The new year 2024 will again bring legal changes, including to income tax and the child allowance. Families with children will receive relief under certain conditions. And the allowance for income tax has been increased – but may change again over the course of the year. The Northwind HR team has compiled the current adjustments to income tax and the child tax allowance for you.
Allowance for income tax
The annual income tax allowance in 2023 was 10,908 euros. On January 1, 2024, this was increased to 11,604 euros. This means that income up to this limit is tax-free. Income above this amount is subject to tax at the starting tax rate of 14 percent. Depending on the level of income, the tax rate is staggered up to 41, 42 or 45 percent. There have also been changes to the top tax rate of 42%. The threshold for this is now 66,761 euros in annual income (compared to 62,810 euros previously). Only the wealth tax rate of 45% has remained unchanged from EUR 277,826.
Due to high inflation, the federal government is considering adjusting the income tax allowance again. This has not yet been decided and is questionable given the tight financial situation of the budget. It is advisable for those affected to keep an eye on this development. Please note: Anyone receiving parental allowance must add this money to their taxable income, which is then used to calculate income tax.
New regulations for the 2024 child allowance
Parents are entitled to the child allowance or child benefit. It is not possible to claim both. While child benefit must be applied for, child allowances are taken into account via the tax return. To do this, parents must fill in the ‘child annex’.
These are the new rules that will apply from 2024
- Child allowance: 9,312 euros / year for both parents (in 2023: 8,952 euros)
- Child benefit: 250 euros / month for each child (since 2023)
The allowances or child benefits are also available to parents of foster children or adopted children. There is also the option of a so-called child supplement, which parents with a low income can apply for and claim. This is up to 292 euros/month per child (previously: 250 euros), which is decided on an individual basis. However, there are some conditions attached to this:
- Child benefit must be received
- the gross income must be at least 900 euros (couples) or 600 euros (single parents)
- the parents must be able to support themselves
You can rely on our expertise. If you have any questions about income tax or the child allowance, please do not hesitate to contact us!