Difficult times - for known reasons. But the federal government is generous and helpful. Only the citizens are slowly losing track of where and at what level they should be helped. Here's an attempt to shed some light.
The representatives of the federal and state governments are just putting their heads together again. Among other things, it is about agreeing on the form and amount in which the state could provide its citizens with further support in the energy crisis. Which is gratifying, but should also have psychological reasons. So that nobody sticks their heads in the sand and the crisis doesn't even take hold in their minds. Motto: Germany stands together, no one is left alone. But the now third relief package, like the other two, only creates a good mood to a limited extent. Accusation: watering can principle, unfair et cetera. Just the usual bitching.
A whole lot has already been decided and paid out, for example the reduction in the EEG surcharge, the 300 euro energy flat rate, the child bonus, the suspension of the price increase for CO₂ and the reduction in VAT for gas. Since September, housing benefit recipients have been granted a heating subsidy until December. Single people receive 415 euros, couples 540 euros and a family with two children 740 euros.
And there's still a lot in the pipeline. For example, some tax relief from next year, a possible tax-free bonus of up to 3,000 euros net from the boss, the 300-euro energy premium for pensioners, but above all the electricity and gas price brake. This is still pending or planned:
Let's start with the good news for all taxpayers. The state must not enrich itself from inflation at the expense of the citizens. In order to curb the creeping tax increases associated with the cold progression, Federal Finance Minister Christian Lindner had already presented the key points for an inflation compensation law.
This envisages adjusting the tax burden for inflation for 48 million citizens in order to avoid additional burdens. In addition, families should receive targeted tax support. Employees, pensioners, the self-employed and entrepreneurs should benefit. However, particularly high incomes are deliberately excluded, for which the so-called wealthy tax rate (from 277,836 euros) of 45 percent applies. For everyone whose annual income is less than 62,000 euros, the relief effect should exceed the additional burden caused by the cold progression.
Explanation: The high inflation, i.e. the increase in prices, burdens the citizens on the one hand and, on the other hand, leads to higher income tax burdens in the event of inflation-related wage increases (the so-called cold progression). The term describes a kind of creeping tax increase, when a salary increase is completely eaten up by inflation, but still results in higher taxation. Result: Although the salary has increased, you actually have less money in your pocket.
But one after anonther. Let's start with the families.
According to the Federal Ministry of Finance (BMF), the child allowance is to be gradually increased by a total of 264 euros for each parent from 2022 to 2024, until it is 2994 euros on January 1, 2024.
In addition, child benefit is to be gradually increased in the years 2023 to 2024. In 2023 it should be 227 euros per month for the first, second and third child. From the fourth child, 250 euros are added to the account. In 2024, the rates for the first to third child are to be raised again - to 233 euros. So far, parents have received 219 euros for the first and second child, 225 euros for the third and 250 euros for each additional child.
From January 1, 2024, it will be EUR 233 per month for the first, second and third child, and EUR 250 for the fourth and each additional child.
In addition, the maximum maintenance amount for 2022 is to be raised from 9,984 euros to 10,347 euros. In this way, more costs that are incurred, for example, for vocational training or maintenance for a person entitled to maintenance, can be claimed for tax purposes.
In addition, the basic allowance for all taxpayers is to be increased by 285 euros to 10,632 euros as of January 1, 2023. A further increase of 300 euros to 10,932 euros is planned for 2024.
In order to compensate for the cold progression despite inflation, the so-called tariff benchmarks are to be postponed. In 2023, the top tax rate should start at 61,972 euros instead of the previous 58,597 euros, and in 2024 it should start at 63,515 euros.
And what do the measures actually bring me?
The BMF provides concrete figures on the amount of taxable income that citizens will receive in 2023 compared to the applicable 2022 tariff. Important: Any child allowances and other tax-reducing deductions are already taken into account in the taxable income. So it is not the gross annual salary. Now that that's settled, here are a few examples:
EUR 20,000: EUR 115 for individual assessments; for splitting procedures 0 euros
EUR 30,000: EUR 172 for an individual assessment; for splitting procedures 182 euros
EUR 40,000: EUR 250 for individual assessments; for splitting procedures 230 euros
EUR 50,000: EUR 352 for an individual assessment; for splitting procedures 282 euros
EUR 60,000: EUR 471 for an individual assessment; for splitting procedures 344 euros
EUR 70,000: EUR 479 for an individual assessment; for splitting procedures 416 euros
In addition, the changes are not only intended to avoid additional tax burdens, they also mean less administrative work for many people. According to the BFM, more than 270,000 citizens are no longer required to submit a tax return. This affects around 75,000 pensioners, among others.
Pension contributions are also fully deductible
In addition, taxpayers can deduct 100 percent of their contributions to the statutory pension insurance, which are due from 2023. Only 96 percent were actually planned. But first of all, the statement that this step is less due to the high cost of living and more a reaction to a ruling by the Federal Fiscal Court (BFH) in May 2021 to avoid double taxation of pensions in the future.
