Tax allowances 2026: Which deductions reduce your tax burden

Tax allowances are legally defined amounts up to which income is not taxed. Only the portion of income that exceeds this amount is subject to taxation. The most important is the basic allowance of 12,348 euros (2026) for single filers. Other allowances concern children, capital gains, and single parents. Those who know about them often significantly reduce their tax burden.

What is a tax allowance?

A tax allowance describes a fixed amount that is deducted from taxable income. Only income above this threshold is taxed. Tax allowances thus directly reduce the tax burden without requiring individual documentation for each item.

The legislature uses tax allowances to account for specific life circumstances: the subsistence minimum, the support of children, or income from capital assets. Each allowance serves its own purpose and is tied to specific conditions.

The concept explained simply

Let's take an income of 30,000 euros. If the basic allowance is 12,348 euros, this amount remains tax-free. Only the remaining sum of 17,652 euros is included in the income tax calculation. This is how the principle works for almost all tax allowances.

Significance and purpose of tax allowances

The significance of these allowances is evident in the subsistence minimum. A portion of income must remain tax-free so that basic living costs are covered. The basic allowance protects precisely this share from taxation.

Tax allowances also serve social fine-tuning. Families, single parents, and savers receive targeted relief. Without these provisions, identical incomes would be taxed equally regardless of life circumstances, which tax law would consider unfair.

Why values increase annually

Between 2020 (9,408 euros) and 2026 (12,348 euros), the basic allowance increased by roughly 31 percent. The reason lies in offsetting cold progression. The tax rate thresholds shift by two percent in 2026 so that wage increases do not alone lead to higher taxes through inflation.

Tax allowance versus exemption threshold: the difference

Allowance and exemption threshold sound similar but work very differently. With an allowance, the amount below the threshold always remains tax-free; only the exceeding portion is taxed. With an exemption threshold, the entire sum becomes taxable once the threshold is exceeded by even one cent.

An example clarifies the difference: For private asset sales under Section 23 of the Income Tax Act, an exemption threshold of 1,000 euros per year applies. If someone makes a profit of 1,001 euros, the full amount is taxed, not just one euro.

Why confusion can be expensive

Many taxpayers don't know this difference. Those who slightly exceed an exemption threshold are surprised by the tax bill. For gains from private transactions, it therefore pays to verify that the 1,000-euro threshold is maintained.

Difference between allowance and standard deduction

A standard deduction is a fixed deduction amount that the tax office automatically recognises without requiring receipts. An allowance, by contrast, sometimes must be claimed. The best-known standard deduction is the work expense standard deduction of 1,230 euros for employees.

The saver's allowance of 1,000 euros for single filers and 2,000 euros for joint filers is also classified as a standard deduction. Here too: no documentation required; the amount is recognised without individual expenses.

What allowances exist?

German tax law recognizes over 25 different allowances, standard deductions, and exemption thresholds. This variety makes the topic confusing. However, the most important allowances for private individuals are easy to understand.

• Basic allowance: 12,348 euros (single, 2026)
• Child allowance: 9,756 euros per child (2026)
• Saver's allowance: 1,000 euros / 2,000 euros
• Relief amount for single parents: 4,260 euros
• Training allowance: 1,200 euros
• Work expense standard deduction: 1,230 euros

How high is the basic allowance?

The basic allowance ensures the subsistence minimum and applies to all taxpayers. It is newly determined each year and has been noticeably increased in recent years.

• 2024: 11,784 euros (single) / 23,568 euros (joint filers), retroactively increased from 11,604 euros
• 2025: 12,096 euros / 24,192 euros
• 2026: 12,348 euros / 24,696 euros

For married couples, the basic allowance doubles with joint filing. A married couple pays income tax on combined income exceeding 24,696 euros in 2026.

Child allowance: Relief for families

The child allowance consists of two parts: the material allowance and the allowance for childcare, education or training expenses. The childcare, education or training (CET) portion has remained unchanged at 2,928 euros since 2021.

• 2024: 6,612 euros material, total 9,540 euros
• 2025: 6,672 euros material, total 9,600 euros
• 2026: 6,828 euros material, total 9,756 euros

For single parents, half of the amount applies. The child allowance is not an annual allowance; it is granted on a pro-rata basis.

Child allowance or child benefit?

The tax office automatically checks via a favorable comparison whether child benefit or child allowance is more advantageous. Child benefit increases to 259 euros per month per child as of 2026. At higher incomes, the child allowance often has a stronger effect. However, always complete Schedule Child.

Relief amount for single parents

Single parents have received a relief amount of 4,260 euros since 2023. For each additional child in the household, an additional 240 euros applies. This amount is deducted from the sum of income and claimed via Schedule Child.

