Grundfreibetrag

Grundfreibetrag is a tax-free basic allowance in the German income tax system. It represents the portion of an individual’s annual income that is not subject to income tax. Any income earned above this threshold is taxed according to the progressive income tax rates. The Grundfreibetrag applies to natural persons and to income that is taxable under Einkommensteuer. It is not a tax credit or a separate payment, but a deduction that reduces the amount of income subject to tax.

The Grundfreibetrag is set by law and adjusted annually for inflation. For the 2023 tax year, the amount was 10,908 euros for single taxpayers; for married couples filing jointly, the corresponding threshold is effectively double, around 21,816 euros. The exact figure can vary each year as part of budget and inflation adjustments announced by the federal government. The threshold is linked to the goal of ensuring that income necessary to cover basic living costs remains tax-free.

In practice, the Grundfreibetrag reduces the base of taxable income. If a taxpayer’s annual income falls at or below the threshold, no income tax is due on that income. Once income surpasses the Grundfreibetrag, the excess is taxed according to the German progressive rate schedule. Other personal allowances, such as the Kinderfreibetrag (child allowance), interact with the Grundfreibetrag in the overall calculation of tax liability, particularly in the case of joint assessment.

See also: Einkommensteuer in Deutschland, Steuerfreibeträge, Kinderfreibetrag, Progressive Einkommensteuer.