Child allowance or child benefit – cheaper examination

rate test

Child tax credit

For children, the tax-free allowance is an amount that is not taken into account when taxing the parents’ income, i.e. is not taxed. In this sense, it does not represent a way of promoting children, but is merely a result of the principle of tax justice. Like child benefit, for the most part it does not serve as a kind of social benefit, but as compensation or compensation (compensation) from the state for taxing the income of taxpayers and thus the subsistence level of the children. Both the child allowance and child allowance can be viewed as control measures for family support.

Difference between child benefit and child allowance

The main difference between child benefit and child allowance is that the child allowance is paid to the parents on a monthly basis, whereas the child allowance, as the name suggests, is granted as a tax-free allowance.

Cheaper check whether child benefit or child allowance

The tax office takes the so-called when checking whether the child benefit or child allowance is granted rate test automatically, without the parents having to make an application.

As part of the parents’ income tax return, the child allowance and child benefit are compared in such a way that the financially more favorable model is taken into account for the taxable parents.

This means that the tax exemption for children is only effective if the tax office ascertains that the benefit check for the parents would be financially more disadvantageous as part of the benefit assessment.

Child allowance amount

The legal basis for family allowance compensation can be found in Section 31 of the Income Tax Act, which includes the reference to the child tax allowance in Section 32 (6) of the Income Tax Act.

In principle, a taxable parent receives income tax in accordance with section 32 (6) EStG per child to be considered from 2019 Child allowance of 2490 euros per year benefit. This serves the Ensuring the child’s minimum subsistence level.

In addition to this objective minimum income, the taxpayer is also entitled to an allowance for childcare, upbringing and training needs. This is 1,320 euros. The tax burden is reduced by these allowances, since the taxable income is reduced by them.

Child allowance for spouses

For spouses who taxable together , the amount resulting from the actual subsistence minimum of 4,980 euros and the allowance for childcare, education and training needs of 2,640 euros will total 7,620 euros annually from 2019 (7,428 to 2018) for both spouses.

Positive effect of the child allowance

In addition, the child allowance for taxable parents whose taxation is carried out according to the splitting table only comes from a taxable income of approx. € 63,500, for taxation according to the basic table only from an amount of € 33,500. If the income remains below these amounts, it is financially more favorable for taxpayers to receive child benefit.

In practical terms, this means that the child allowance is worthwhile for two taxable married parents whose taxation is assessed together and who have an overall income of over € 63,500. For spouses and single people who are taxed separately according to the basic table, the child allowance is only worthwhile from an income of € 33,500.

example calculation

Taxable income of a married person: € 64,000.00

Income tax: 11,800.00 euros
Solidarity surcharge: 649.00 euros
Total taxes: EUR 12,449.00

Taxation with child allowance of 7,620 euros: 56,380 euros
Income tax: EUR 9,450.00
Solidarity surcharge: 519.75 euros
Total taxes: 9,969.75 euros

Tax savings from child allowance: EUR 2,479.25
Child benefit allowance: 2,328 euros

The amount of the child benefit is € 209.83 higher than the tax benefit resulting from the child allowance. Here, the tax office would grant the child benefit without taking into account the cheaper principle, since it is financially cheaper for taxpayers.

Duration of the child allowance

The child allowance runs for as long as the claim would insist on child benefit. amendments takes the tax office only if the change in taxable income would make it easier for taxpayers to receive child benefit.

Spouses separated or divorced

Spouses who live separately or who are permanently divorced are entitled to half of the child allowance. In this regard, it is possible for a parent who is divorced or separated to apply to the tax office for the child tax allowance to be transferred to the other parent. However, this is only possible if the child fulfills at least 75% of the child’s maintenance obligation, but the other parent does not meet his maintenance obligation. Both the child allowance and the allowance for childcare, education and training requirements are then transferred.

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Christina Cherry
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