In the new year, taxpayers can look forward to relief. Depending on your income, a few hundred euros end up in your account.
The traffic light coalition has launched some tax relief, which will come into force from 1 January 2024. Employees and the self-employed will then have significantly more net salary left over than before. Families and single parents with children benefit the most.
So much more money is left for employees thanks to the tax breaks
The Handelsblatt asked the financial scientist Frank Hechtner from the University of Erlangen-Nuremberg to calculate how much relief taxpayers can expect depending on their salary. According to him, a single person with a gross monthly salary of 3,000 euros is left with about 172 euros more per year. A single person with a salary of 5,000 euros per month can look forward to an additional 292 euros. Single parents with one child will be relieved even more: with an income of 2,500 euros, the net increase by 161 euros.
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In 2024, employees can look forward to more net of gross.
© Zoonar/Imago
The adjustment is also particularly pleasing for families with two children: If one spouse earns 3,000 euros and the other 4,000 euros, 542 euros more will end up in the account at the end of the year. A family with a top income of 16,000 euros can even look forward to an additional 1,600 euros in net income.
Other examples of tax relief depending on salary and family constellation:
- Single with a gross salary of 2,500 euros per month: + 153 euros
- Single parent with one child and a salary of 4,000 euros: + 233 euros
- Families with two children, 1st spouse with 2,500 euros salary, 2nd spouse with 5,000 euros salary: + 568 euros
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Why will employees have more net of gross from 2024?
With the adjustments as of 1 January 2024, the German government wants to compensate for the so-called "cold progression". This refers to a kind of creeping tax increase, which comes about when a salary increase is completely eaten up by inflation, but still leads to higher taxation for the employee. This is because the tax burden increases faster than the salary. As a result, despite a salary increase, those affected have less money in their pockets in reality.
The traffic light coalition wants to counteract this effect by raising the basic tax-free allowance from next year. This means that employees are allowed to earn up to 11,604 euros per year without having to pay taxes. Currently, the limit is 10,908 euros. In addition, the child tax allowance will be increased from 6,024 euros to 6,384 euros. The tax relief amounts to a total of around 35 billion euros.
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Relief will be reduced by higher social security contributions
However, there is one downside: taxpayers will have to reckon with higher social security contributions from next year. For example, the average additional contribution rate in statutory health insurance for insured persons will rise from 1.6 to 1.7 percent.
In addition, the Federal Government is tightening the contribution assessment limits in statutory health and pension insurance. In statutory health and long-term care insurance, it will rise uniformly nationwide to 5,175 euros per month (62,100 euros per year) – an increase of 187.50 euros. In the case of general pension insurance, the contribution assessment ceiling will increase by 350 euros to 7,450 euros per month in the new federal states and by 250 euros to 7,550 euros in the old federal states.
What is the contribution assessment ceiling?
Each employee pays social security contributions from his gross salary. The more employees earn, the more they pay in. However, the contributions are capped, i.e. they are only levied at a certain income limit – the so-called contribution assessment ceiling. Income above the limit is non-contributory.
According to Hechtner's calculations, this amounts to an additional burden of 710 euros in social security contributions for a single person. For a high-earning family, it is a maximum of 541 euros more in social security contributions. "The truth is that a not insignificant part of the tax relief is eaten up by the increased social security contributions," said the financial scientist, according to Handelsblatt. However, in his calculations of the tax relief for 2024, he has taken into account the increased social security contributions. The same applies to changes that came into force in 2023 – including the higher contribution rate in long-term care insurance for employees, which will provide for a higher long-term care allowance from 2024.
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