Monday, January 29, 2024, 12:47 p.m
Higher basic and child tax allowance, higher exemption limit for the solidarity surcharge, a new maximum amount for deductible pension expenses: The Lohnsteuerhilfeverein Vereinigte Lohnsteuerhilfe e. V. (VLH) shows which tax innovations have applied to employees since this year and which could still come as a result of the Growth Opportunities Act.
The Bundestag passed the Growth Opportunities Act at the end of 2023. However, the Federal Council has not yet decided on this, but has convened the mediation committee – so the tax changes planned therein from 2024 have still not come into force and are partly uncertain.
These changes are fixed
1. Subsistence minimum: basic allowance increases
The Federal Parliament regularly defines a subsistence minimum that must be tax-free for all employees: the basic tax allowance. For 2024 it is 11,604 euros. That is 696 euros more than in 2023. This means: Income is only taxed from the 11,605th euro. Double the amount applies to married couples.
2. Relief for parents: higher child allowance
The child allowance is available to all women and men with biological and adopted children and, depending on the extent of care, also to foster children. As of January 1, 2024, this amount increased by 360 euros to 6,384 euros compared to the previous year. That’s 3,192 euros per parent. Together with the unchanged allowance for care, upbringing and training needs, this results in a tax break of 9,312 euros per child for parents in 2024.
3. Solidarity surcharge: exemption limit continues to rise
Since 2021, according to the federal government, around 90 percent of those citizens who previously had to pay the solidarity surcharge have been exempt from this financial tax. From 2024 onwards, even fewer people will be deducted from their salaries because the exemption limit has been increased. In concrete terms, this means: Only higher earners with a standard income tax of more than 18,130 euros per year have to pay the solidarity surcharge (17,534 euros in the previous year). For couples with joint assessment, double the amount applies, i.e. 36,260 euros.
4. Top tax rate: Who has to pay it?
Anyone who has a taxable income of at least 66,761 euros in 2024 will pay the top tax rate of 42 percent. Last year they slipped into this category with a taxable income of 62,810 euros. The limit for the maximum tax rate, the so-called rich tax, remains unchanged: taxable income of at least 277,826 euros is taxed at 45 percent.
5. Retirement plan expenses: Increased maximum amounts
Contributions to retirement provision in the statutory pension, the Rürup pension as well as in agricultural retirement funds and professional pension schemes are fully tax deductible as special expenses, provided they do not exceed the annual maximum amount. In 2024, this will be 27,565 euros for individual and 55,130 euros for joint assessments. Compared to the previous year, this means an increase of just over 1,000 or 2,000 euros.
Growth Opportunities Act: These changes have not yet been decided
1. Increase in meal allowances on business trips
According to the plans in the Growth Opportunities Act, anyone who goes on a business trip in 2024 and spends at least eight hours will be entitled to a meal allowance of 16 euros. That would be 2 euros more than in the previous year, and the amount can be deducted from tax as additional meal expenses. A flat rate of 32 euros should be claimed for an absence of at least 24 hours. That would be 4 euros more than in 2023. If it is a business trip lasting several days, the flat rate for the arrival and departure days should also be 16 euros each.
By the way: Since 2020, professional drivers have been able to deduct a flat rate in addition to the meal allowance for overnight stays in their truck sleeping cabin. According to the Growth Opportunities Act, this is to be increased from 8 to 9 euros per night in 2024.
2. Higher limit for low-value assets
So-called low-value assets (GWG) can be written off directly. The depreciation does not have to be spread over the useful life. Until now, however, such a GWG could have cost a maximum of 800 euros net; from 2024, according to the Growth Opportunities Act, the limit should be 1,000 euros. This can be useful, for example, for office equipment in the study or expensive smartphones that are used for work.
3. Higher exemption limit for private sales
Profits from private sales may have to be taxed. Until now, there was an exemption limit of 600 euros; according to the Growth Opportunities Act, this is set to rise to 1,000 euros in 2024. This means: Anyone who does not earn more than 1,000 euros in a calendar year from such private sales transactions would not have to pay tax on them.
4. Tax exemption limit for income from rental and leasing
According to the plans in the Growth Opportunities Act, a tax exemption of 1,000 euros for income from rental and leasing is to be introduced from 2024. The aim is to reduce bureaucracy, especially for small private landlords. If, for example, a rental leads to losses, landlords can still submit an income tax return for the income from rental and leasing in order to take this into account for tax purposes.
5. Higher tax reduction for energy-related renovations
Insulation of the facade or new windows: Homeowners who renovate their buildings to make them more energy efficient receive financial support from the federal government. Among other things, you can apply for a reduction in the standard income tax. According to the Growth Opportunities Act, the following will also apply from 2024: For measures on eligible properties that were started after December 31, 2023 and completed before January 1, 2026, a tax reduction of 10 percent of the costs (maximum 14,000) is available in the calendar year in which the renovation measures are completed Euro) instead of the previous 7 percent. In the following calendar year, 10 percent is possible again (a maximum of 12,000 euros) instead of the previous 6 percent.
Growth Opportunities Act: Planned changes put to the test
Since the Federal Council has appealed to the Mediation Committee regarding the Growth Opportunities Act passed by the Bundestag at the end of 2023, the tax changes planned therein are still under review. The plans not only affect employees, but also include relief and improvements for companies. Which of these will ultimately come into force, either as planned or in a different form, is currently still up in the air due to the strained budget situation.
The VLH: Largest income tax assistance association in Germany
The wage tax assistance association United Wage Tax Assistance e. V. (VLH) is Germany’s largest income tax assistance association with more than a million members and around 3,000 advice centers nationwide. Founded in 1972, VLH also provides the most consultants certified according to DIN 77700.
The VLH prepares the income tax return for its members, applies for all tax reductions, checks the tax assessment and much more within the scope of the limited advisory authority in accordance with Section 4 No. 11 StBerG.