German tax cuts and benefits overhaul approved by Bundestag
At the end of Olaf Scholz's coalition government, several important changes for citizens were enacted. Among the changes are higher tax reliefs and an increase in the Kindergeld family allowance.
Deutsche Welle reports that on Friday, December 20, the Bundesrat voted in favour of legislative changes beneficial for Germans. Earlier, the regulations were passed in the Bundestag.
This is all thanks to the SPD and the Greens' agreement with the FDP (a party that left Olaf Scholz's coalition in November 2024). This gives the green light to implement regulations planned for the next two years.
Higher tax reliefs in Germany. here are the amounts
One of the changes is to adjust the basic tax-free amount to inflation. According to the proposal, in 2025, the threshold will increase to 12,096 euros, meaning an increase of 312 euros. Meanwhile, in 2026, the amount will reach 12,348 euros, which is 252 euros higher. Furthermore, the authorities also want to adjust the reliefs from the solidarity tax.
The tax reductions are intended to compensate for the burdens resulting from "cold progression." This concerns higher tax rates for employees, despite the fact that the increase in their income is fully or partially offset by inflation, reports DW.
Kindergeld increase, nationwide ticket extended
Additionally, in 2025, the Kindergeld family allowance will also increase. After an increase of 5 euros, the allowance will be 255 euros per month (about $374 CAD). In 2026, the allowance is expected to be 259 euros per month (about $380 CAD).
It is worth highlighting in this context that, unlike the one-time revaluation of the 500 plus (from 2024, parents receive 800 plus), Kindergeld is regularly increased. In 2010, the allowance was 180 euros per month (about $265 CAD at the current exchange rate).
The tax-free amount for having children will initially increase by 60 euros, followed by another 156 euros. The child supplement for low-income families eligible for social benefits will increase by 5 euros in 2025. This will be a one-time increase.
During a speech in the Bundesrat, German Finance Minister Jörg Kukies (SPD) pointed out that only through tax reductions will citizens notice an improvement in their finances.
Furthermore, financial security for the country-wide ticket (known as the Deutschlandticket) in public transport for 2025 was approved. The nationwide ticket is expected to cost 58 euros per month next year (about $85 CAD). Currently, 13 million people use it, but a decision has not yet been made on whether it will be maintained in 2026.
