Basic tax-free allowance for 2026: €12,348; amounts below this threshold are tax-free

What is the basic tax-free allowance?

The basic tax-free allowance is the zero bracket in the income tax schedule. No income tax is due on income up to this amount (Section 32a(1) of the Income Tax Act (EStG)). It exempts the minimum subsistence level from taxation and is generally increased when the cost of living rises.

It is often confused with three other things. It does not apply to gross income, but to taxable income. Nor is it an amount that appears as a net figure on your pay stub throughout the year: Income tax is withheld during the year according to a specific schedule. And it applies only to income tax, not to social security contributions.

What is the basic tax-free allowance for 2026, 2025, and 2024?

In 2026, the basic tax-free allowance will be €12,348. That is €252 more than in 2025 (€12,096) and €564 more than in 2024 (€11,784). The Bundestag approved the figures for 2025 and 2026 in December 2024 as part of the Tax Development Act.

What counts as taxable income?

Several deductions are applied to convert gross income into taxable income. For employees, the employee lump-sum allowance of €1,230 is first deducted, provided there are no higher income-related expenses (§ 9a EStG). This is followed by special expenses—which include pension contributions—and extraordinary expenses. The result is the figure that is compared with the basic tax-free allowance.

Does the basic tax-free allowance apply twice for married couples?

In the case of joint assessment, yes—that’s the result. The splitting method applies the tax rate to half of the joint taxable income and doubles the tax amount (Section 32a(5) of the Income Tax Act (EStG)). The basic tax-free allowance thus applies twice: €24,696 for 2026 and €24,192 for 2025. In the case of separate assessment, each person has their own basic tax-free allowance.

How does the basic tax-free allowance apply to mini-jobs, pensions, and college?

Minijob: Earnings do not exceed the de minimis threshold under social security law. If the employer pays a flat-rate tax on these earnings, the wages are not taken into account for income tax purposes (Section 40(3) of the Income Tax Act [EStG]) and are therefore not included in taxable income. The threshold and all other details regarding flat-rate taxation are covered in the article on mini-jobs.

Pension: Only a portion of the pension is considered income—the taxable portion (Section 22 of the Income Tax Act). This percentage depends on the year the pension begins; for pensions starting in 2026, it is 84%. The tax-exempt portion of the pension is set in the year following the start of pension payments and then applies for the entire duration of the pension: Regular pension increases do not result in a recalculation and are fully taxable. The comparison with the basic tax-free allowance is based on total taxable income, not the pension alone.

College Students: Those who work part-time have had income tax withheld from their paychecks throughout the year. If taxable income at the end of the year is below the basic tax-free allowance, no income tax is due under the standard tax brackets. The withheld income tax is credited through the tax assessment, which takes place upon request (Section 46(2)(8) of the Income Tax Act (EStG)). The request must be made by filing an income tax return.

How does the tax bracket continue after the basic tax-free allowance?

Above the basic tax-free allowance, the tax rate starts at 14%. This entry-level tax rate applies to the first euro above the threshold, not to the entire income. The marginal tax rate—that is, the rate applied to the last euro earned—then rises continuously up to 42%. For very high incomes, the rate of 45% applies (Section 32a(1) of the Income Tax Act [EStG]). In 2026, the 42% rate will apply to taxable income of €69,879 or more, and the 45% rate will apply to taxable income of €277,826 or more.

The first bracket, with an initial tax rate of 14%, ranges from €12,349 to €17,799; the second bracket then extends up to €69,878. The brackets merge seamlessly: At the end of the first bracket, the marginal tax rate is 23.97%, and that is exactly where the second bracket begins.

There are two rounding rules under this tax bracket: The tax is calculated based on the taxable income rounded down to the nearest whole euro, and the tax amount itself is rounded down to the nearest whole euro.