Germany Approves €10 Billion Tax Reform to Aid Families

Germany's federal cabinet has given its approval to a €10 billion income-tax reform package aimed at reducing the financial load on low- and middle-income households, with a particular focus on families with children. The measures are scheduled to be rolled out in two phases, reaching full implementation by 2028, according to the finance ministry.

Finance Minister Lars Klingbeil framed the reform as a direct response to household financial pressures. "We are providing relief to families with children," he said, adding that the goal is to ensure "a little more is left at the end of the month."

Under the new plan, a middle-income family with two children can expect to have more than €600 extra per year from 2028. The child benefit will be raised to €267 per child per month in 2027, up from the current €259, and will further increase to €272 in 2028. The basic tax-free allowance is also set to climb, reaching €12,564 in 2027 and €12,900 the following year.

To offset the cost of these relief measures, the government is adjusting the tax structure for high earners. The existing 45% top rate will now apply to taxable income starting at €250,000, while a new 47% rate will be levied on annual income exceeding €280,000. Klingbeil defended this approach, stating, "We have also decided to make the tax system fairer. Those with the very highest incomes must make a somewhat greater contribution."