Those who select tax class II receive the relief amount already during the year through payroll tax withholding. This leaves more net income without having to wait for your tax return.

Training allowance for adult children

The training allowance has been 1,200 euros per year since 2023; previously it was 924 euros. The requirement is an adult child with a child benefit entitlement living away from home.

This allowance is also not an annual allowance. It is checked monthly. If the child lives away eight months, the result is 8/12 of 1,200 euros, or 800 euros.

What is the saver's allowance?

The saver's allowance makes capital gains up to a certain amount tax-free. Since 2023, it stands at 1,000 euros for single filers and 2,000 euros for joint filers. Until 2022, amounts were 801 euros and 1,602 euros respectively.

It covers interest, dividends, and other capital gains. Through an exemption order with your bank, you avoid having taxes withheld on gains that fall below the allowance.

Distribute exemption order correctly

Those using multiple banks or brokers should divide the saver's allowance. This way, a portion remains exempt at each bank, and capital gains are not unnecessarily burdened.

Tax allowances for retirees

Pensions are also subject to taxation, but not entirely. In addition to the basic allowance, the pension allowance applies. It ensures a fixed portion of the first full annual pension remains permanently tax-free.

The pension allowance depends on the year of pension commencement. Those who retired earlier have a higher tax-free portion. The pension allowance then remains as a fixed amount over the entire benefit period.

How high is the tax allowance for retirees?

The individual pension allowance results from the percentage of tax-free income in the second year of retirement. Retirees additionally benefit from the basic allowance. Many pensioners with small pensions thus remain below the income tax threshold.

Tax allowances for self-employed persons

Self-employed individuals use the basic allowance just like employees. For business income, there is also a business tax allowance of 24,500 euros for sole proprietors and partnerships.

Special expenses such as provision contributions reduce income further. Those active in volunteer work can claim the volunteer instructor allowance of 3,300 euros (2026) or the volunteer allowance of 960 euros.

Request payroll tax allowance from the tax office

A payroll tax allowance reduces monthly payroll tax immediately, not just after your tax return. The application is made through the payroll tax reduction procedure at the tax office. The allowance is entered in the ELStAM.

An example: With a 6,000-euro allowance starting in July, the amount is distributed over five months. This results in a monthly reduction of taxable wages by 1,200 euros. This leaves more net income immediately.

When the application is worthwhile

The application is worthwhile for foreseeable high work expenses, special expenses, or extraordinary burdens. Those with long commutes, for example, benefit from the commuting allowance, which applies to 0.38 euros starting with the first kilometer as of 2026.

Using tax allowances in practice

Many allowances must be actively claimed. Those who miss the exemption order or payroll tax allowance leave money on the table. Check your situation annually because the values change regularly.

Which deductions apply automatically without documentation

Some amounts are automatically deducted by the tax office without any receipts. These include the work expense standard deduction of 1,230 euros and the saver's allowance. These standard deductions apply regardless of whether actual expenses in this amount have incurred.

Calculate tax allowances with tax software

Given the complexity, tax software such as WISO Steuer or Tax is recommended. Such programs automatically consider all relevant allowances and standard deductions when filing income tax returns. This ensures no advantages are lost.

Transfer gifts and assets tax-free

For a gift, separate allowances apply, graduated by degree of relationship. Spouses and life partners have 500,000 euros, children 400,000 euros, grandchildren 200,000 euros, and non-relatives 20,000 euros.

These allowances renew every ten years. Those who transfer assets early and in stages can pass on larger sums tax-free. However, the amounts have remained unchanged since 2009, while real estate values have increased significantly.

Common errors in tax returns

Two factors repeatedly lead to mistakes: confusion of allowance and exemption threshold, and failure to submit applications. Those who meet the requirements for an allowance but don't apply receive nothing.

• Set up exemption order with all banks
• Complete Schedule Child for child allowance and relief amount
• Apply for tax class II as a single parent
• Use payroll tax allowance for high burdens

Tax allowances 2026 at a glance

The current values for 2026 show noticeable relief compared to 2023, when the basic allowance was still 10,908 euros for single filers and 21,816 euros for joint filers. Today it stands at 12,348 euros and 24,696 euros respectively.

The solidarity surcharge affects only about 10 percent of taxpayers from 2026 because the exemption threshold increased to 40,700 euros. Childcare costs are 80 percent deductible starting 2025, with a maximum of 4,800 euros per child.

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An annual review of your own tax situation pays off. Allowances, standard deductions, and thresholds change almost every year. Those who know the current values and submit applications on time maximize their income tax return.