What tax changes will the new year bring?

Tax changes 2026: The Saarland Chamber of Tax Consultants points out important changes in the new year in a press release.

Several tax reforms are scheduled to come into effect on January 1, 2026. The corresponding legislative processes are still in their final stages and need to be completed. The core of the reforms is a significant reduction in income tax through higher tax allowances and the renewed compensation for bracket creep. Families will also benefit from increased benefits. Commuters will receive permanent support through an improved commuter allowance.

In addition, the legislature intends to strengthen voluntary work, create a tax incentive for voluntary continued work after reaching the standard retirement age with the active pension scheme, and provide relief to consumers through a permanently lower VAT rate on restaurant meals. "Overall, 2026 is a year in which government relief measures should have a greater impact on everyday life, including on payroll and tax returns," explains Ronald Maul, President of the Saarland Chamber of Tax Advisors.

More net income through income tax relief

It is confirmed that the basic tax-free allowance for income tax will increase to €12.348 per person on January 1, 2026 – this is the portion of income that remains completely tax-free. In 2025, it will be €12.096. For employees, this means that a larger portion of their income will not be taxed at all, resulting in a lower tax burden through monthly payroll tax deductions.

At the same time, the tax bracket thresholds will be raised again to compensate for bracket creep. This prevents inflation-related wage increases from automatically leading to higher tax rates, even though purchasing power hardly increases in real terms. Anyone receiving a salary increase in 2026 will therefore keep more net income than they would without this adjustment to the tax brackets.

Families in focus: Higher child benefit and higher child tax allowance

Families will also receive a significant boost in 2026; that much is already certain. The child tax allowance will increase to €6.828 per child for both parents combined. That's €3.414 per parent. This will provide greater tax relief for children's basic needs, resulting in additional tax savings, especially for middle and higher income earners.

At the same time, child benefit will increase to €259 per month per child, meaning families will receive more support every month, regardless of income. As before, the tax office will automatically check whether child benefit or the child tax allowance is more advantageous in each individual case, ensuring that all families benefit from the relief.

Relief for commuters: €0,38 from the first kilometer

Commuters should see a noticeable improvement in 2026 if the proposed changes are passed. The commuter allowance will be uniformly increased to €0,38 per kilometer, starting from the first kilometer. Currently, the first 20 kilometers are only reimbursed at €0,30, while the higher rate of €0,38 only applies from the 21st kilometer onward. In the future, every commute will be given greater tax consideration, regardless of distance, and deductible work-related expenses will increase. This will lead to a higher tax refund or a lower tax payment in the 2026 tax return in many cases, and for employees with a tax-free allowance, it could even result in higher net income in the current year.

By removing the time limit on the mobility bonus, taxpayers with lower incomes should continue to receive the mobility bonus even after 2026.

Eating at a restaurant becomes cheaper

Consumers in the restaurant and catering sector are also set to receive tax relief if the legislature approves it. From 2026, the reduced VAT rate of 7 percent will permanently apply to food in restaurants, cafes, canteens, as well as to takeaway and delivery services, while beverages will remain at the standard rate of 19 percent.

The aim of this tax reduction is to provide tax relief for dine-out customers and to safeguard the availability of restaurants across the country. Whether and to what extent businesses pass on the tax relief in the form of lower prices depends on their individual cost structures. However, the legal basis for lower prices will be permanently established from 2026 onwards.

Strengthening voluntary work: Higher tax-free allowances

Volunteering is set to become more tax-efficient in 2026, once the legislative process is complete. The tax-free allowance for trainers and instructors is to increase to €3.300 per year, up from the current €3.000. The general volunteer allowance is also slated to rise in 2026 to €960 per year, up from the current €840, allowing, for example, club board members or volunteers in social and cultural institutions to receive higher tax-free compensation.

These adjustments send a clear signal to strengthen voluntary engagement and at the same time relieve the burden on those who dedicate themselves to the community.

Active pension: Up to €2.000 per month tax-free in retirement

With the active pension scheme, the legislature aims to create a strong incentive for voluntary continued employment after retirement, starting in 2026. Those who remain in employment subject to social security contributions after reaching the standard retirement age will be able to earn up to €2.000 per month tax-free – that is, €24.000 per year.

The tax-free amount is intended to apply in addition to the basic tax allowance and will make continuing to work in retirement significantly more worthwhile. Only income above this limit will be subject to regular taxation, thus making the transition to retirement more flexible and financially attractive. A final decision is still pending.

Electric company cars are becoming more attractive

Finally, employees with company cars will benefit from an expansion of tax incentives for electrically powered company cars. The limit for the particularly favorable taxation of purely electric cars as company vehicles will be raised to a gross list price of up to €100.000 – previously it was €70.000.

This means that even higher-value electric vehicles can continue to be taxed according to the 0,25 percent rule, which significantly reduces the taxable benefit from private use. For employees, this translates to a lower monthly income tax burden and therefore more net pay, while simultaneously creating an additional incentive for climate-friendly mobility.

Tax return deadline

In addition to the substantive tax changes, citizens should also keep an eye on the filing deadlines for the 2025 income tax return. Those who prepare their tax return themselves and submit it without tax advice must submit it to the tax office by July 31, 2026, at the latest, provided they are required to file. However, those who have their 2025 tax return prepared by a tax advisor have considerably more time. In these cases, the statutory filing deadline is not until February 28, 2027. Since this date falls on a weekend in 2027, the deadline is postponed to the next working day, March 1, 2027.

Regardless of the above, the following applies: Those not required to file a tax return can voluntarily submit it until December 31, 2029. Filing voluntarily is generally worthwhile in order to receive a tax refund.

 

Conclusion and recommendation by Chamber President Ronald Maul Conclusion "Overall, the 2026 tax year brings a number of clearly consumer-oriented improvements. Higher tax allowances and the compensation for bracket creep will increase the disposable income of many taxpayers. Families will receive higher benefits through child allowances and tax credits. Commuters will be permanently better off, dining out could become more affordable thanks to the VAT reduction, and volunteers will benefit from higher tax-free allowances. Furthermore, the introduction of the active pension scheme opens up new financial possibilities for retirement. The Saarland Chamber of Tax Advisors recommends examining the personal implications early on in order to make optimal use of the tax relief in the tax return and ongoing payroll tax deductions," concluded Ronald Maul, President of the Saarland Chamber of Tax Advisors.
Online Here you can find further information from the Saarland Chamber of Tax Consultants. 

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