Tax Exemptions 2026: Which Exemptions Reduce Your Tax Burden

Tax exemptions are amounts fixed by law up to which income is not taxed. Only the portion of income above this threshold is subject to taxation. The most important is the basic exemption of €12,348 (2026) for single taxpayers. Other exemptions concern children, capital gains and single parents. Those who know them often significantly reduce their tax burden.

What is a tax exemption?

A tax exemption describes a fixed amount deducted from taxable income. Only income above this threshold is taxed. Thus, exemptions directly reduce the tax burden without requiring individual proof for each item.

The legislator uses tax exemptions to account for certain life circumstances: the cost of living, the support of children, or income from capital assets. Each exemption serves its own purpose and is tied to specific conditions.

The concept explained simply

Let's take an income of €30,000. If the basic exemption is €12,348, this amount remains tax-free. Only the remaining sum of €17,652 flows into the income tax calculation. This is how the principle works for nearly all tax exemptions.

Importance and purpose of tax exemptions

The significance of these exemptions shows itself in the cost of living. A portion of income must remain tax-free so that basic living expenses are covered. The basic exemption protects exactly this portion from taxation.

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

Why the values increase annually

Between 2020 (€9,408) and 2026 (€12,348), the basic exemption rose by around 31 percent. The reason lies in offsetting cold progression. The tariff values shift by two percent in 2026 so that wage increases do not lead to higher taxes solely due to inflation.

Tax exemption and tax-free threshold: the difference

Exemption and threshold sound similar, but work fundamentally differently. With an exemption, the amount below the threshold always remains tax-free; only the excess is taxed. With a threshold, the entire sum is taxed as soon as the threshold is exceeded by even one cent.

An example illustrates the difference: For private capital gains under Section 23 of the German Income Tax Act, a tax-free threshold of €1,000 per year applies. If someone achieves €1,001 in profits, the full amount is taxed, not just one euro.

Why the confusion is costly

Many taxpayers are unaware of this distinction. Those who slightly exceed a tax-free threshold are surprised by the tax burden. For profits from private transactions, it is therefore worthwhile to check whether the €1,000 threshold is maintained.

Difference between exemption and allowance

An allowance is a fixed deduction amount that the tax office automatically recognizes without requiring receipts. An exemption, by contrast, sometimes must be claimed. The best-known allowance is the advertising cost allowance of €1,230 for employees.

The savings allowance of €1,000 for single filers and €2,000 for joint filers also counts as an allowance. Here too: no proof required; the amount is recognized without individual expenses.

What exemptions are there?

German tax law recognizes more than 25 different exemptions, allowances and thresholds. This variety makes the topic unclear. However, the most important exemptions for individuals are easy to grasp.

• Basic exemption: €12,348 (single, 2026)
• Child exemption: €9,756 per child (2026)
• Savings allowance: €1,000 / €2,000
• Relief amount for single parents: €4,260
• Training exemption: €1,200
• Advertising cost allowance: €1,230

How high is the basic exemption?

The basic exemption secures the cost of living and applies to all taxpayers. It is reset each year and has been significantly increased in recent years.

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

For married couples, the basic exemption doubles with joint filing. A married couple in 2026 only pays income tax on joint income above €24,696.

Child exemption: relief for families

The child exemption consists of two parts: the material exemption and the exemption for childcare, education or training needs (BEA). The BEA portion has been unchanged at €2,928 since 2021.

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

For single parents, half applies respectively. The child exemption is not an annual exemption; it is only granted on a time-proportional basis.

Child exemption or child allowance?

The tax office automatically checks via a more favorable comparison whether child allowance or child exemption is more advantageous. Child allowance rises to €259 per month per child from 2026. For higher incomes, the child exemption often has greater effect. Nevertheless, always complete the child attachment.

Relief amount for single parents

Single parents have received a relief amount of €4,260 since 2023. For each additional child in the household, €240 is added. This amount is deducted from the sum of income and is claimed via the child attachment.

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

Training exemption for adult children

The training exemption has been €1,200 per year since 2023, previously €924. The requirement is an adult child with a child allowance entitlement who lives away from home.

This exemption is also not an annual exemption. It is checked monthly. If the child lives away for eight months, 8/12 of €1,200 results, which is €800.

What is the savings allowance?

The savings allowance makes capital gains up to a certain amount tax-free. Since 2023, it is €1,000 for single filers and €2,000 for joint filers. Until 2022, €801 or €1,602 respectively applied.

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

Distribute exemption order correctly

Those who use multiple banks or brokers should split the savings allowance. This way, a portion remains exempt at each bank, and capital gains are not unnecessarily burdened.

Tax exemptions for retirees

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

The pension exemption depends on the year of retirement. Those who retired earlier have a higher tax-free portion. The pension exemption thereafter remains as a fixed amount throughout the benefit period.

How high is the tax exemption for retirees?

The individual pension exemption results from the percentage tax-free portion in the second year of retirement. Additionally, retirees benefit from the basic exemption. Many retirees with small pensions thus remain below the threshold for income tax.

Tax exemptions for the self-employed

The self-employed use the basic exemption just like employees. For business income, the business tax exemption of €24,500 for sole proprietors and partnerships is added.

Special expenses such as retirement savings reduce income further. Those active in volunteer work can claim the instructor exemption of €3,300 (2026) or the volunteer exemption of €960.

Request payroll tax exemption from the tax office

A payroll tax exemption reduces monthly payroll tax immediately, not just after the tax return. The request is made in the payroll tax reduction procedure with the tax office. The exemption is entered in the electronic wage tax register.

An example: At €6,000 exemption starting July, the amount is distributed over five months. This results in a monthly reduction of taxable wages by €1,200. This way, more remains net immediately.

When the application is worthwhile

The application is worthwhile for foreseeable high advertising costs, special expenses or extraordinary expenses. Those who, for example, commute long distances benefit from the commute allowance, which from 2026 applies at €0.38 from the first kilometer.

Using tax exemptions in practice

Many exemptions must be actively claimed. Those who miss the exemption order or payroll tax exemption forfeit real money. Check your situation annually because the values change regularly.

Which allowances apply without proof

The tax office automatically deducts some amounts without receipts. These include the advertising cost allowance of €1,230 and the savings allowance. These allowances apply regardless of whether actual expenses of this amount have been incurred.

Calculate tax exemptions with tax software

Given the complexity, tax software like WISO Steuer or Tax is recommended. Such programs automatically consider all relevant exemptions and allowances in the income tax return. This way, no advantages are lost.

Transfer gifts and assets tax-free

With a gift, separate exemptions apply, scaled by degree of relationship. Spouses and life partners have €500,000, children €400,000, grandchildren €200,000 and non-relatives €20,000.

These exemptions renew every ten years. Those who transfer assets early and staggered can pass on larger sums tax-free. However, the values have been unchanged since 2009, while property values have increased significantly.

Common errors in tax returns

Two factors repeatedly lead to errors: confusing exemptions and thresholds, and missing applications. Those who meet the conditions for an exemption but do not apply receive nothing.

• Set up exemption order with all banks
• Complete child attachment for child exemption and relief amount
• Request tax class II as a single parent
• Use payroll tax exemption for high expenses

Tax exemptions 2026 at a glance

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

From 2026, the solidarity surcharge affects only about ten percent of taxpayers because the threshold rose to €40,700. Childcare costs are 80 percent deductible from 2025, with a maximum of €4,800 per child.

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