The Bundestag has enacted significant tax relief measures and increased child benefits to alleviate financial burdens on citizens. This legislative move, supported by the red-green minority government in partnership with the
FDP, aims to counteract the effects of inflation and provide economic relief to families. Starting from 2025, these measures will result in a 7 billion euro reprieve for taxpayers, followed by an additional 6 billion euros in 2026.
The adjustments include raising the basic tax-free allowance, modifying income tax brackets, and increasing the child benefit, child tax allowance, and immediate child supplement. These changes are expected to help families with low to average incomes, especially those bearing the brunt of the economic downturn. A household with two children earning 60,000 euros will see a relief of 306 euros.
Although the Bundestag has approved these changes, they await ratification by the Bundesrat. The changes will not be immediately noticeable, as they are designed to take effect retrospectively from the beginning of the year to address inflationary pressures.
While the measures enjoy broad support, they do face criticism for not including incentives for business investment or improved tax deductions, which some parties had advocated. Additionally, adjustments to the solidarity surcharge exemption thresholds and the immediate child supplement are part of efforts to dismantle the cold progression in taxes. Despite the anticipated state revenue shortfall of 7.2 billion euros in 2025, the initiative marks a significant step in economic relief and social support for German families.
