Tax-free allowance
A Freibetrag (tax-free allowance) is an amount deducted when calculating tax – only the part above it is taxed.
Allowance vs. exemption limit – the important difference:
• Allowance (Freibetrag): only the amount ABOVE the allowance is taxed. €12,000 income, €12,348 allowance = €0 tax. €13,000 income = only €652 is taxed
• Exemption limit (Freigrenze): if it is exceeded, the ENTIRE amount is taxed. €50 benefit-in-kind exemption limit: €50 = tax-free, €51 = EVERYTHING taxable!
The most important allowances in Germany 2026:
• Basic tax-free allowance: €12,348/year – subsistence minimum, completely tax-free
• Saver's allowance: €1,000 (singles) / €2,000 (couples) – capital income tax-free
• Child allowance: €9,756 per child (for joint assessment)
• Employee lump sum: €1,230 – automatic deduction of income-related expenses
• Inheritance (children): €400,000 | spouse: €500,000
• Trade tax: €24,500 (only for partnerships and sole proprietors)
Important exemption limits (DON'T confuse them!):
• Benefits in kind: €50/month – at €50.01 EVERYTHING becomes taxable
• Crypto gains: €1,000/year – at €1,001 EVERYTHING is taxed
• Private sales transactions: €1,000/year (since 2024)
📚 Tax-free allowance understood?
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