The basic allowance is the amount of income for which no tax is due. The income is only taxed from this limit. The basic allowance is intended to ensure the subsistence level for taxpayers. The basic allowance applies to all taxable persons, including pensioners.
- The basic allowance ensures the tax-free subsistence level.
- The adjustment is made annually based on the needs in social assistance.
- Parents are additionally relieved by the child allowance.
- The basic tax allowance represents indirect state aid for taxpayers.
What is the basic allowance?
Short for BA by abbreviationfinder, the regulation for the basic tax allowance can be found in Paragraph 32a, Paragraph 1, No. 1 and Paragraph 52, Paragraph 41, No. 1 of the Income Tax Act (EStG). The Federal Constitutional Court has repeatedly emphasized that tax law and social law are closely linked. This means that the tax-free basic allowance is identical to the subsistence level defined by social assistance law. For families with children, the cost of raising and caring for children must also be taken into account. This fact is ensured by the child allowance anchored in tax law.
The following factors are used to determine the subsistence level under tax law:
- Standard requirement
- Needs for education and participation of children
- Accommodation costs (gross rent or comparable expenses for home or apartment ownership in an appropriate amount)
- Heating costs including costs for water heating
Employment expenses are taken into account through the income-related expenses, the employee allowance and the commuter allowance.
How much is the basic tax credit?
The basic tax-free amount is adjusted annually, but there is no percentage system. The development over the past few years is as follows:
- 2002–2003: 7,235 euros
- 2004–2008: EUR 7,664
- 2009: 7,834 euros
- 2010–2012: 8,004 euros
- 2013: 8,130 euros
- 2014: 8,354 euros
- 2015: 8,472 euros
- 2016: 8,652 euros
- 2017: 8,820 euros
- 2018: 9,000 euros
- 2019: 9,168 euros
- 2020: 9,408 euros
- 2021: 9,744 euros
For married couples, the basic tax-free amount doubles accordingly for a joint tax return.
Is the basic allowance stated in the tax return?
The basic allowance does not have to be listed separately in the tax return. While the taxable income of a single in 2014 was 40,000 euros, taxation only began from 8,354 euros.
This process takes effect automatically. The same applies to families with children. The child allowance is also automatically taken into account, as is the employee lump sum. The taxpayer is only instructed to disclose his income-related expenses, i.e. expenses incurred in connection with the exercise of his profession. Advertising costs include, for example, the cost of a home office, if recognized by the tax office, or expenses for training and further education.
Is the basic allowance gross or net?
The basic allowance is deducted from taxable income. If the taxable income of a single in 2018 is 40,000 euros, only 32,000 euros are used to determine the tax burden. For married people it is only 24,000 euros.
The taxable income corresponds to the gross income minus all tax-deductible expenses. These in turn vary from taxpayer to taxpayer. With a landlord, the rental income increases on the one hand the taxable income. On the other hand, it is reduced again by interest, depreciation and non-apportionable ancillary costs.
