Child allowance
Table of contents
What is the child allowance?
The term "child allowance" refers to a tax allowance that parents in Germany can claim for their children. This allowance takes into account the financial burdens associated with raising and caring for children and thus reduces the parents' taxable income.
The child allowance allows a certain amount to be deducted from income tax and is set annually by the legislator.
Parents can choose whether they want to claim child benefit or the child allowance, as it is not possible to claim both at the same time.
What values can the child allowance have?
The child allowance in Germany is set in euros and varies depending on the tax year. Here are the values for 2021 and 2022:
- Child allowance 2021: The child allowance is 5,460 euros per child and year for both parents if they are jointly assessed. This corresponds to a monthly allowance of 455 euros.
- Child allowance 2022: For 2022, the child allowance has been increased to 8,388 euros per child per year. This means a monthly allowance of 699 euros.
There are two components of the child allowance:
- Childcare and education allowance: This part of the child allowance is intended to cover the costs of childcare and education. In 2021, it amounted to 2,928 euros, and in 2022 it was increased to 4,008 euros.
- Relief amount for single parents: If a parent is a single parent, they are entitled to the relief amount for single parents in addition to the care and education allowance. This amounted to €1,908 in 2021 and was increased to €2,580 in 2022.
What does the child allowance factor mean?
The child allowance factor, also known as the child allowance factor, is a figure used in German income tax to calculate the tax advantage of the child allowance. It is used to determine the tax relief amount for parents who claim the child allowance instead of the child benefit.
The child allowance factor is based on the assumption that the tax benefits of the child allowance should be equated with child benefit. As the child allowance is paid monthly, the factor is needed to convert the annual amount of the child allowance into monthly installments.
For 2021, the child allowance factor is 0.5, and for 2022 it has been reduced to 0.3563. This means that 50% (or 35.63%) of the annual child allowance will be included in the calculation of income tax as a monthly relief amount.
The choice between child benefit and child allowance depends on various factors, including individual income and tax assessment. The child allowance is often advantageous for parents with higher incomes, while child benefit is the simple and direct support for many families.
How is the child allowance calculated?
The child allowance for several children is calculated as follows: Parents receive the full child allowance and the BEA allowance for each of their children. Both allowances are divided according to the half-sharing principle.
For married couples in tax class IV (4), the same allowance is used. This means that for one child the numerator is 1.0 and for two children 2.0 for each parent. For married couples in tax classes III (3) and V (5), the entire tax-free allowance is allocated exclusively to the partner in tax class III (3).
For unmarried couples in tax classes I (1) or II (2), the numerator 0.5 applies per child.
What values can the child allowance assume?
The child allowance factor is redefined annually and varies accordingly. For 2022, the child allowance factor is 0.3563. This means that 35.63% of the annual child allowance is included in the calculation of income tax as a monthly relief amount.