Increase in child benefit and tax relief: traffic light parties reach an agreement

Before the new elections, a law to compensate for the cold progression in income tax and to increase child benefit is to be passed in the Bundestag. The FDP wants to approve the draft together with the minority coalition of the SPD and the Greens, as the DPA news agency learned from the parliamentary groups. In order for it to come into force, the Federal Council would also have to approve the law.

The FDP recently called for changes to the draft law, which dates back to the time of the traffic light coalition. She had criticized that it also envisaged new bureaucratic costs for companies. The FDP had to make this compromise in the traffic light coalition, but no longer wanted to support it after the government broke.

The parliamentary groups have now agreed to delete the criticized points from the law. However, the Greens were not very enthusiastic about it. “Party tactics dominate here instead of economic responsibility,” criticized householder Sven-Christian Kindler. Important impulses for tax support for investments and research by companies were now missing.

However, the core of the law remains: a creeping tax increase in January is to be prevented and the negative effect of inflation on income tax is to be offset. To achieve this, several key parameters in the tax rate should be shifted.

Among other things, the basic tax allowance, i.e. the part of income that is not taxed, will be increased. The draft envisages an increase of 312 euros to 12,096 euros in 2025. It is expected to rise further in 2026. The basis is calculations on the effect of inflation and the subsistence level in Germany.

The other key parameters of the tax rate should also be shifted so that higher tax rates only take effect later. Only the limit for the rich tax, which is still above the top tax rate, should remain the same. The exemption limit for the solidarity surcharge will also be adjusted.

It is also planned that child benefit will increase by five euros to 255 euros from the beginning of the year. The child allowance is to be increased by 60 euros to 6,672 euros. The immediate child allowance for families with low incomes is to increase by five euros to 25 euros per month.

“We will relieve a family with two children with an income of 60,000 euros by 306 euros next year,” said Kindler. The package also specifically supports children in poor families. There will also be another adjustment for child benefit and child allowance in 2026.

It remains unclear whether the law also has a chance in the Federal Council – because the states would forego revenue. FDP parliamentary group vice-president Christoph Meyer sees the Union and the SPD as having a responsibility to ensure this: “In the Federal Council, the Union and the SPD must now commit to the relief package or tell the working population to their faces that the states do not want to afford the relief,” he explained . The chancellor candidates Friedrich Merz (Union) and Olaf Scholz (SPD) are responsible for the approval of the states.