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Overview of the 2028 Tax Reform
The ruling coalition in Germany has reached an agreement on a significant income tax reform aimed at providing relief primarily to small and middle incomes, with a special focus on families with children. The reform intends to ease the tax burden by raising the basic tax-free allowance and increasing child benefits, with full effects expected by 2028. A family with two children and a combined taxable income of €60,000 could save over €600 annually as a result of these changes, according to the coalition’s agreement paper [Source 1].
Details of the Tax Relief Measures
The tax-free allowance, currently at €12,348, is planned to increase to approximately €12,900 by 2028 in two phases. Concurrently, the monthly child benefit is scheduled to rise to €272 by the same year. Practical examples from the coalition paper illustrate that by 2028, couples working in typical middle-income occupations like caregiving and bus driving earning €2,800 gross each with two children will enjoy a tax relief of about €632 annually. Single parents with similar incomes will receive relief ranging from roughly €468 to nearly €500, depending on their profession [Source 1].
Implementation Timeline and Financial Considerations
The coalition plans to introduce the tax relief measures in two stages, starting in 2027 with a second instalment following in 2028. This staggered rollout is intended to ease the impact on the federal budget, which currently faces significant shortfalls. To finance these tax breaks, options under discussion include tax hikes on higher earners, reductions in subsidies, and elimination of certain tax privileges. The coalition has decided against increasing the top tax rate for high-income individuals at this point, a position reportedly favored by the conservative parties [Source 1][Source 4][Source 2].
Other Reform Elements and Political Context
The broader reform package also covers reforms of sick leave regulations and efforts to cut costs for businesses. The coalition showed a rare display of unity in announcing these reforms after protracted negotiations. However, debates remain over the full spectrum and funding of the relief measures. Opposition parties and professional associations have expressed concerns over some aspects of the reforms, such as the planned abolition of phone-based sick notes [Source 5][Source 2].
Expat, International Student, and Foreign Worker Impact
For expatriates, international students, and foreign workers residing in Germany, this tax reform signals possible financial relief from 2027 onwards, particularly for those supporting families or earning in the middle-income range. The gradual increase in the tax-free allowance could reduce overall taxable income and increase net salaries. Higher child benefits also offer additional support for families. Affected individuals should monitor changes in tax filings and child benefit applications to ensure they benefit fully from the new provisions. Due to the two-stage implementation, planning for changes in 2027 and 2028 will be essential. Since the reform does not increase burdens on high earners, those earning higher incomes may see fewer changes but should stay informed about potential future adjustments [Source 1][Source 4].
For more details, see the original German report here: tagesschau.de [Source 1].
