German income tax lump-sum deduction increase to 1,430 euros in 2027, Digi Mart USA News (Germany): The planned increase is part of the draft Income Tax Reform Act 2027, which the German federal cabinet approved on September 2, 2026, and which has been listed as a parliamentary paper in the Bundestag since late September. The government justifies the change partly by reduced bureaucracy, since more employees would no longer need to document their work-related expenses individually.
According to the government’s calculation, the change would cost the state about 1.1 billion euros per year. The increase has not yet been adopted.
The Bundesrat issued its opinion on October 16, 2026, and on November 4 the Bundestag’s Finance Committee heard expert witnesses.
For the new rules to apply from January 1, 2027, the Bundestag and Bundesrat would need to pass the law before the end of the year.
The employee flat-rate allowance is deducted from gross wages before tax is calculated. A 200-euro increase therefore reduces taxable income by 200 euros, and the actual saving equals the tax due on that amount.
At a marginal tax rate of 30 percent, the saving would be 60 euros per year, or 5 euros per month.
Taxpayers whose income falls below the basic allowance pay no tax and would gain nothing from the increase.
The publisher’s table, based on the planned 2027 tariff for single taxpayers and counting only the 200-euro change, shows annual savings of 37 euros at 15,000 euros of taxable income, 49 euros at 20,000 euros, 56 euros at 30,000 euros, 63 euros at 40,000 euros, 70 euros at 50,000 euros, 77 euros at 60,000 euros and 84 euros at 80,000 euros.
Church tax payers would save an additional 8 or 9 percent of that tax saving. For married couples where both partners are employed, the allowance applies to each partner separately, so the saving could double.
Because the allowance is already considered in monthly wage tax, the benefit would appear directly on pay slips.
Employees whose actual work-related expenses already exceed 1,430 euros, for example because of a long commute, a home office or high training costs, would see no benefit and would continue to claim those costs individually. Those who previously had between 1,230 and 1,430 euros in expenses would benefit only partially.
Pensioners and retirees would not benefit: pension income keeps the 102-euro allowance, which the draft does not change.
Whether individual receipts remain worthwhile depends mainly on the commute. The commuting allowance has been 38 cents per kilometer from the first kilometer since 2026, so 1,430 euros is reached at a one-way commute of about 17 kilometers over 220 working days.
Employees with longer commutes or other costs should still itemize expenses from 2027. For others, the higher allowance may reduce the effort of preparing a tax return, since receipts for work equipment, specialist literature or account fees often no longer need to be collected.
The tax office checks an expense item only when the total exceeds the allowance.
