax-free allowance for 2024 has been raised by EUR 696 to EUR 11,604 and retrospectively adjusted by a further EUR 180 to EUR 11,784. This allowance serves to exempt the subsistence level from tax, so that income up to this amount remains tax-free. The increase in the basic allowance leads to a reduction in the tax burden for all taxpayers and thus contributes to an increase in net wages.

Adjustment of the Income Tax Tariff

To mitigate the effects of so-called "cold progression", the tariff threshold values of the income tax tariff have been shifted. This ensures that wage increases which merely compensate for inflation do not lead to a higher tax burden. This measure aims to maintain the purchasing power of employees and avoid a creeping tax increase.

Increase in the Allowance for the Solidarity Surcharge

The allowance for the solidarity surcharge has been raised to EUR 18,130 for single filers and EUR 36,260 for joint filers. This adjustment means that more taxpayers are exempt from the solidarity surcharge, which represents direct relief for many taxpayers.

Increase in the Child Allowance

The child allowance for 2024 has been increased by EUR 360 to a total of EUR 9,312 per child. This allowance consists of two components: the allowance for the child's material subsistence minimum (EUR 6,672) and the allowance for care, upbringing, or training needs (EUR 2,640). This measure serves to provide tax relief for families and ensures that the subsistence minimum of children remains tax-free.

Raising the Income Limits for the Employee Savings Allowance

The income limits for the employee savings allowance have been doubled: for single persons, the income limit is now EUR 40,000, and for married persons EUR 80,000. This increase ensures that more employees are entitled to the savings allowance, which is granted for capital-forming benefits. This makes saving for the future easier and more attractive.

Planned Abolition of Tax Classes III and V

From 2030, tax classes III and V are to be abolished and replaced by the so-called factor procedure of tax class IV. This change is intended to lead to a fairer distribution of the tax burden between spouses and at the same time simplify the tax system. The factor procedure enables a more precise consideration of the individual incomes of both partners and thus avoids extreme tax burdens or advantages.

Employment Expenses

The employee lump sum, also known as the employment expenses lump sum, was already raised to EUR 1,230 for 2023. Employees can deduct this amount automatically without having to prove individual employment expenses. If the actual professional expenses are higher, these can of course still be claimed.

In addition, the lump sum for professional drivers who sleep in the vehicle has been raised to EUR 9 per calendar day. This is intended to take account of the special conditions of the profession and contribute to appropriate tax relief.

Home Office Lump Sum

The home office lump sum has been raised from EUR 5 to EUR 6 per day from the 2023 assessment period onwards, with a maximum annual cap of EUR 1,260. This is intended to accommodate employees who work from home and recognise the costs incurred by working from home for tax purposes.

Changes to Maintenance Payments

The maximum amount for the deduction of maintenance payments to needy persons has been raised to EUR 11,784 for 2024. This amount is based on the basic tax-free allowance and is adjusted annually. From 2025, maintenance expenses must also be made by non-cash means in order to be recognised for tax purposes. Cash payments will no longer be taken into account from this point onwards.

Effects of the Basic Tax-Free Allowance on Country Group Classification

The country group classification serves to adjust maintenance payments to persons living abroad for tax purposes to the local cost of living. Depending on the assignment of the state of residence of the maintained person to a specific country group, the deductible maximum amount is reduced proportionally:

• Country group 1: 100% of the maximum amount (EUR 11,784)
• Country group 2: 75% of the maximum amount (EUR 8,838)
• Country group 3: 50% of the maximum amount (EUR 5,892)
• Country group 4: 25% of the maximum amount (EUR 2,946)

For example, Spain was reclassified from country group 1 to country group 2 from 1 January 2024, meaning that maintenance payments to persons living in Spain can now only be deducted for tax purposes up to 75% of the maximum amount. This adjustment is intended to take account of the different costs of living in the respective countries and enable a fair tax treatment.