Tax relief: This is how employees, pensioners and families benefit from Lindner's plans

Created: 08/11/2022, 09:14

By: Patricia Huber

With Lindner's tax relief, the high inflation should be compensated.

But who actually benefits and how?

An overview.

Berlin – With the so-called Inflation Compensation Act, Federal Finance Minister Christian Lindner wants to relieve around 48 million citizens.

He explained exactly what that should look like on Wednesday (August 10) in a press conference.

He has repeatedly emphasized that the law is intended to support “middle of society” in particular.

But how exactly will the law impact individual consumer wallets?

Tax relief: This is how much money employees receive on average

The following changes are specifically planned:

• The basic allowance will increase by 285 euros to 10,632 euros on January 1, 2023

• In 2024, the basic allowance is to increase again by EUR 300 to EUR 10,932

• In order to compensate for the cold progression, the so-called basic tariff values ​​will be shifted and with them all tax rates.

  The top tax rate for 2023 will then start at EUR 61,972 (previously EUR 58,597)

As a result of these changes, employees in particular with small and medium-sized incomes receive more net than the gross and salary increases are not eaten up so quickly by wage tax.

On average, this should result in an increase of 193 euros in consumers' wallets if their income does not change.

Low incomes should be relieved the most.

The website of the Federal Ministry of Finance states: "In particular, families, low earners, employees and pensioners benefit from the measure."

What is the cold progression?

The term "cold progression" describes a kind of creeping tax increase, when a pay rise is completely eaten up by inflation, but still results in higher taxation.

Result: Although the salary has increased, you actually have less money in your pocket.

Table shows: That's how much money remains for taxpayers thanks to the relief law

The following table shows specifically how citizens will be relieved in the coming year compared to the 2022 tax rate.

The figures in it come from the Federal Ministry of Finance and the amount of taxable income mentioned includes any child allowances and other tax-reducing deductions.

The salary listed there does not correspond to the gross annual salary.

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In 2024, the relief in the individual salary brackets will be even higher.

You can read the entire table here.

Tax relief: This is how families should be helped

But not only employees should be relieved in times of high inflation.

Something is also changing for families:

• The child benefit will be increased: From January 1, 2024, there will be 233 euros per month for the first, second and third child (previously 1st and 2nd child: 219 euros, 3rd child: 225 euros).

  From the fourth child, there is then, as before, 250 euros.

• The child allowance will gradually increase for each parent until 2024.

  By January 1, 2024, it should then be EUR 2,994, i.e. EUR 264 higher than before.

Tax Relief Act 2022: This is how pensioners benefit

And what about the retirees?

They haven't been forgotten about in the tax break either - at least those who pay income tax.

Because they also benefit from compensating for the cold progression.

In addition, the increase in the basic allowance will result in approx.

75,000 pensioners no longer have to pay income tax.

The Federal Ministry of Finance writes this on its website.

Because only those who receive more pension than the basic tax-free amount have to pay tax on it.