Parental allowance is tax-free. Unfortunately, there is a weighty but here. Because it is subject to the so-called progressive tax, it is ultimately indirectly indirectly taxed by the income tax rate increases.
This can best be explained by a simple example:
Your taxable income in 2019 is 50,000, - EUR. The tax rate is (estimated) 25%, the income tax therefore 12.300, - EUR. The tax office is now checking whether you have received so-called progression benefits (parental allowance, maternity pay, sickness pay, unemployment benefit I, etc.) this year. Let's assume that you have received 10.00,- EUR parental allowance. Your "notional" taxable income is now 60,000,- EUR, the tax rate would be about 27%.
Now this (higher) tax rate will be applied to your original taxable income. So at 50,000, - EUR now comes a tax rate of 27%, instead of 25%. The income tax increases due to the parental allowance by 1,200, - EUR to 13,500, - EUR.
Progression reservation tips:
The less taxable income in the calendar year, the weaker the progression effect.
Particularly "hard" it meets parents assessed together, where one earns very well and the other also has a high parental allowance.
Withdraw money for tax back-payments if the working parent pays salary with income tax bracket 3 during parental leave.
Have your tax bill calculated early so you do not get any "nasty surprises".
The inflow principle applies to progression incomes. When parental leave starts at the turn of the year, plan carefully in which year it is wiser to receive the first (subsequent) payment of parental benefit.
We help you with the planning and will gladly give you more tips!
For more information on Parental Allowance and Income Tax, see this video: https://youtu.be/LoVMKXG57gA
Use our software and make your applications quickly and easily: www.einfach-elterngeld.de/en/register
The parental allowance rules can be complicated. Make it easy and, like many other parents, use our services to get the most out of your parental allowance. We offer you many possibilities to make your application for parental leave as easy and uncomplicated as possible: