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Why more salary ends up in your account in December
Updated on November 23, 2024 – 2:53 p.mReading time: 2 min.
At the end of the year, employees can be happy: their payroll will be slightly higher. Why that is and how much more money there is.
Good news for taxpayers: After the Bundestag, the Bundesrat also approved the traffic light bill, according to which the so-called basic tax allowance for 2024 will subsequently be increased by another 180 euros. Instead of the previous 11,604 euros, it will now be 11,784 euros.
This means more net salary for you. The basic allowance is the part of your income on which you do not have to pay taxes. If it increases, the net of the gross is correspondingly higher.
Since the 180 euros will be credited to you in one go in December, more money will end up in your account this month. This happens automatically and the employer takes care of the calculation. In addition, there is also the retroactive increase in the child allowance. It increases by 228 euros to 6,612 euros. Depending on the tax class, half of the child tax allowance is granted to each parent (tax classes 4/4) or fully allocated to one parent (tax classes 3/5).
Calculations by the German Taxpayer Institute show how much more net you are likely to have in December. According to this, single people with a gross monthly salary of 2,000 to 7,000 euros will be relieved of around 34 euros. Families with two children receive around 62 euros more with a gross monthly salary of 3,000 euros; with a gross monthly salary of 3,500 to 8,000 euros, they are left with an additional 68 euros net. “Bild” first reported on the calculations.
Further increases in the allowances have also been announced for 2025. For 2025, the basic allowance should be 12,096 euros and for 2026 it will be 12,348 euros. This is necessary to counter the so-called cold progression. In simple terms, the term refers to the problem that people earn more but can still afford less from their salaries. You can read why this is the case here.
The tax allowances are regularly increased and adjusted to the newly calculated subsistence minimum for adults and children. Because no income tax may be levied on it. Every two years, the federal government presents the subsistence minimum report, which, among other things, takes into account wage and price developments in Germany.
While the tax burden is likely to fall next year, social security contributions will go in the other direction. Health insurance contributions are expected to increase significantly. Read here what this means for your net salary.
What are the benefits of the new basic tax allowance for employees in Germany?
Interview Between Time.news Editor and Tax Expert
Editor: Welcome to our special feature on financial changes for the end of the year! Today, we’re joined by Dr. Anna Müller, a tax expert from the German Taxpayer Institute. Anna, it’s great to have you with us!
Dr. Müller: Thank you for having me! I’m excited to discuss these changes that will have a positive impact on many taxpayers this December.
Editor: Fantastic! Let’s dive right in. We just learned that the Bundestag and Bundesrat have approved a significant increase in the basic tax allowance for 2024—a boost of 180 euros. Can you explain what that means for the average employee?
Dr. Müller: Absolutely! The basic tax allowance is crucial because it determines the amount of income that is exempt from taxation. Now, instead of having to pay taxes on the first 11,604 euros of income, employees can now keep more of their earnings, since the new allowance will be 11,784 euros.
Editor: So, in simple terms, this means more net salary in employees’ pockets, correct?
Dr. Müller: Very much so! When the basic allowance is increased, it directly affects the amount of taxable income. For many, this will result in a noticeable boost in their net salaries—especially since the new amount will be credited in one go this December.
Editor: That’s great news as we approach the holiday season! I also read that there’s a retroactive increase in child allowances. Could you elaborate on that?
Dr. Müller: Yes, indeed! The child allowance has also seen an increase, jumping by 228 euros to a total of 6,612 euros. This means families will not only receive the tax relief from the increased basic allowance but also benefit from the higher child allowance. Depending on the tax class, the distribution of this allowance can vary, but ultimately, it leads to more financial relief for households.
Editor: So, if I understand correctly, families stand to gain quite a bit. Is there an estimate of how much extra money might end up in accounts this December due to these changes?
Dr. Müller: Calculations by the German Taxpayer Institute indicate that employees can expect an increase in their take-home pay! While the exact amount will vary based on income and tax class, many can anticipate a boost in their December salary that should be especially welcome during the holiday season.
Editor: It certainly sounds like a timely gift from the government! What advice would you give to people who might be wondering how to best utilize this extra income?
Dr. Müller: This is a great opportunity for individuals and families to consider their financial goals. Whether it’s saving for future investments, setting aside money for emergencies, or planning some holiday spending, it’s essential to think strategically about this additional income.
Editor: That’s really insightful, Anna. Do you believe these changes signal a positive trend in government tax policies going forward?
Dr. Müller: I do! Increasing tax allowances helps alleviate the financial burden on employees and families, especially in the current economic climate. If this trend continues, we could see significant positive impacts on disposable income, which can stimulate the broader economy.
Editor: Thank you so much for your insights today, Anna. It sounds like employees have a lot to look forward to this December.
Dr. Müller: Thank you for having me! I hope this information helps everyone make the most of their hard-earned money.
Editor: And thank you to our viewers for tuning in. Keep an eye on your paychecks this December—more might be coming your way! Until next time, stay informed.