Basic Allowance 2026: How Much Stays Tax-Free?
The basic allowance is perhaps the single most important figure in German tax law: up to that amount, income remains entirely untaxed. For 2026 it stands at €12,348 per person. Compared with 2025, when €12,096 applied, that is an increase of €252. For jointly assessed married couples and registered civil partners the amount doubles to €24,696, because the splitting tariff calculates the tax on half the combined income.
Why the figure rises every year
The basic allowance is not a political gift but a constitutional obligation. The subsistence minimum may not be taxed — the state must exempt the portion of income a person needs to live on. How high that minimum is, the federal government determines regularly in its subsistence minimum report, based on standard benefit rates, housing costs and heating costs. When those costs rise, the basic allowance has to follow. That is why it is raised in practically every year, usually together with a shift of the remaining tariff zones.
What the increase is actually worth
The effect of raising the basic allowance can be estimated well: it corresponds roughly to the additionally exempted amount multiplied by your personal marginal rate. With €252 more allowance, that is somewhere between around €35 a year for low earners at a 14 percent marginal rate and a good €105 for taxpayers at the top rate. Anyone also paying solidarity surcharge or church tax saves a little more. How large the effect is in your case is shown by the Income Tax Calculator once you enter your taxable income.
One point is important to grasp: the basic allowance is not an amount reserved for low earners. It is built into the tariff and works for every taxpayer — even someone with €200,000 of taxable income keeps the first €12,348 tax-free. The only difference is that at high incomes the allowance makes up a smaller share of the total.
The basic allowance and pensions
For pensioners the basic allowance is the decisive threshold. It is not the whole pension that is taxed, only the share determined by the taxable portion applicable to the year the pension began. If that taxable part, after work-related and special expenses, stays below €12,348, no income tax is due. This is exactly why many long-standing pensions remain tax-free, while newer pensioners with a higher taxable portion are more likely to have to file a return.
The basic allowance for students and side jobs
Students and apprentices benefit too. Anyone working alongside their studies who earns less than the basic allowance over the year pays no income tax. If wage tax was withheld anyway — which happens frequently with fluctuating monthly pay — it is recovered in full through the tax return. Because the €1,230 employee allowance and the €36 special expenses allowance are deducted as well, the practical threshold is actually around €13,600 of annual gross pay.
Not to be confused: allowance versus standard deductions
The basic allowance is often muddled up with other figures. The €1,230 employee allowance reduces income before the tariff is applied. The saver's allowance concerns investment income only and operates inside the flat tax system. The child allowance, €9,756 in 2026, is offset against child benefit of €259 a month and applied only where it is more favourable for the family. The basic allowance, by contrast, is built directly into the tariff formula of § 32a EStG and needs no application at all.
What happens just above the threshold
A widespread misconception holds that crossing the basic allowance suddenly makes the entire income taxable. The opposite is true: only the excess is taxed, and initially at the entry rate of 14 percent. At €13,000 of taxable income, €652 falls into the taxable range, which produces a tax bill well under €100. Only as the distance from the allowance grows does the rate rise noticeably.
Using the allowance to the full
Anyone sitting just above the basic allowance can often become completely tax-free with targeted deductions. Commuting costs, professional literature, work equipment, job application costs, professional association fees, donations and provision expenses all reduce taxable income directly. For married couples there is the added effect that an unused portion of one partner's allowance benefits the other through the splitting tariff. Try out in the Income Tax Calculator how strongly additional work-related and special expenses push down your tax — at lower incomes the effect is often surprisingly large.