Every January, the same thing happens: tax allowances change, contribution rates go up, something gets "adjusted." Most people only notice on their payslip, wondering why their take-home pay dropped even though gross stayed the same. 2026 is no exception. But there are some genuine improvements too.
Basic Tax Allowance: 252 EUR More Tax-Free
The Grundfreibetrag (basic tax-free allowance) rises from 12,096 EUR (2025) to 12,348 EUR (2026). This is the subsistence minimum that the state cannot tax. 252 EUR more sounds modest, and it is. At a marginal tax rate of 30%, that saves about 76 EUR per year. Six euros a month.
But the Grundfreibetrag isn't a gift. It's an obligation. Without the adjustment, inflation would mean people pay taxes on income that's worth less in real terms than the year before. That's called kalte Progression (bracket creep), and the government offsets it. Partially.
| Figure | 2025 | 2026 | Effect |
|---|---|---|---|
| Grundfreibetrag (single) | 12,096 EUR | 12,348 EUR | Relief for lower incomes |
| Kinderfreibetrag (per child) | 9,600 EUR | 9,756 EUR | Relief for families |
| Kindergeld (per child) | 255 EUR | 259 EUR | +4 EUR/month directly |
| Soli exemption threshold | 19,950 EUR | 20,350 EUR | Relief for middle incomes |
| Top tax rate (42%) from | 68,481 EUR | 69,879 EUR | Bracket shifts upward |
Source: Steuerfortentwicklungsgesetz 2025/2026 via Finanztip.
Kindergeld: 259 EUR Starting January
Four euros more per child per month. From 255 to 259 EUR. For a family with two kids, that's 96 EUR more per year. Covers roughly half a month's grocery bill at the discounter. Better than nothing, but nowhere near enough to offset the rising costs of childcare, school supplies, and food.
The Kinderfreibetrag (child tax allowance) rises to 9,756 EUR in parallel. Which option works out better (Kindergeld or the tax allowance) is automatically checked by the Finanzamt (tax office). For most families with average income, Kindergeld remains the better deal.
Aktivrente: 24,000 EUR Tax-Free for Working Retirees
This is the genuinely interesting new development. Starting 2026, retirees who've reached the regular retirement age can earn up to . That's 24,000 EUR per year, without this amount affecting the tax progression on their regular pension.
