In this article, you will find out more about financial and tax changes in Germany in 2024.
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Changes in income tax and child benefits
The Inflation Compensation Act brings several changes to what remains in your wallet after paying taxes.
Starting from January 1, 2024, the basic tax allowance in Germany will increase from 10,908 euros to 11,604 euros. For married couples, the allowance will rise to €23,208. This means that all incomes below this threshold are not subject to tax.
In January 2023, the child benefits (Kindergeld) in Germany were increased to 250 euros per child per month. It is expected that this amount will remain the same in 2024.
The child tax exemption (Kinderfreibetrag), ensuring that parents' incomes up to a certain amount are not taxed, will increase from 6,024 euros to 6,384 euros in 2024.
Additionally, the solidarity surcharge is being adjusted. In 2021, it already disappeared for about 90 percent of taxpayers. For the remaining taxpayers, from January 2024, the tax exemption limit will increase by additional 587 euros.
For a more detailed analysis of how much you will take home after deductions from your salary, use the Stiftung-Warentest calculator.
Minimum wage increase
Currently, the minimum wage is 12 euros per hour, but it will increase in two stages: on January 1, 2024, it will rise to 12.41 euros gross per hour, and a year later, to 12.82 euros. In some sectors, there are mandatory minimum wages that already exceed the legally established minimum wage.
Increase in the limit for mini-jobs
What should mini-contractors keep in mind regarding the increase in monthly earnings? "If the overall minimum wage is raised, the limit wage for mini-jobs will also increase", states the Mini-Job Center's website in anticipation of the upcoming year.
According to the advisory center, starting from January 2024, it will increase from 520 to 538 euros per month. The message further mentions, "The annual earnings limit will consequently rise to 6,456 euros."
The introduction of mini-jobs in Germany aims to make it easier for employers to find part-time workers while offering employees a flexible work schedule that can be occasionally used for part-time work, with some tax exemptions.
Bürgergeld will increase by 12%
From January 2024, standard rates for long-term unemployment and social assistance will increase. Single adults will receive 563 euros per month – 61 euros more than before. Adults living with a partner will receive 506 euros instead of the previous 451 euros.
Those living with dependent minors will also receive more, depending on the age of their children. Parents or guardians of young people aged 15 to 18 will receive 471 euros in the future (previously 420 euros). For children aged seven to 14, the rate will increase from 348 to 390 euros. For the youngest children, it will increase from 318 to 357 euros.
School supply allowances
The amounts allocated to school children for personal school supplies will increase by approximately 12% – from 116 to 130 euros in the first half of the academic year and from 58 to 65 euros in the second half of the academic year.
Assistance for acquiring personal school supplies is part of the so-called educational package for children, adolescents, and young people receiving Bürgergeld benefits or social assistance, as well as for parents receiving child benefits (Kinderzuschlag) or housing benefits (Wohngeld).
Changes in parental allowance (Elterngeld) payout
Currently, couples in Germany can receive parental allowance up to an annual taxable income of 300,000 euros. But there were plans to reduce this limit to €150,000 for couples, meaning those with a combined income above this limit would not receive parental allowance.
However, after numerous critical remarks, the coalition government agreed to reduce this limit in two stages: first to 200,000 euros, and then to 175,000 euros. The limit for single parents, currently at 250,000 euros, will be reduced to 150,000 euros.
For parents whose children are born before March 31, 2024, nothing will change. However, from April 1, 2024, a new limit of 200,000 euros will apply to couples, and 150,000 euros for single parents. The new limit of 175,000 euros will apply to couples whose child is born from April 1, 2025.
Unlike Mutterschutz (maternity leave), which is exclusively provided to mothers before and after childbirth, Elterngeld offers paid leave that both parents can share at their discretion. Monthly payments can go up to 1,800 euros to compensate for lost income.
VAT increase in cafes and restaurants
For those who enjoy dining out in cafes and restaurants, significant changes are coming in 2024.
The German government has decided to raise VAT from 7% to 19%.
The tax was lowered as a measure against rising inflation caused by the energy crisis.
The cost of dining in restaurants has already increased significantly, so this will be another blow to people's wallets and will also impact restaurant owners.
Termination of 'price breaks' on energy resources
The term of restrictions on electricity and gas prices in Germany expires at the end of 2023.
Initially, the Bundestag voted to extend the program until the end of March 2024
However, the government decided to end the program earlier than planned after a decision from the highest court disrupted expenditure plans.
This means that electricity bills may increase from the current limit of 0.40 euros per kWh for electricity and 0.12 euros per kWh for gas. However, this will depend on individual tariffs and household consumption.
Insurance premiums for vehicular transport will rise
Insurance premiums for cars and other automotive transport will increase by at least 10% in 2024, according to the Central Consumer Advisory Center of Germany (Verbraucherzentrale).
The main reason for this is the rising cost of repairs due to high inflation. It is worth comparing prices among different providers due to intense competition. If prices increase, consumers have a special right to terminate the contract within four weeks after receiving notification.
Additional contributions to health insurance may increase
From 2024, additional contributions to mandatory health insurance in Germany will be increased by 0.1%.
Thus, these contributions will reach the highest level in history at 1.7%.
Currently, contributions to mandatory health insurance are 14.6%, and additional contributions (set by the health insurance company) can reach 1.6%.
Not all insurance company prefer to charge the maximum additional contribution set by the government. For example, Techniker Krankenkasse currently charges 1.2 percent, while Barmer charges 1.5 percent.
This means that not all people with mandatory health insurance will face an increase in expenses next year, but some insurance company are likely to opt for additional income.
For those who are employed, this may mean that an additional 0.05% of their salary will go towards health insurance – 5 cents for every 100 euros earned – and the remaining 0.05% will be covered by their employers.
Income threshold for health insurance and pensions raised
Most employees in Germany automatically pay contributions to mandatory health insurance and pension insurance from their salary, but there are exceptions for high-income earners.
In 2024, the salary at which an employee can opt out of mandatory health insurance will increase to 69,300 euros per year from the current 66,600 euros. This corresponds to a monthly salary of 5,775 euros before tax deductions.
The so-called 'Beitragsbemessungsgrenze' – the income threshold used to calculate health insurance – will also increase to 62,100 euros in 2024 from 59,850 euros in 2023. Thus, if you earn, for example, 65,000 euros per year, your mandatory insurance will be calculated only as a percentage of 62,100 euros, not your entire salary.
A similar system is used to calculate pension contributions: they are calculated as a percentage of your income, but only up to a certain amount.
In 2024, this amount will be 7,450 euros per month in the former East German states and 7,550 euros in the western states.
Related topics:
The basic tax allowance in Germany will increase to 11,604 euros for individuals and 23,208 euros for married couples, starting from January 1, 2024.
The child tax exemption (Kinderfreibetrag) in Germany will increase from 6,024 euros to 6,384 euros in 2024.
