In 2023 some things will change in the calculation of your taxes and duties. While income tax is falling, contributions to health insurance, pension and unemployment insurance are rising. FOCUS online shows what that means for you.
The Federal Ministry of Finance and the traffic light coalition have decided on a number of changes for the new year. Here is an overview:
– Increase in the basic allowance: the amount of your income on which you do not have to pay tax increases in 2023 from 10,347 to 10,632 euros.
– Recalculation of tax limits: The income limits above which your tax rates increase will be increased in 2023. This reduces the tax payments for all taxpayers.
– Higher child allowance: The child allowance is increased by 70 euros to 2880 euros per child.
– Higher social contributions: The additional contribution for the statutory health insurance increases on average from 1.3 to 1.6 percent of gross income. Employees bear half of this, so your contributions increase from 0.65 to 0.8 percent. The contribution for pension insurance increases by 0.1 to 18.7 percent, for unemployment insurance by 0.1 to 2.6 percent.
– Pension contributions may be fully tax deductible from 2023. Previously, this step was only planned for 2025, in 2023 96 percent of the contributions would have been deductible.
In principle, two forces are working against each other when it comes to the tax burden from January. While you have to pay less due to the new income tax regulations, social security contributions will increase.
This also shows the crux, which you can find in our table in exact numbers. The lower your salary, the less income tax you pay and the less you benefit from the relief. However, the higher your income, the higher your tax rates and the greater the relief from recalculating the limits.
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For this reason, high incomes benefit the most, both in absolute and relative terms. While a single minimum-wage worker can look forward to 11.51 euros more net – or 0.8 percent of his income – a single top earner in the same tax class 1 gets a whole 85.40 euros or 2.0 percent more net. This pattern also applies to single parents, childless couples and families with different values.
The new regulations benefit families and single parents the least. The latter get the smallest plus in net wages, families with two children and a household income of less than 7500 euros gross per month even make a minus.
However, single people and couples with children also benefit from the increase in child benefit by 18 euros per child and month. Including that, single parents with one child would have between 20.62 and 104.88 euros more per month, depending on their income. That would be between 1.3 and 2.3 percent more. Families with two children thus achieve an increase of 35.22 to 85.91 euros. That would actually favor low-income families more than higher-income families, in percentage terms. The values are between 2.0 and 0.8 percent.
The Leibniz Center for European Economic Research (ZEW) estimates the overall relief from the reorganization of taxes at 10 billion euros. However, 30 percent of this goes to the account of the top ten percent of incomes. “The share that goes to the poorest 10 percent is negligible,” the researchers write. The economists bring a certain understanding with them. After all, the new regulations should first apply to reducing the so-called cold progression.
Cold progression occurs when salaries increase but income tax limits and allowances are not adjusted. Then employees slide into higher tax rates. In the end, you still have more net in your pocket than before, but depending on inflation, real purchasing power can fall. This effect is greater in times of high inflation such as the current one.
The new regulation of the income tax limits is intended to weaken cold progression in Germany. By definition, people who pay more taxes – i.e. people with high incomes – benefit more from this. It is the second adjustment this year. High earners also benefited more in the first relief package in spring.
“This is unpopular in terms of distribution policy, but it is necessary in times of high inflation,” says Holger Stichnoth, head of the ZEW research group “Inequality and Distribution Policy”. However: The necessary measure against cold progression should not rule out stronger support for low incomes. “The relief that is also required for lower income groups in view of rising prices is another matter.”
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Entrepreneurs and citizens must have submitted their property tax returns in six weeks. Several large associations and the German Tax Union are demanding that Finance Minister Lindner extend the deadline beyond October 31. Otherwise there is even a threat of a “collapse of the tax offices.
Although the third relief package has not yet been paid out, economists and associations are already calling for the fourth all-round blow. Above all, they lack assistance for working people with low incomes and for pensioners. These measures could come.
With the new citizens’ allowance, Hartz IV should soon be history. You can find out here who will get more money from January and how much.
