Kinderfreibetrag

What Is Kinderfreibetrag?

The Kinderfreibetrag is a tax-free allowance in German tax law designed to ensure that the basic living expenses of children are exempt from taxation for their parents. As a fundamental component of the country's income tax system, it falls under the broader financial category of family benefits and tax allowances. This allowance effectively reduces the Steuerpflichtiger's taxable income, leading to a lower Einkommensteuer burden. The purpose of the Kinderfreibetrag is to prevent a double burden on parents, ensuring that the income needed to support a child is not taxed, while also providing financial Steuerentlastung for families.

History and Origin

The concept of accounting for family burdens within the tax system has a long history in Germany, evolving significantly over decades to adapt to changing societal needs and economic realities. The Kinderfreibetrag, as it is known today, is rooted in the principle of ensuring the tax-free subsistence minimum for children, which is constitutionally mandated. Over time, the specific amounts and the mechanisms for claiming the Kinderfreibetrag have been regularly adjusted through various tax reforms and annual tax laws to reflect increases in the cost of living and provide adequate support for families. These adjustments are typically outlined in legislative acts, such as amendments to the Einkommensteuergesetz (Income Tax Act). For instance, the values for the Kinderfreibetrag are subject to regular updates by the German government to reflect current economic conditions and cost of living.⁶

Key Takeaways

• The Kinderfreibetrag is a tax allowance that reduces parents' taxable income in Germany, rather than being a direct payment.
• It comprises two main components: one for the child's basic living needs and another for care, education, or training expenses.
• The German tax office automatically performs a "Günstigerprüfung" (most favorable check) to determine whether the Kinderfreibetrag or the monthly Kindergeld (child benefit) provides a greater financial advantage for the parents.
• The Kinderfreibetrag typically offers a greater tax benefit to higher-income households due to Germany's progressiver Steuertarif.
• It is generally granted until a child turns 18, or up to 25 under specific conditions, such as ongoing education or job-seeking status.

Formula and Calculation

The Kinderfreibetrag is not a single, fixed amount but rather a combination of two distinct tax allowances. These allowances are granted per child and typically divided equally between two parents unless specific circumstances dictate otherwise.

The combined Kinderfreibetrag (total per child for both parents) consists of:

1. Freibetrag für das Existenzminimum des Kindes: This component is intended to cover the child's basic material needs, representing the amount considered necessary for their subsistence.
2. Freibetrag für den Betreuungs-, Erziehungs- oder Ausbildungsbedarf (BEA-Freibetrag): This component accounts for expenses related to the care, upbringing, and education or training of the child.

For 2025, the values are:

• Freibetrag für das Existenzminimum des Kindes: €3,336 per parent (€6,672 total for both parents)
• BEA-⁵Freibetrag: €1,464 per parent (€2,928 total for both parents)

Therefore, ⁴the total combined Kinderfreibetrag per child for both parents in 2025 is calculated as:

These amounts are deducted from the parents' taxable income during the annual Steuererklärung process.

Interpreting the Kinderfreibetrag

The Kinderfreibetrag is a crucial element in assessing a family's effective tax burden in Germany. Its primary interpretation revolves around the "Günstigerprüfung" (most favorable check) performed automatically by the Finanzamt. This mechanism determines whether the tax savings from applying the Kinderfreibetrag are more beneficial to the parents than the Kindergeld (child benefit) they receive monthly. If the tax savings from the Kinderfreibetrag exceed the total Kindergeld paid out for the year, the Kinderfreibetrag is applied, and the Kindergeld already received is offset against the resulting tax reduction. Conversely, if the Kindergeld is more advantageous, it remains the preferred form of support. This ensures that parents always receive the maximum financial benefit available. The value of the Kinderfreibetrag is relevant when calculating various tax components, including the Solidaritätszuschlag and Kirchensteuer.

Hypothetical Example

Consider a married couple, Maria and Thomas, who have one child, Lena, and file their taxes jointly in Germany for the year 2025.
Maria and Thomas each have a substantial income, placing them in a higher tax bracket.

1. Kindergeld Received: Throughout 2025, they receive Kindergeld for Lena at €255 per month, totaling €3,060 for the year (\€255 \times 12).
2. Kinderfreibetrag Calculation: The combined Kinderfreibetrag for Lena for 2025 is €9,600 (as calculated above: €6,672 for basic needs + €2,928 for care/education).
3. Günstigerprüfung: When Maria and Thomas submit their Steuererklärung, the Finanzamt automatically compares the potential tax savings from the €9,600 Kinderfreibetrag against the €3,060 Kindergeld received.
4. Tax Benefit: Given their high income and Steuerklassen combination, the tax reduction resulting from deducting €9,600 from their taxable income is significantly higher than €3,060.
5. Outcome: The Finanzamt applies the Kinderfreibetrag. Their taxable income is reduced by €9,600. The Kindergeld they already received is effectively "clawed back" by being offset against the tax reduction. This means their final income tax liability will be lower than if only Kindergeld had been considered, leading to a larger tax refund or a lower tax payment.

