German taxes 2026: changes you need to know

INDEX

• Adjustment of income tax brackets

• Increase of child benefit & child allowance

• Commuter allowance increases

• Higher tax-free allowances for volunteers & instructors

• Minimum wage, mini-job & midi-job

• Higher tax relief for donations to political parties

• Better tax treatment of union membership fees

• Tax changes for retirees

• Other Changes

Germany adopted several tax changes for 2026 as part of the Tax Amendment Act 2025 (Steueränderungsgesetz 2025). Some measures, particularly regarding child benefits, had already been decided earlier and now take effect. Below is a structured overview aligned with the official framework.

Adjustment of income tax brackets

Tax rates (Steuersätze)

To offset inflation-related “cold progression,” income tax brackets (Einkommensteuertarife) are adjusted upward in 2026. The 42% top tax rate (Spitzensteuersatz) now begins at 69,879 euros of taxable income (previously 68,481 euros). The 45% maximum tax rate (Höchststeuersatz) continues to apply from 277,826 euros.

Increase of the basic tax-free allowance (Grundfreibetrag)

From 1. January 2026, the basic tax-free allowance (Grundfreibetrag) rises to 12,348 euros per taxpayer and 24,696 euros for married couples filing a joint tax return (Zusammenveranlagung). This amount represents the minimum subsistence level that remains exempt from income taxation.

Maintenance payments (Unterhalt)

The maximum amount of maintenance payments you can deduct as extraordinary expenses (außergewöhnliche Belastungen) always corresponds to the annual basic tax-free allowance (Grundfreibetrag). In 2026, this means you can deduct up to 12,038 euros in maintenance payments, plus contributions to basic health and long-term care insurance.

Please note: Maintenance payments for your minor child are not tax-deductible. Child maintenance can only be claimed as extraordinary expenses if the child

• is legally entitled to maintenance from you
• does not have significant assets, and
• is no longer entitled to child benefit (Kindergeld).

Solidarity Surcharge (Solidaritätszuschlag)

The exemption threshold for the solidarity surcharge increases to 20,350 euros (single assessment) and 40,700 euros (joint assessment). If the assessed income tax does not exceed this threshold, no solidarity surcharge is levied. Above it, the surcharge applies gradually (mitigation zone).

Increase of child benefit (Kindergeld) & child allowance (Kinderfreibetrag)

Child benefit (Kindergeld) increases to 259 euros per month per child from 2026. At the same time, the total child allowance (Kinderfreibeträge) rises to 9,756 euros per child. As usual, the tax office automatically performs a comparison calculation (Günstigerprüfung) to determine whether the allowance or the direct child benefit results in a greater advantage for you.

Commuter allowance increases (Entfernungspauschale)

The commuting allowance (Entfernungspauschale) will increase from January 1st, 2026. Previously, the higher rate of 38 cents per kilometer applied only from the 21st kilometer of your one-way commute. For the first 20 kilometers, 30 cents per kilometer could be claimed. From 2026, the higher rate of 38 cents per kilometer applies from the very first kilometer.

The commuter allowance always applies to the one-way trip to work (either outbound or return) and is independent of the mode of transport. You can claim it whether you commute by car, public transport, or bicycle.

Mobility bonus (Mobilitätsprämie) becomes permanent

At the same time, the mobility bonus (Mobilitätsprämie) will become permanent. It was originally set to expire at the end of 2026.

The mobility bonus was introduced in 2021 to ensure that long-distance commuters whose income does not exceed the annual basic tax-free allowance can also benefit from the increased commuting allowance. Since those below the basic allowance do not pay income tax, they cannot otherwise benefit from tax deductions.

The mobility bonus must be applied for in your tax return and is paid directly to your bank account.

Higher tax-free allowances for volunteers & instructors (Ehrenamt)

If you work on the side as a volunteer or as an instructor (e.g. sports coach) and receive compensation, this income is tax-free up to a certain limit. From 1. January 2026, the tax-free allowances increase:the volunteer allowance (Ehrenamtspauschale) rises from 840 euros to 960 euros per year.

The instructor allowance (Übungsleiterpauschale) increases from 3,000 euros to 3,300 euros per year.

Minimum wage, mini-job & midi-job

As of January 1st, 2026, the statutory minimum wage increases from 12.82 euros to 13.90 euros per hour. It is planned to rise further to 14.60 euros in 2027. As a result, the mini-job income limit increases from 556 euros to 603 euros per month. The midi-job transition zone therefore begins at 603.01 euros per month. The upper limit for midi-jobs remains unchanged at 2,000 euros gross per month.

Higher tax relief for donations to political parties (Parteispenden)

Donations and membership fees to political parties are tax-deductible as special expenses (Sonderausgaben) in two steps:

Step 1

50% of the donation amount is directly deducted from your assessed income tax. The maximum amount has now been doubled: from January 1st, 2026, donations of up to 3,300 euros can be deducted this way. For jointly assessed couples, the limit is 6,600 euros.

Step 2

If you donate more than 3,300 euros, the excess amount can also be deducted as special expenses. However, it no longer reduces your tax liability directly but instead reduces your taxable income (zu versteuerndes Einkommen). Here too, the maximum amount has been doubled to 3,300 euros (or 6,600 euros for joint assessment).

