The Growth Opportunities Act has been decided after long discussions. The billions in tax subsidies and the reduction in bureaucracy are intended to help the weakening German economy in particular get back on its feet. There is also some relief for employees and retirees. The income tax assistance association United Income Tax Assistance (VLH) draws attention to the five most important points:
1. The share of taxation on pensions increases more slowly
The percentage of a retiree’s pension that has to be taxed depends largely on the year in which he or she retires. The taxable portion of the pension increases year after year – although with the passage of the Growth Opportunities Act, it is slower than originally planned. Instead of one percent increments, from 2023 it will only go up in 0.5 percent increments.
Retirees who retired in 2023 will therefore only pay tax on 82.5 percent of their pension instead of 83 percent. In 2024 the tax share will rise to 83 percent. Due to the change, pensions will only be fully taxable from the retirement year of 2058. Originally, this was supposed to be the case from the retirement date in 2040.
2. Age relief amount falls less quickly
All retirees who are at least 64 years old and have other income in addition to their pension – for example capital gains, rental income or wages – automatically benefit from an age relief amount. Due to the relief amount, a certain portion of the additional income remains exempt from tax. Thanks to the innovation, from 2023 onwards, the age relief amount will only decrease by 0.4 instead of 0.8 percentage points for each year of advanced retirement. In 2023 it will be 14 percent, but a maximum of 665 euros, in 2024 it will be 13.6 percent and a maximum of 646 euros.
3. Profits from private sales more often remain tax-free
Whether selling cars, clothes or technology: Anyone who makes a profit from a private sale transaction usually had to pay tax on an amount of 600 euros or more. This exemption limit will increase to 1,000 euros retroactively from January 1, 2024. Anyone whose profit remains below this calendar year will benefit from tax exemption.
4. Improved 0.25 percent tax on private use of electric company cars
Anyone who is allowed to use an electrically powered company car privately only has to pay a flat rate tax of 0.25 percent of the gross list price of the vehicle per year as a monetary benefit. For comparison: For a vehicle with a combustion engine, one percent of the gross list price must be taxed. Previously, this regulation only applied to electric vehicles with a gross list price of up to 60,000 euros.
With the passage of the Growth Opportunities Act, it applies to vehicles with a price of up to 70,000 euros that were purchased from January 1, 2024. The regulation continues to include hybrid vehicles with a minimum electric range of 80 kilometers.
5. Travel allowances only increase for professional drivers
If you travel for work, you can in some cases claim flat-rate travel expenses for tax purposes. With the change in the law, there has been little change in the amount of the flat rates. Only professional drivers now benefit a little more from taxation if they spend the night in their truck sleeping cabin. From January 1, 2024, there will be a flat rate of nine euros per night instead of the previous eight for such overnight stays.