This example illustrates how the Kinderfreibetrag can provide a substantial Steuerentlastung for families with higher incomes.

Practical Applications

The Kinderfreibetrag finds its primary application within the German income tax system, acting as a crucial tool for family financial planning. It directly influences the calculation of a family's Einkommensteuer liability. While Kindergeld is paid monthly regardless of income, the Kinderfreibetrag is a tax allowance that reduces the taxable income, primarily benefiting higher earners. This mechanism ensures that the progressive nature of the tax system considers the additional financial burden of raising children.

For parents, understanding the Kinderfreibetrag is essential for submitting their annual Steuererklärung. Although the "Günstigerprüfung" is automatic, knowing its implications helps in anticipating tax outcomes. The Kinderfreibetrag also plays a role in determining the basis for other levies, such as the Solidaritätszuschlag and Kirchensteuer, as these are calculated based on the income tax. Official government portals, like the Familienportal des Bundes, provide detailed information on these allowances and how they integrate with overall family benefits.

Limitations and Criticisms

While the Kinderfreibetr³ag provides significant tax relief for many German families, it is not without its limitations and criticisms. A primary point of contention is its perceived regressive impact: because it reduces taxable income, it disproportionately benefits higher-income households subject to a higher marginal tax rate. Lower-income households, whose tax burden might already be minimal, often gain more from the direct payment of Kindergeld than from the tax-reducing Kinderfreibetrag, which the "Günstigerprüfung" aims to address. This disparity has led to ongoing debates about the fairness and effectiveness of Germany's family support system.

Another limitation concerns the automatic nature of the "Günstigerprüfung." While designed to simplify the process, some parents may not fully understand why they benefit more from one over the other, particularly if they are new to the German tax system. Furthermore, the conditions for claiming the Kinderfreibetrag for adult children (up to 25 years old) require specific criteria, such as ongoing education or job-seeking, which can be complex to navigate. Critics also argue that the total value of the Kinderfreibetrag may not fully cover the actual cost of raising a child, despite regular adjustments for inflation and living costs. This suggests that while it offers a valuable Freibetrag, it might not entirely free the essential child-related expenses from the tax burden.

Kinderfreibetrag vs. Kindergeld

The Kinderfreibetrag and Kindergeld are the two main forms of state support for families with children in Germany, often leading to confusion due to their intertwined nature. The key difference lies in their mechanism: Kindergeld is a direct, monthly financial payment provided to all eligible parents, regardless of their income. Conversely, the Kinderfreibetrag is a tax allowance that reduces a parent's taxable income, thereby lowering their income tax liability. Parents do not receive both simultaneously for the same child; instead, the German tax office performs an automatic "Günstigerprüfung" as part of the annual Steuererklärung. This check determines which of the two benefits (the direct Kindergeld payment or the tax reduction from the Kinderfreibetrag) is more financially advantageous for the family. Typically, Kindergeld is more beneficial for lower to middle-income households, while the Kinderfreibetrag offers greater savings for higher-income earners due to the progressive nature of the Einkommensteuer system.

FAQs

How does the Kinderfreibetrag affect my monthly salary?

The Kinderfreibetrag itself does not directly reduce your monthly net salary. Instead, it is considered during your annual Einkommensteuer assessment by the Finanzamt. While the number of child allowances (Kinderfreibeträge) is noted on your electronic wage tax deduction features (ELStAM) and influences the calculation of your Solidaritätszuschlag and Kirchensteuer, it does not impact the basic monthly wage tax deduction.

Is the Kinderfreibetrag automatically applied?

Yes, the Kinderfreibetrag is automatically considered by the Finanzamt when you submit your annual Steuererklärung (tax declaration), provided you have filed the "Anlage Kind" (Child Annex). The tax office will perform a "Günstigerprüfung" to check whether the tax benefits from the Kinderfreibetrag are more favorable than the Kindergeld you received throughout the year.

Can both parents claim the full Kinderfreibetrag?

For married parents who are jointly assessed, the full Kinderfreibetrag for a child is typically considered for their combined income. For unmarried or separated parents, each parent is generally entitled to claim half of the Kinderfreibetrag. In certain situations, one parent may be able to have the other parent's share transferred to them, for instance, if the other parent is not meeting their child support obligations or is not subject to unlimited tax liability in Germany, as detailed in the Einkommensteuergesetz (EStG) § 32.

What happens if my child turns 18? Do I still get the Kinderfreibe²trag?

The Kinderfreibetrag can generally be claimed for children up to the age of 18. However, under specific circumstances, it can continue to be claimed for adult children up to their 25th birthday. These circumstances include if the child is undergoing vocational training or higher education, is in a transition period between educational stages, or is unable to begin or continue training due to a lack of available places. For children with disabilities who are unable to support themselves, the Kinderfreibetrag may apply beyond the age of 25, provided the disability occurred before their 25th birthday. These rules are outlined by official sources such as the Bundesministerium für Familie, Senioren, Frauen und Jugend.¹