The planned German Income Tax Reform Act 2027 brings several changes for employees, families and pensioners. The government bill combines tax relief with counter-financing measures. Important: this is still a government draft – changes during the legislative process remain possible.
The full topic page with all tax brackets, the detailed figures and the government draft as a PDF download is available here (in German): Einkommensteuerreform 2027.
The planned changes at a glance
- Employee lump sum (Arbeitnehmer-Pauschbetrag): up from EUR 1,230 to EUR 1,430 per year.
- Basic allowance (Grundfreibetrag): EUR 12,564 in 2027 and EUR 12,900 in 2028.
- Child benefit (Kindergeld): EUR 267 in 2027 and EUR 272 in 2028 per child and month.
- Child allowances: EUR 10,056 in total in 2027, EUR 10,236 in 2028.
- Income tax schedule: adjusted brackets plus a new 47 per cent rate from EUR 280,000 of taxable income.
- Tradesperson services: relief under sec. 35a (3) EStG drops from 20 to 15 per cent, the cap from EUR 1,200 to EUR 900.
- Mini-jobs: the flat tax under sec. 40a (2) EStG rises from 2 to 5 per cent (employer side).
- Sunday and public holiday premiums: the maximum qualifying base wage rises from EUR 50 to EUR 75 per hour; night work stays at EUR 50.
What it means for employees
The higher employee lump sum applies automatically, without itemised proof. Anyone with higher work-related expenses can still claim actual costs, for example training, work equipment or certain travel costs. The higher lump sum therefore mainly helps employees whose actual expenses fall below it.
For the basic allowance, what matters is not gross salary but taxable income as determined under the tax rules.
What it means for families
Child benefit and child allowances rise in parallel. During the annual assessment the tax office automatically checks which option is more favourable. For two children, monthly child benefit would total EUR 534 from 2027.
Where it gets more expensive
Not every measure is relief. The reduced tradesperson bonus affects owners and tenants who claim renovation, maintenance or modernisation work. The higher mini-job flat tax primarily affects employers. Very high incomes face a heavier burden through the new 47 per cent bracket – a marginal rate that only applies within the top bracket.
When does the reform apply?
The draft provides for entry into force on 1 January 2027, with further increases to the basic allowance, child allowances and child benefit planned for 1 January 2028. For wage tax withholding, the 2027 changes apply to payroll periods ending after 31 December 2026.
Conclusion
For many employees and families the relief outweighs the cuts, but savings are made elsewhere. The actual effect depends on income, family situation and work-related expenses. As a member you can discuss your case with your advisory office within our advisory scope under sec. 4 no. 11 StBerG.
Status of this article: September 2026 – government draft, changes possible during the legislative process.