Lower taxes, higher social benefits, more relief for consumers. Each of us will feel January 1st, 2023 in our wallets. These are the main changes.
There were three relief packages with a volume of more than 200 billion euros this year. This has a positive effect on almost every household in Germany. The Institute of German Economics in Cologne has calculated that singles with an annual gross income of 30,000 euros will have 676 euros more net in their pockets next year than in 2022. The relief increases to up to 2831 euros for families with double the annual income. Here are the key points.
The most important change in tax law affects everyone. In order to reduce the effect of the cold progression, the limits for the different tax rates are completely recalculated. On the one hand, this means that the basic tax-free allowance is raised from 10,347 to 10,632 euros, and on the other hand, the limits for all other tax rates are also increasing. Ultimately, employees will be relieved of their income by 0.8 to 2.0 percent, with higher income brackets tending to benefit more.
The state intervenes twice in their calculations. The basic supply is capped by the federal government. This means that for each 80 percent of your electricity and gas consumption, you pay a maximum of 40 cents per kilowatt hour for electricity, 12 cents per kilowatt hour for natural gas and 9.5 cents per kilowatt hour for district heating. The actual prices of your supplier only apply in the event of additional consumption.
The regulations officially only apply from March, but then retroactively to January 1st. That sounds confusing, but it should give the providers more time for organization. So in reality you pay the regular market rate in January and February and then get a refund from your provider in March.
Several social benefits will be reorganized from January. Hartz IV, for example, becomes the new citizen’s income. In addition to the new name and some new regulations, the rule sets are increasing. Single people and single parents get 502 instead of the previous 449 euros. Adult partners receive 451 euros, adults under the age of 24 receive 402 euros and children between 318 and 420 euros per month, depending on their age. In addition, the rent and heating costs for a suitable apartment will continue to be covered.
Two more benefits will be increased for children. The child benefit increases to a uniform 250 euros per child and month, regardless of how many children you have. You can also apply for stepchildren, grandchildren and foster children if they live with you in the same household and your place of residence is in Germany.
The child supplement also rises to 250 euros. This is a payment that couples or single parents can apply for in addition to child benefit if they do not earn enough to support the family without this payment.
The proportion of your pension contributions that are tax-deductible has been gradually increasing for years. Actually, the proportion would not have risen to 100 percent until 2025, but the traffic light coalition has now brought this forward two years. Exactly how much more net you get from this depends on your income. For a single person with a gross income of 4000 euros per month, it is 46.58 euros more net per month.
From January, two million instead of the previous 600,000 households in Germany will be entitled to state support in the form of housing benefit. In addition, the payments for the new “Wohngeld plus” should double on average. You are entitled to housing benefit from January if your household income is less than EUR 1,371 (singles) to EUR 3,484 (four-person household) net per month. Between 312 and 879 euros are paid out. The exact calculation is complicated because it takes your specific household situation into account.
Those who work a lot at home will also be given more support from January. You can claim a five euro deduction for income-related expenses per day in your home office. You can deduct a maximum of 600 euros, which corresponds to 120 days in the home office per year. The regulation introduced in the corona pandemic is now being extended indefinitely.
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