In its ruling, the BFH had complained that the transitional regulation on the subsequent taxation of pensions, which has been in force since 2005 and will last until 2040, would lead to unconstitutional double taxation in the future. The same has already been stated in the traffic light coalition agreement. The Institute of German Economics (IW) criticizes the tax exemption of pension contributions as not a spontaneous political relief measure, but a requirement of the constitutional court. In addition, according to the coalition paper, the full taxation of pensions should actually be stretched from 2040 to 2060 and thus defused. This point may be found in one of the next (presumed) relief packages.
But no matter - the main thing is less taxes. Especially since taxpayers can not only deduct contributions paid into the statutory pension insurance, but also those into agricultural old-age funds, professional pension institutions and basic pension contracts, the so-called Rürup pensions.
But before the whole thing becomes unnecessarily complicated, let's stick with a few examples of how the full deductibility of contributions only affect the statutory pension. For this purpose, Finanztip used a calculator - taking into account the current allowances, pension contribution rates (currently 9.3 percent employee share) and tax tables for 2022.
Result? Employee tax payments are reduced. A little bit. For example, for single people with an annual gross income of:
And for a couple with a child and an annual gross income of:
The approximately 21 million pension and pension recipients will also be relieved by an energy price flat rate (EPP) of 300 euros. Previously, the fact that retirees were not included in the windfall had caused a great deal of unrest, while many employees already had the money in their accounts by September. Among them are some retirees who are employed. The latter and all other pension recipients can now look forward to another or even the first EPP until December 15 - the payment is planned until then.
Nothing is certain yet, but according to the proposal, gas customers should receive a special payment in the amount of a monthly gas bill this year. From next year, the state wants to subsidize the gas consumption of citizens by 80 percent from March 2023 to the end of April 2024. The price is to be capped at 12 cents per kilowatt hour. Anyone who then reduces consumption also has the advantage of saving outside of this 80 percent quota. The aim of the proposals is to create incentives to save gas.
In addition, gas customers are to receive a special payment in the amount of a monthly gas bill in December. The one-off payment is to be determined on the basis of the consumption on which the down payment in September was based. The suppliers should therefore waive the down payment for December for practically all household and commercial customers and have it reimbursed by the state. As usual, the property management must also determine the deductions and divide the grants. The gas customer himself would not have to do anything. A whole raft of detailed regulations will follow, for example to prevent abuse. The project is to be sealed on November 11 at a special meeting of the Federal Council. Higher earners with an income of more than 75,000 euros a year may have to pay tax on the second stage of the relief planned for March at the latest.
District heating customers should experience relief via a heat price brake. Similar to the gas price, there should be a guaranteed gross price of 9.5 cents per kilowatt hour of district heating, which in turn should apply to a basic quota of 80 percent of consumption.
According to calculations by the comparison portal Verivox, the gas price brake proposed by the Commission of Experts would reduce household costs by around 41 percent. Whoever heats a single-family house would save around 1700 euros.
Effects of the special payment
The basis for the calculation are the current market prices. At the beginning of October, the nationwide average gas costs for a single-family house with an annual consumption of 20,000 kWh were 4108 euros (20.54 cents/kWh). Twelve months ago the average costs were still 1402 euros. That means additional costs of 2706 euros and an increase of 193 percent. Based on the current market prices, the average down payment for a single-family house is currently around 342 euros. If the state pays an installment, the annual costs drop from 4108 euros to 3766 euros, which corresponds to a reduction of around 8 percent.
Effects of the gas price brake
A family with a gas consumption of 20,000 kilowatt hours would currently have to pay 4108 euros for gas without a price brake. If 80 percent of the basic consumption is capped at 12 cents per kWh, the gas bill drops to 2742 euros at the current market prices - this corresponds to a reduction of 1366 euros per year (33 percent). With a consumption of 18,000 kWh it would be 1230 euros, with 12,000 kWh 739 euros and with 5000 kWh 340 euros.
The electricity price brake is based on the mechanisms of the gas price brake. Apart from an emergency aid. There should be relief for this from January 2023, calculated on the basis of capping the electricity price at 40 ct/kWh (gross) for a basic quota of up to 80 percent of historical consumption in households and municipalities. If operational implementation is not immediately possible by January 1st, the relief is to be implemented at a later date retrospectively to this date. The cap expires on April 30, 2024.
According to calculations by the federal government, people living alone can save around 140 euros and a family with two children around 308 euros.
As during the pandemic, employers are again able to transfer money to their employees tax-free to help them pay their increased costs. This time the amount was even doubled from 1500 to 3000 euros. The employer does not have to pay the lump sum, but he can. If he feels like it or if the company's financial situation allows it. Then he actually has nothing to do other than enter the bonus in the "tax-free allowance" wage type. If the payment marked in this way is made within a period that has yet to be defined, then it is completely exempt from tax and social security.
