Parental allowance replaces prenatal income. In this article, we show you ways to increase your parental allowance
Salaried employees should first determine the relevant assessment period. The assessment period is the prenatal comparison period that determines the amount of gross income relevant to parental benefits.
Due to exclusions and deferrals, the determination of the assessment period can be difficult. For this purpose, it is best to use our free parental allowance calculator.
Once the assessment period has been determined, you can now check to what extent the gross income relevant for parental allowance can be increased. There are several options here:
Many employees benefit from the tax exemption of salary components in favor of company pension plans. It is often forgotten here that the tax exemption means that the lower salary falls within the parental allowance assessment basis.
3,000€ current taxable gross, but 200€ of this is tax-exempt as part of deferred compensation -> only 2,800€ of parental allowance is still relevant, which with tax class 1 amounts to almost 70€ less basic parental allowance per month.
It is advisable to check the risks that may be associated with this. For example, in the case of contracts that also cover occupational disability insurance, a new health check may be necessary.
As is generally known, one-time payments and special payments are unfortunately not taken into account in the calculation of parental allowance.
You can avoid this problem by distributing the one-time payments over the regular months. Talk to your employer whether such a solution would be possible (possibly for a limited period). The effect is not negligible:
3,000€ current taxable gross and a one-time payment of 3,000€ in November of a year (classic Christmas bonus). In this case, the parental allowance is 1,206€ per month of life in basic parental allowance.
If the one-time payment is paid spread over all months, the parental allowance-relevant gross increases by an average of 250€ to a total of 3,250€, resulting in a basic parental allowance of 1,290€, which is over 80€ more per month.
It is best to raise this issue with your employer when you are planning to have a child, but at the latest when you become aware of your pregnancy, because the effect is weakened with each month that passes.
Of course, it's positive for parental benefits if you get a raise, so maybe now is the perfect time to enter into salary negotiations with your employer.
Instead of paying off overtime, see if the employer would be willing to pay out the overtime with the salary as gross income relevant to parental benefits.
The highly praised and repeatedly cited "trick" of optimizing parental allowances has a sunny side and a dark side. Those who meet the requirements of having tax class 3 in the majority of the calendar months of the assessment period (more on this in our article Elterngeld und Steuerklasse) can expect a significantly higher parental allowance:
With a gross income of 3,000€, you receive a basic parental allowance of 1,206€ with tax class 4. With tax class 3, on the other hand, you can expect a basic parental allowance of 1,381€:
That is more than 175€ more per month.
But, in general, the partner receives the unfavorable tax class 5, which not only significantly weakens the actual prenatal net income, but also noticeably reduces his parental allowance entitlement.
To stay with our example, this means that the partner only receives a parental allowance of only 986€.
You should first check whether you can still change the tax class relevant for parental allowance at all. In the next step, you should be aware of the consequences (possibly lower actual net family income until the birth, which will be compensated by the tax return and possibly significantly lower parental allowance of the partner).
In the year of the wedding, you can also change your tax class retroactively.
Many parents do not know that with good planning and a bit of luck, it is possible to create a situation where both parents benefit from the favorable tax class 3.
All that is required is that both parents had tax class 3 in the individual assessment period.
The following example shows how this can look::
Date of birth: 16.12.2021
In general, both parents are employed
In 2020 the father has tax class 3, the mother tax class 5
When the pregnancy is known, they change the tax classes, so that the mother gets tax class 3 (maternity leave starts at the beginning of November, so assessment period 11/2020 to 10/2021 -> she must have tax class 3 in the payroll at the latest in May 2021)
The father must only be actively self-employed in the period January 2020 to November 2021 at the latest (month before birth), then 2020 will be taken as a basis for him. There, he had tax class 3, which means that both parents will be based on tax class 3 in the parental allowance calculation.
The disadvantage is that tax class 3 also counts for the net calculation in any additional earnings for both parents, regardless of the actual tax class in the reference period. To avoid surprises, you should seek advice.
Self-employed persons should first check which assessment period and which income will be decisive for the calculation of the parental allowance. In principle, the calendar year before the birth counts, although a different calendar year can be used as a basis due to so-called postponement facts.
With the help of our free parental allowance calculator, you can determine your assessment period quickly and easily.
In the next step, you should be clear about which profit counts for you. In the video linked above, we go into detail about the different profit determination variants. Basically, however, you can remember that the taxable profit is decisive.
Maybe you are one of the lucky people who do not have to worry about an optimization because you have already reached the maximum amount of the parental allowance of 1.800€ due to the amount of your profit.
You will have reached the parental allowance maximum amount if you give birth in 2021 with a taxable profit in 2020 of 39.680€. However, this figure only applies to you if you are exempt from compulsory social insurance and also did not have to pay church taxes.
Nevertheless, you should consider a parental allowance consultation, because in your case the focus will be on the reference period, so that solutions can be found to ensure that you actually receive the unreduced maximum parental allowance.
If the amount of your relevant profit does not bring you within the maximum amount of parental allowance, we recommend that you check extensively to what extent it makes sense to increase your taxable profit in favor of a higher parental allowance.
Here, you must adhere to the tax regulations, because the parental allowance law is based on the tax law.
We would like to present the following options for optimizing profits:
As far as possible, you should receive/recognize your operating income in the calendar year of the assessment period (depending on the profit determination method), which is relevant under tax law.
So, especially around the two turns of the year, try to control your accounting/payment receipts accordingly, already even if there is a desire to have a child and no pregnancy has been confirmed yet.
As far as possible, you should receive/recognize your business expenses outside the calendar year of the assessment period for tax purposes (depending on the profit determination method).
So, especially around the two turns of the year, try to control your accounting/payment outgoings accordingly, already even if there is a desire to have children and no pregnancy has been confirmed yet.
If absolutely necessary, you can also refrain from declaring business expenses; this is possible under tax law, but may not make sense from a tax perspective.
You should only take this route if various test calculations by the tax advisor and parental allowance advisor confirm the advantage of the higher taxable profit with regard to the higher parental allowance. Otherwise, you run the risk of losing the additional parental allowance due to a higher income tax burden.
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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: