Germany’s federal government wants to raise child benefit (Kindergeld) to €267 a month and the tax-free basic allowance (Grundfreibetrag) to €12,564 from January 1, 2027. The employee lump sum for work expenses would rise by €200.
To pay for this, top earners would pay more, minijob employers would pay a higher flat tax, and you could deduct less for tradespeople. The Income Tax Reform Act 2027 (Einkommensteuerreformgesetz 2027) is still in parliament. Experts criticized it at a Bundestag hearing on November 4, 2026.
- Kindergeld: €267 per child and month in 2027 (now €259), €272 from 2028
- Basic allowance: €12,564 in 2027 (now €12,348), €12,900 from 2028
- Employee lump sum (Arbeitnehmer-Pauschbetrag): €1,430 (now €1,230)
- Top tax rates: 45% from €250,000 and a new 47% rate from €280,000 of taxable income
- Minijob flat tax: 5% instead of 2%
- Tradespeople (Handwerkerleistungen): 15% of labor costs, up to €900, instead of 20% and €1,200
NOTE: This is a bill, not law yet. The Bundestag still has to pass it and the Bundesrat has to approve it. Figures can still change. If it passes, the new values apply to your payslip from January 2027.
How Much Will Families Get?
Kindergeld would rise by €8 to €267 per child and month in 2027, and to €272 in 2028. Since 2026, Kindergeld rises automatically whenever the child tax allowances rise. Read how the payment works in our article on automatic Kindergeld payments.
The child allowance (Kinderfreibetrag) would rise by €150 per parent to €3,564. Together with the allowance for care and education, a child’s minimum needs would be tax-free up to €10,056 a year, up from €9,756. The tax office automatically checks whether the allowance or Kindergeld is better for you.
| 2026 | 2027 (planned) | 2028 (planned) | |
|---|---|---|---|
| Kindergeld per child and month | €259 | €267 | €272 |
| Basic tax-free allowance | €12,348 | €12,564 | €12,900 |
| Child allowances in total (both parents) | €9,756 | €10,056 | €10,236 |
| Employee lump sum | €1,230 | €1,430 | €1,430 |
What Changes for Employees?
The basic allowance rises by €216. You pay no income tax on taxable income up to €12,564. More on how allowances work in our guide to tax-free allowances in Germany.
The employee lump sum for work expenses (Werbungskosten) rises from €1,230 to €1,430. The tax office deducts it automatically, even if you claim nothing. The government expects about 1.3 million people to no longer need to list their work expenses (Anlage N) in their tax return. If your real costs are higher, you can still claim them. See which expenses employees can deduct.
If you work on Sundays or public holidays, more of your supplement would stay tax-free. The hourly base wage used for the tax-free Sunday and holiday supplement would rise from €50 to €75. For night work it stays at €50.
WARNING: Experts at the Bundestag hearing said the reform does not fully offset inflation. The Leibniz Centre for European Economic Research (ZEW) said that for 98% of taxpayers, the relief stays below what would be needed to offset expected inflation. Business associations criticized that the tax brackets are not adjusted for expected inflation.
Who Pays More?
- High earners: The 45% rate would start at €250,000 of taxable income for singles. A new 47% rate would apply from €280,000. Joint filers pay these rates from double the amounts.
- Minijob employers: The flat tax on minijobs would rise from 2% to 5% of pay. It covers income tax, solidarity surcharge and church tax. Usually the employer pays it, but some contracts pass it on to the employee.
- Homeowners and tenants using tradespeople: You could deduct 15% of labor costs for repairs and renovation, up to €900 a year. Today it is 20%, up to €1,200.
If you have a minijob, also read about the new €633 minijob limit for 2027.
What Should You Do Now?
- Planning repairs or renovation? Labor costs you pay by bank transfer in 2026 still get the old 20% deduction, up to €1,200.
- Check your tax class. The new values are built into payroll tax for each tax class from January 2027 if the law passes.
- Want to pay less tax from January? You can apply for a tax-free allowance (Freibetrag) for 2027 now. See how to apply.
- Filing your 2026 tax return? Compare tax software in English or find an English-speaking tax advisor.
You can use online services to help you file and save income tax in Germany. We find Wundertax*, SteuerGo*, and WISO Steuer* (German) among the best tax software out there.
If you have a complex tax return or filing it yourself makes you nervous, you should get advice from a tax consultant. Tax consultants are not cheap in Germany. Depending on your situation, they may cost between 600€ and 2000€.
However, a good tax consultant can save you a lot of money.
You can get a free quote from a tax consultant here. The tax advisor offer services in English.
See every change in Germany for 2027 ->
