Soli & child benefit: how much you will benefit from the 2021 tax relief

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In the coming year, the majority of taxpayers will have more net than gross.

A key, but not the only reason for the financial relief is the elimination of the solidarity surcharge for 90 percent of taxpayers.

It's not just about a few more euros in the account: Singles can expect relief of up to 1036 euros in 2021, single parents with up to 1168 euros.

Families with two children even have up to 2553 euros more in their accounts at the end of the year.

An overview.

For around 90 percent of citizens, the solidarity surcharge will be completely eliminated in the coming year.

According to the Federal Ministry of Finance, this applies to singles up to a gross annual income of EUR 73,441.

The full solos only have to be paid if the gross annual wage is 109,975 euros or more.

In between lies the so-called mitigation zone: Here the rate increases gradually to the familiar 5.5 percent.

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For families with two children in which there is a single earner, the surcharge is completely eliminated up to a gross income of 154,076 euros.

The end of the moderation zone is a gross annual wage of 223,463 euros.

Overall, according to the Federal Ministry of Finance, taxpayers will have to pay around ten billion euros less to the tax authorities in the coming year.

Frank Hechtner, professor at the Friedrich-Alexander-Universität Erlangen-Nürnberg, has calculated what this means for the individual.

Among the singles, therefore, those who have a gross monthly income of around 6,000 euros benefit the most.

You will be relieved of around 881 euros in the coming year.

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Even those who get 9,000 euros gross per month will have to pay 53 euros less solidarity surcharge in the coming year.

The specified monthly gross income corresponds to one twelfth of the annual gross income.

In the case of families, the exact relief depends on the distribution of income between the two partners.

Roughly it can be said that the effect of eliminating solos is greatest with a joint income of 13,500 euros per month.

As a result alone, the family has a good 1,800 euros more than in 2020 for the whole of 2021.

Adjustment of the tax tables

But the abolition of solos does not stop there.

In addition, taxpayers will benefit particularly strongly from the adjustment of the tax rate in the coming year.

In order to prevent an employee from having less money after deducting inflation, despite a wage increase, the tax curve is shifted every year by the expected price increase.

In this way the so-called cold progression is to be compensated.

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The matter will be lucrative in the coming year because politicians misjudged the inflation rate.

It assumed a rate of 1.52 percent.

The rate will now be significantly lower, experts see it at just under 0.5 percent.

That means: The cold progression will be more than compensated for in 2021.

The Federal Ministry of Finance speaks of a relief of 1.2 billion euros.

In addition, the basic tax-free allowance for everyone will rise from 9408 to 9744 euros in 2021.

Single parents usually receive an additional tax allowance of 1908 euros per year.

After 2020, this relief amount will also be increased to EUR 4008 for 2021.

"Fiscally, the Bundestag resolution to compensate for the cold progression, including the increase in the basic tax allowance, means around 4.2 billion euros less tax revenue in 2021," says a study by the Institut der Deutschen Wirtschaft (IW) on the effects of the tax law change in the current legislative period .

In this case, less government revenue means more money in the citizen's account.

More child benefit, but higher social contributions

Families can also look forward to more child benefit.

On January 1st, it will increase by 15 euros to 219 euros for the first two children, for the third to 225 euros, for the fourth and each additional child it will be 250 euros.

The child allowance increases by 576 euros to 8388 euros.

Total relief for taxpayers according to IW: 3.4 billion euros.

The three relief effects - partial abolition of solos, changed tax rates, more child benefits - totaling around 18 billion euros, will be offset by higher social security contributions in the coming year.

On the one hand, the additional contribution to statutory health insurance increases, and on the other hand, the assessment ceiling is raised.

According to this, the income threshold in statutory health insurance will increase from January 1, 2021 from EUR 4687.50 per month to EUR 4837.50.

In the statutory pension insurance, the income limit up to which the contribution rises from 6900 euros to 7100 euros per month in the old federal states and from 6450 euros to 6700 euros in the new federal states.

This means that higher incomes will have to pay higher contributions in the coming year.

The IW estimates the volume of this opposing effect at three billion euros.

A total of up to 2553 euros more per year

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The tax experts have taken a close look at how differently the relief totaling around 15 billion euros will affect individual income groups in the coming year.

Among the singles, those with a gross income of 6500 euros per month can feel like winners.

They have to pay almost 900 euros less solidarity surcharge and 370 euros less income tax throughout 2021.

In return, the social security contributions increase by around 230 euros.

The bottom line is a plus of 1036 euros.

Source: WORLD infographic

The positive effect decreases continuously with higher gross income.

This is mainly due to the fact that the solidarity surcharge is being gradually raised again.

It looks very similar with single parents.

According to IW, the maximum relief is only achieved with a monthly gross income of 7,000 euros - namely 1168 euros.

Source: WORLD infographic

This is due to the fact that the child tax allowance is taken into account when determining income tax and solidarity surcharge, which means that the absolute tax burden and thus also the relief is lower compared to a single person with the same income, according to the study.

For example, if you are a single parent with a child who earns 3500 euros a month, you will be relieved of 450 euros a year.

160 euros less solidarity surcharge and 150 euros less income tax are offset by higher social contributions of 40 euros.

The remaining net relief results from 180 euros more child benefit.

That leaves the family.

Among the families with two children, those in whom the partners together have a monthly income of 14,000 euros are relieved the most.

It is assumed that one partner contributes two thirds and the other partner one third to the gross household income.

The effect in 2021: 2553 euros.

Source: WORLD infographic

For a family with two children and a gross household income of 7,000 euros per month, the net relief for the year as a whole is approximately 1,050 euros.

This results from the fact that 440 euros less solidarity surcharge and 330 euros less income tax have to be paid, but 80 euros more social security contributions.

In this case, there is also the higher child benefit.