Photo by Herman Mahal on Unsplash
New Commuter Tax Allowance Increases to Benefit Workers and Expats from 2026
Starting January 1, 2026, commuters in Germany can claim a higher tax allowance (Pendlerpauschale) of 38 cents per kilometer for every kilometer of their one-way journey to work, beginning from the very first kilometer. This change replaces the previous system where a lower rate applied for the first 20 kilometers, with higher rates only kicking in afterward. German taxpayers, including expats, international students, and foreign workers, will benefit directly from this uniform increase in tax relief on daily commuting expenses regardless of whether they travel by car, public transport, or bicycle. The federal government estimates this reform will save taxpayers around 1.1 billion euros in 2026, rising to 1.9 billion euros in 2027 [Source 1][Source 3][Source 5].
How the Increased Pendlerpauschale Affects Expats and International Workers
For expats and foreign workers residing in Germany, this enhanced tax allowance means greater financial relief on commuting costs that can add up significantly over the year. Since the allowance applies from the first kilometer, even those with shorter commutes will see a noticeable benefit when filing their tax returns for 2026, with the refund effect appearing in 2027. Expats who often manage their finances between different countries should consider incorporating this change into their annual tax declarations to maximize returns. The allowance covers all means of transport, which is relevant to those relying on public transport or driving. However, individuals using employer-provided vehicles for commuting are not eligible for this allowance [Source 5][Source 6].
Debate Surrounding Fairness and Environmental Impact of the Pendlerpauschale Reform
While commuters have generally welcomed the higher tax relief, the reform has faced criticism from environmental and fiscal experts. Critics argue that increasing the allowance may encourage more car usage rather than supporting greener mobility solutions. Some mobility researchers and organizations advocate for strengthening public transportation and electric vehicle infrastructure instead of expanding the tax break, which they view as a costly fiscal gamble amid tight public budgets. Additionally, concerns have been voiced over the social fairness of the allowance, with claims that it disproportionately benefits higher-income earners who tend to have longer commutes, while low-income workers receive less relative support [Source 2][Source 3][Source 8].
The reform also includes a mobility premium for low earners, which only applies from 20 kilometers of commuting distance and therefore does not benefit those with very short travel distances under the new system. The debate highlights ongoing challenges in balancing tax policy, environmental goals, and social equity in Germany’s transport legislation [Source 5][Source 2].
What Expats Should Do: Key Points and Deadlines
Expats and international workers should take note of the upcoming changes when preparing their tax returns for the 2026 tax year. They can start applying the 38-cent rate per kilometer on commuting expenses from January 1, 2026, leading to lower taxable income and thus potentially higher refunds after filing in 2027. It is advisable to keep detailed records of commuting distances and expenses, regardless of transport mode, to optimize tax benefits. Since the allowance also includes bicycle trips, expats relying on sustainable transport may see financial recognition for their efforts.
Understanding entitlement conditions is important. Those using company cars for commuting will not qualify for the allowance, and the low-income mobility premium starts only after traveling 20 kilometers. Therefore, expats with shorter commutes or employer vehicles should adjust expectations accordingly. Consulting tax advisors familiar with German tax law may help international residents maximize benefits while complying with all regulations [Source 1][Source 5][Source 6].
For further detailed information, the original seed article in German is available at https://www.tagesschau.de/wirtschaft/verbraucher/pendlerpauschale-arbeitsweg-100.html.