Better tax treatment of union membership fees

Union membership fees (Gewerkschaftsbeiträge) are tax-deductible as income-related expenses (Werbungskosten). From 1. January 2026, their tax treatment improves: until now, the membership fees were included in the income-related expenses lump sum (Arbeitnehmer-Pauschbetrag) deduction of 1,230 euros like all other income-related expenses. The new rule allows them to be considered in addition to the lump sum.

Tax changes for retirees

1. Deductibility of contributions to retirement provision increases

Your contributions to retirement provision are 100% tax-deductible as special expenses (Sonderausgaben). This includes contributions:

• to the statutory pension insurance (gesetzliche Rentenversicherung)
• to professional pension schemes (berufsständisches Versorgungswerk)
• to the Rürup-Rente (“Basis-Rente”)

A maximum annual amount applies to the special expense deduction. In 2026, this limit is 30,826 euros. Married couples filing jointly can claim 61,652 euros.

2. The “Active Pension” is introduced

From January 1st, 2026, employees who have reached the statutory retirement age may earn up to 2,000 euros per month tax-free (“Aktivrente”). This applies regardless of whether they are already receiving a pension or defer pension receipt.

The Aktivrente is currently only available to employees subject to social insurance contributions. Civil servants (Beamte) and self-employed individuals (Selbstständige) are excluded. However, the Federation of Taxpayers (Bund der Steuerzahler) plans to file a lawsuit to allow self-employed individuals to also take advantage of the Active Pension.

Earnings above 2,000 euros are taxed normally. Within the Active Pension scheme, both employees and employers pay contributions to health and long-term care insurance. Employers continue to pay the regular pension insurance contribution of 9.3% for their employees. Contributions to unemployment insurance are waived.

3. Earnings limit for pensions due to reduced earning capacity is increased

If you have fully reduced earning capacity (volle Erwerbsminderung), you may earn up to 20,763.75 euros gross per year in addition to your pension due to reduced earning capacity. This is about 1,730 euros per month. For pensions due to partial reduction in earning capacity (teilweise Erwerbsminderung), the limit is at least 41,527.50 euros gross per year.

For partial reduction in earning capacity, the earnings limit can be higher because it is based on your work income in the 15 years prior to the onset of disability. If you exceed the earnings limit, 40% of the excess income is offset against the disability pension.

Tax tip: Before taking up employment, have your individual earnings limit calculated by the pension provider. This ensures you stay on the safe side.

4. Exemption limits for the basic pension (Grundrente) increase

The basic pension is an individual supplement to the statutory pension (“Grundrentenzuschlag”). It was introduced in 2021 for retirees who have worked long but earned below-average income. At the end of 2024, 1.4 million retirees in Germany received the basic pension supplement.

The exemption limit, up to which your income is not offset against the basic pension, will increase on January 1st, 2026. It is adjusted every year at the start of the year in line with the annual pension adjustment. Income includes additional earnings, the tax-free part of the pension, and capital income (Kapitaleinkünfte).

For singles

• You receive the full basic pension supplement with income up to 1,492 euros per month.
• For monthly income between 1,492 and 1,909 euros, 60% of the excess is offset against the supplement.
• Income above 1,909 euros per month is fully offset against the supplement.

For married couples

• Joint income up to 2,327 euros is not offset.
• Income between 2,327 and 2,744 euros per month is offset at 60% against the basic pension supplement.
• Income above 2,744 euros per month is fully offset against the basic pension.

Other Changes

Reduced VAT rate for meals permanently lowered

Due to COVID-19, VAT on meals in restaurants was temporarily reduced from 19% to 7% in 2021, 2022, and 2023. In 2024 and 2025, it returned to 19%. To further support the restaurant industry, the reduced VAT rate of 7% has applied permanently since 1 January 2026. Beverages are excluded.

Digital tax assessment notice as standard postponed to 2027

Originally, the digital tax assessment notice was to become standard from 1 January 2026. §122a AO (Fiscal Code) was adjusted accordingly. Taxpayers with a valid Elster certificate submitting a digital tax return would automatically receive a digital tax assessment. Paper notices would only be sent if explicitly requested. The option will be available in Mein Elster from April 2026.

The new rule postpones the standard introduction of the digital tax assessment notice to 1 January 2027.

Accommodation costs for double households abroad capped at 2,000 euros

If you maintain a double household (Doppelte Haushaltsführung) for work, you can deduct actual accommodation costs as income-related expenses (Werbungskosten), including abroad. Accommodation costs for double households within Germany are capped at 1,000 euros per month. From 1 January 2026, accommodation costs (rent and utilities) for double households abroad are capped at 2,000 euros per month. Exceptions apply if you are required to use employer-provided housing.

Deutschlandticket becomes more expensive

The price of the Deutschlandticket increases from 58 euros to 63 euros from 1 January 2026. The ticket allows nationwide use of local public transport for a flat monthly fee. Long-distance trains are excluded except in a few cases.

Additional contribution for health insurance rises again

The additional contribution to statutory health insurance (Zusatzbeitrag), individually set by each insurer, rose to an average of 2.5% in 2025. In 2026, it rises to an average of 2.9% and is expected to remain stable throughout 2026.

Tax exemption for electric cars extended

The exemption from vehicle tax for electric cars was originally set to end on 31 December 2025. It applies to fully electric vehicles first registered or fully converted to electric drive. The exemption is now extended by five years until 31 December 2030.