Key facts
- Germany's cabinet approved a €10 billion income-tax reform package.
- The reform targets relief for low- and middle-income households, particularly families with children.
- Child benefits and the basic tax-free allowance will increase in stages by 2028.
- Higher earners will face increased taxes, with a new 47% rate for incomes above €280,000.
Germany's cabinet has approved a €10 billion income-tax reform package aimed at providing financial relief to low- and middle-income households, with a particular focus on families with children. The measures, announced by Finance Minister Lars Klingbeil, are set to be implemented in two phases and will be fully effective by 2028.
Key components of the reform include an increase in child benefits, which will rise to €267 per child per month in 2027 and further to €272 in 2028, up from the current €259. Additionally, the basic tax-free allowance will be raised to €12,564 in 2027 and €12,900 the following year. According to the finance ministry, a middle-income family with two children can expect to have over €600 more available annually from 2028.
To partially fund these relief measures, the government will increase taxes on high earners. The existing 45% top tax rate will be applied to taxable incomes starting from €250,000. A new, higher rate of 47% will be introduced for annual incomes exceeding €280,000, ensuring that those with the highest incomes contribute more significantly to the tax system.