The federal cabinet agreed on Wednesday to raise child benefit in Germany by 15 euros from 2021. Families will also receive more tax relief. 

Families in Germany to get a financial boost

The monthly child benefit (Kindergeld) looks set to increase by 15 euros next year. This is a central component of the so-called Family Relief Act, which aims to lessen the financial burden on middle and lower class families in Germany. It’s part of a package that will cost the government around 9,8 billion euros between 2019 and 2020. 

The measure, which was approved on Wednesday by Angela Merkel’s CDU / CSU / SPD coalition cabinet, will see child benefit payments rise to 219 euros per month from January 1, 2021, for the first and second child, to 225 euros per month for the third child, and to 250 euros per month for the fourth and any subsequent children. 

The bill also provides relief from taxation for families, for example by raising the tax-free child allowance (Kinderfreibetrag) by more than 500 euros, to 8.388 euros per year. According to Finance Minister Olaf Scholz, overall families will be relieved of around 12 billion euros annually. “This is good news for all families and children in Germany,” he said. 

It’s not the only payment that families in Germany can look forward to. The planned 300-euro child bonus will be transferred in two instalments of 150 euros in September and October this year. It will be paid to parents along with their regular Kindergeld payments. 

Income tax relief for all German taxpayers

The act will also relieve all taxpayers of income tax, since the basic tax-free allowance will be increased in 2021, from 9.408 euros to 9.696 euros. Anyone whose annual salary or overall income is less than this will pay zero income tax. The limit, after which the top tax rate of 42 percent is payable, will also be increased, from 57.052 euros to 57.919 euros. A further increase is planned from 2022.

The changes, although passed by the cabinet, have yet to be formally adopted, since they still need the approval of both the Bundestag and the Bundesrat before they can become final.