Taxpayers in Germany might be looking at a bit more disposable income in 2024 due to upcoming tax and social security adjustments. Financial expert Frank Hechtner from the University of Erlangen-Nuremberg analyzed these changes, set to take effect on January 1, 2024.
Hechtner points out that changes in income tax rates will bring significant relief, especially for high-income earners. For instance, a single person earning 5,000 euros monthly will gain an additional 292 euros a year. Families with children may also see notable savings, with a family of two earning 2,500 and 4,000 euros a month experiencing a tax benefit of 508 euros.
However, the good news is somewhat tempered by the rise in social security contributions. Hechtner clarifies that a significant portion of the benefits are canceled out by this increase. Individuals without children, in particular, will be affected, with the additional social security contribution burden amounting to up to 722 euros for a single person in 2024.
One factor contributing to the rise in social security contributions is the increase in the average rate of additional contributions to mandatory health insurance from 1.6 to 1.7 percent in 2024. High-earning families will have to pay 541 euros more in social security contributions in 2024.
To offset these higher contributions, there are several tax reduction measures in effect. For example, the basic tax allowance will increase from 10,908 euros to 11,604 euros, allowing people to earn more without taxation. Furthermore, the child tax allowance (Kinderfreibetrag) will be raised from 6,024 euros to 6,384 euros, ensuring that parents' earnings up to a certain amount are not taxed.
The German government will also tackle the issue of 'cold progression' by adjusting tax rates. This term refers to a situation where an income increase, intended to combat inflation, leads to a person moving to a higher tax rate without an increase in their real income.
For a more precise assessment of what you will take home after salary deductions, utilize the Stiftung-Warentest calculator.
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