How does that work with the child allowance??
The state supports parents with the so-called child allowance: parents can earn and earn EUR 7,620 per child per year without paying taxes.
Anyone who makes money in some way – for example, by going to work or renting an apartment – has to pay taxes. Certain groups of people do not have to pay taxes for special costs, they receive so-called allowances.
This also applies to women and men with biological and adopted children and – depending on the scope of care – with foster children: You can take 7,620 euros a year without paying taxes. This is the so-called child allowance 2019 including the child allowance. With this, the state wants to ensure that parents have enough money to pay for their children things like food, an apartment, childcare or training.
Child benefit has exactly the same purpose: for every first and second child, parents have received 204 euros since July 1, 2019, 210 euros for the third child and 235 euros for each additional child, tax-free every month. Both child benefit and child allowance are tax-exempt. The big difference, however, is that the state pays child benefit to the parents every month, not the child allowance. Instead, the tax office retroactively deducts the EUR 7,620 child allowance from your taxable annual income.
By the way:
As part of the so-called Family Relief Act (FamEntlastG), the child allowance 2020 will be increased to 5,172 euros. Including the parental allowance, parents can secure 7,812 euros in annual tax relief.
What applies to me, child benefit or child allowance?
Parents can only get one form of tax relief: child benefit or child allowance. If you have submitted your tax return to the tax office, the tax officials will check what is more convenient for you and what the state can provide you with more financial support ("rate test").
Would you like a quick overview of the child allowance? Watch our video:
How does the tax office calculate?
This is a bit complicated. We’ll explain it with an example: Let’s say two full-time spouses with a young son have an annual income of 50,000 euros that they have to pay tax on. The tax office now calculates how much tax you would have to pay, first without and then with the child allowance.
Without the child allowance, you would have to pay 7,582 euros tax (without solidarity surcharge). With the child tax allowance, i.e. minus 7,620 euros, your taxable income shrinks to 42,380 euros. Then you would only have to pay around 5,464 euros in taxes.
And now the real sticking point comes: The difference between the taxes that you would have to pay with and without child tax allowance is 2,118 euros. So you would save so much tax with the child allowance.
In the past twelve months, however, you have received a total of 2,448 euros in child benefit for your son – that’s more than you save through the child allowance. The allowance is therefore not financially cheaper for you. Therefore, the tax officer does not count on the child allowance for you.
By the way:
For single parents, the child allowance pays off at 37,500 euros taxable income per year, for spouses from 75,000 euros. After you have deducted all costs that you can deduct from the tax.
Our infographic shows you clearly how such an additional invoice for child allowance 2019 can look like:
Can I save myself the child benefit application if the child allowance is more worthwhile for me anyway?
The child benefit is not automatically transferred to your account after the birth of your child. Instead, you have to inform the state that you have had children. The family funds are responsible for this. All you have to do is fill out the required form and present your child’s birth certificate. Since January 1, 2018, however, child benefit can only be paid retrospectively for six months.
Even if you are sure that the child allowance will be applied to you, you should definitely apply for child benefit. Firstly, you get the child benefit transferred to your account every month and not retrospectively recognized at the end of the year. Secondly, the tax office assumes that all parents have applied for and received child benefit and includes this amount in the tax return – regardless of whether you actually applied for it or not. Because you are responsible for that.
Who is entitled to the child allowance??
Half of the child allowance is due to both parents, namely until the child is 18, or until the child is 25 years old if they continue to study or study for so long. On request, the child allowance can also be transferred to a step-parent or grandparent if the child lives with one of them.
By the way:
In a letter dated January 17, 2014, the Federal Ministry of Finance made it clear that the equality of life partners with spouses also applies to the transfer and granting of child allowances.
This means that if registered partners adopt a child together or if one partner adopts the child of the other partner, both adoptive parents are entitled to child allowances. The same applies to step parents if a step parent has taken the child into his household.
How is the child allowance calculated for several children??
Parents receive a full child allowance for each child. They share this according to the so-called semi-division principle. The same child allowance is applied to married couples who both have tax bracket IV (4). Here, the counter 1.0 is counted for one child and the counter 2.0 for two children for each parent. For married couples with tax classes III (3) and V (5), on the other hand, the entire child allowance is taken into account in full with the partner with tax class III (3). For unmarried couples with tax class I (1) or II (2), the counter 0.5 applies per child.
How is the child allowance distributed in the event of separation or divorce??
In the event of a separation or divorce, the following applies to both parents: It does not matter whether the children live with the father or with the mother. If a parent does not fulfill at least 75 percent of his maintenance obligation, the full parent will be charged the full 7,620 euros.
How does a child allowance transfer work??
As already mentioned, both parents are actually entitled to the child allowance. Under certain conditions, the child allowance can also be transferred to a parent.
For a transfer.
- both parents must submit a separate income tax return.
- the applicant parent must meet their maintenance obligation – this is usually the case if the child lives with that parent.
- the other parent must meet his maintenance obligation less than 75 percent or not be dependent.
Consequence of the whole: If the child allowance is transferred to a parent, this parent also receives the training allowance.
The child allowance can also be transferred to step-parents or grandparents. The prerequisite is that the child lives in their household or that they are dependent on the child.
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