Planned tax reform: higher child benefit and basic allowance from 2027
The cabinet wants to ease the burden on low and middle incomes, especially families. It is still a draft, parliament and the Bundesrat must approve it.
By Finmon
Tax & contributions · Germany · 2026-09-02 · 4 min · Federal Ministry of Finance (BMF)
Applies to Germany. Other countries have different rules.
€272 child benefit per child from 2028 (planned)
In 30 seconds
- Child benefit is to rise from 259 euros to 267 euros (2027) and 272 euros (2028) per child per month.
- The tax-free basic allowance rises, and the employee lump-sum allowance goes from 1,230 to 1,430 euros.
- Very high incomes pay more: from 280,000 euros a tax rate of 47% is to apply.
What does this mean for you?
I have children (Likely upside)
With children you benefit twice: through higher child benefit and higher child allowances. The tax office automatically checks which is better for you, you do not need to apply separately.
I am employed (Likely upside)
On a low or middle income you are likely to pay a little less wage tax. If your work costs such as commuting are below 1,430 euros a year, you may no longer need to fill in form Anlage N.
I am self-employed (Likely upside)
The higher basic allowance and the flatter tax curve apply to you too. The employee lump-sum allowance, however, is not available to the self-employed.
I am retired (Mixed)
If you pay tax on your pension, the higher basic allowance eases the burden. If your pension is below the tax threshold anyway, little changes for you.
How it could hurt you
Planning with money that is not yet law
Until the law is passed, amounts and start dates can change. Counting firmly on the higher child benefit now means planning on uncertain ground.
Where there may be an upside
A simpler tax return
With the higher lump-sum allowance, collecting individual receipts for work costs is no longer worth it for many people. That saves time.
Only if Only applies if your actual work-related expenses are below 1,430 euros a year and the law passes as planned.
Plan the extra net pay deliberately
If the relief comes, you can put the amount to a specific use, such as your emergency fund, instead of letting it disappear into everyday spending.
Only if Assumes the reform is adopted as planned. The amount depends on income, tax class and number of children.
What happened?
- On 2 September 2026 the federal cabinet adopted the draft Income Tax Reform Act 2027. According to the BMF, the relief amounts to about 10 billion euros and takes full effect from 2028.
- The basic tax-free allowance is to rise to 12,564 euros (2027) and 12,900 euros (2028), child allowances to 10,056 euros (2027) and 10,236 euros (2028).
- Child benefit is to rise from 259 euros to 267 euros (2027) and 272 euros (2028) per child per month. The employee lump-sum allowance rises from 1,230 to 1,430 euros.
- The 45% tax rate is to apply from a taxable income of 250,000 euros, and a new 47% rate from 280,000 euros.
- The BMF states that a family with two children and a middle income will have more than 600 euros a year extra from 2028.
Why does it matter?
Income tax affects almost everyone who works or receives a taxable pension. A higher basic allowance means a larger part of your income stays tax-free. The child benefit increase goes straight to your account. The higher employee lump-sum allowance means the tax office accepts more work-related expenses without receipts. Important: this is a cabinet draft. Amounts and dates can still change during the legislative process.
Child benefit for two children
Worked example
Today: 2 × 259 euros = 518 euros a month. 2027: 2 × 267 euros = 534 euros, i.e. 192 euros more a year. 2028: 2 × 272 euros = 544 euros, i.e. 312 euros more a year than today.
Assumptions: Child benefit only, without tax relief. Applies if the law is passed with these amounts.
What you could check now
- Estimate whether your work costs (commute, work equipment) exceed 1,430 euros a year.
- Only count on the higher child benefit once the law has been passed.
No action needed if: You do not need to apply for anything regarding child benefit or wage tax, the changes would apply automatically.
What is still uncertain
- The Bundestag and Bundesrat still have to approve; amounts may change.
- How much you personally save depends on income, tax class and family situation.
Sources & checks
- Bundesregierung bringt Einkommensteuerreform auf den Weg: Insbesondere Familien mit Kindern werden entlastet
Federal Ministry of Finance (BMF) · 2026-09-02
This explainer was created with AI assistance from the original source and checked automatically: figures against the source text, identical statements in German and English, official sources only, no buy or sell recommendations.
Published 2026-09-29 · Revision 1 · Valid until 2026-12-31
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