German Parliament Approves Tax Relief and Child Benefit Increase

The Bundestag passes a law to combat inflation's tax effects and raise family support, pending Bundesrat approval.

The Bundestag has approved a law to address 'cold progression,' preventing inflation-driven tax increases by adjusting income tax brackets and raising the tax-free basic allowance to €12,096 in 2025.
Child benefit will increase by €5 to €255 per month starting January 2025, with an additional €4 increase planned for 2026.
The child tax allowance will rise by €60 to €6,672 in 2025, with further adjustments to €6,828 in 2026, alongside a €5 increase in the child immediate allowance for low-income families.
The law is expected to provide €7 billion in tax relief for 2025 and €6 billion in 2026, though higher social contributions may offset benefits for some households.
The Bundesrat must approve the legislation on December 20, 2024, as it would result in significant revenue losses for federal and state governments.