Tax-Free Allowance Rises to €12,348, Saving Workers Up to €162
The basic tax-free allowance (Grundfreibetrag) increased to €12,348 for 2026, automatically reducing the tax burden for all workers in Germany without requiring any action.
For 2026, the basic tax-free allowance (Grundfreibetrag) rises to €12,348 per year—up from €12,096 in 2025. This is the amount every resident earns completely free of income tax. To offset inflation-related "cold progression," income tax brackets were adjusted upward, with the 42% top tax rate now beginning at €69,879 of taxable income (previously €68,481).
Automatic savings for everyone
For married couples filing jointly, the allowance doubles to €24,696. This increase saves a single earner on average €162 compared to 2025—without lifting a finger, as employers' payroll already factors it in. The adjustment is part of Germany's annual effort to prevent "bracket creep," where inflation pushes workers into higher tax brackets without real income gains.
From January 1, 2026, employees who have reached the statutory retirement age may earn up to €2,000 per month tax-free ("Aktivrente"), regardless of whether they are already receiving a pension. The Aktivrente is currently only available to employees subject to social insurance contributions.
For expats and foreign workers: These changes apply to everyone earning in Germany, whether you're on a permanent contract, Blue Card, or working holiday visa. The higher allowance means you keep more of your gross salary automatically—check your February or March 2026 payslip to see the adjustment reflected. If you're filing a voluntary tax return for 2025 (deadline July 31, 2026), you'll still use the old €12,096 threshold; the new €12,348 applies only to income earned in 2026.
