The “Cost of Living Relief Package II” has already been enacted by the parliament. Thereby, an automatic inflation adjustment of the substantial component elements in income taxation takes place starting in 2023. The two lowest-income tax brackets were increased by 6.3 %, while the rest by 3.47 % (These are two-thirds of the Inflation rate between July 2021 and June 2022).
Here’s an Overview of the Changes:
| Income 2022 | Income 2023 | Tax Rate 2022 | Tax Rate 2023 |
|---|---|---|---|
| Up to € 11,000 | Up to € 11,693 | 0 % | 0 % |
| Up to € 18,000 | Up to € 19,134 | 20 % | 20 % |
| Up to € 31,000 | Up to € 32,075 | 32,5 % | 30 % |
| Up to € 60,000 | Up to € 62,080 | 42 % | 41 % |
| Up to € 90,000 | Up to € 93,120 | 48 % | 48 % |
| Up to € 1,000,000 | Up to € 1,000,000 | 50 % | 50 % |
| Starting € 1,000,000 | Starting € 1,000,000 | 55 % | 55 % |
Furthermore, the following are increased by 5.2%:
- The “Sole-Earner Deduction” and “Single Parent Deduction”
- The “Alimony Deduction”
- The (increased) “Transportation Deduction” and the “Surcharge from the Transportation Deduction”
- The (increased) “Pension Deduction” and
- The maximum amount for the “Social Insurance Refund”
On the other hand, quite a lot of items were not adjusted such as the following:
- The “Assessment Allowance” (€ 730)
- The “Advertising Expenses Allowance” (€ 132)
- The “Daily and Overnight Allowances” (€ 26.40 and € 15)
- The “Turnover Limit for the Flat-Rate Operating Expense Allowance” (€ 220,000)
- The “Luxury Limit” for passenger cars (€ 40,000)
Tip for Employer:
Subsidies to employees for the use of a CO2– emissions-free car in relation to Car-Sharing for non-business-induced trips are tax-free up to € 200 per year starting 2023. The subsidies can be made through direct payment or gift certificates.
Preview:
With “Cost of Living Relief Package III”, it was decided that the “Family Subsidy” and many other social benefits will be automatically adjusted to the inflation in the future. For 2023, the increase will amount to 5.8 % (corresponds to the inflation rate between August 2021 and July 2022). In addition to the “Family Subsidy”, it also comprises the “Child Care Allowance”, “Child Deduction”, and “Study Grants” (for the first time starting 1. Sep. 2023)