It’s 2024 and the new year brings several relevant tax changes for freelancers and self-employed professionals in Germany. Many of these changes are included in the so-called Wachstumschancengesetz (Growth Opportunities Act). Here’s an overview.
The most important tax changes in 2024
- Grundfreibetrag: The basic tax-free allowance or Grundfreibetrag increases from €10,908 to €11,604. For spouses who file a joint tax return, this amount doubles to €23,208. An additional increase of €180 is planned but not yet in effect.
- End of the electric vehicle subsidies: As of December 17, 2023, the state subsidy for electric vehicles ended abruptly. New applications for the environmental bonus cannot be submitted to the Federal Office for Economic Affairs and Export Control (BAFA). This action is due to budgetary constraints.
- Increase in CO2 levy: Starting January 1, 2024, the CO2 price will be significantly raised. Heating oil, gas, and fuel (gasoline/diesel) will incur a fee of €45 per ton of CO2 emitted (instead of the planned €40). In 2023, it was €30.
- Company pension plans: Relevant for part-time self-employed professionals: Contributions up to 7,248 euros into a company pension plan remain exempt from income tax. This also includes special payments such as Christmas bonuses. Contributions up to €3,624 are also exempt from social security contributions.
- Deducting support payments: Parents can claim up to €11,604 for supporting their children on their taxes if they no longer receive child benefit. This also applies in reverse for children supporting their parents. Restrictions apply if the supported person’s assets exceed €15,500 or if the recipient’s income exceeds €624 per year.
- Deduction for pension contributions: Contributions to statutory pension insurance or a Rürup pension contract can be deducted as special expenses up to amounts of €27,566 (single) or €55,132 (married couples).
- 45% Tax rate for high earners: The top tax rate of 42% increases by three percentage points for taxable income exceeding €277,826 (single) or €555,651 (married couples).
- Solidarity Surcharge: The solidarity surcharge remains applicable for capital income and taxes on corporations. For other taxpayers, it is only applicable to high earners if the income tax exceeds €18,130 (single) or €36,260 (married couples).
- Grunderwerbsteuer (real estate transfer tax) in Thuringia: The real estate transfer tax in Thüringen (Thuringia) decreases from 6.5% to 5%.
- Inflationsausgleichsprämie (inflation compensation premium): Until the end of 2024, companies can pay their employees the inflation compensation premium introduced in 2022, up to a maximum of €3,000. This is tax-free, and social security contributions are also not applicable.
- VAT rate in gastronomy: The reduced VAT rate of 7% for consumed meals ended on December 31, 2023. From 2024, the regular rate of 19% applies again, while the reduced rate continues for takeout or delivery services.
- Standard allowance for personal consumption: This so-called ‘Pauschbetrag für Eigenverbrauch’ affects self-employed professionals who produce and trade food products. New standard allowances for personal consumption of food will be announced.
- Household savings during nursing home stay: A household saving of €11,604 is deducted for nursing home costs if the private household has been abandoned due to health reasons and the individual now resides in a nursing home. The remaining amount can be claimed as an extraordinary burden (außergewöhnliche Belastungen). This regulation does not apply to married couples where one spouse lives in a nursing home and the other at home.
- Tax return for income tax exemption: Employees who claim an income tax exemption (Lohnsteuerfreibetrag) must generally submit a tax return unless the income is very low and does not exceed €12,870 (single) or €24,510 (married couples).
- Tax return deadlines for 2024: From 2024, the regular deadlines for tax returns apply again. Without a tax advisor or support by an assistance association, the tax return must be submitted by July 31, 2025, and with assistance, the deadline is April 30, 2026.
💡Tip from Accountable: Watch out, as more tax changes expected in 2024 due to the Wachstumschancengesetz (Growth Opportunities Act). But we will keep you posted, of course.
Other tax changes in 2024
On November 17, 2023, the Bundestag approved the Wachstumschancengesetz (Growth Opportunities Act). Just a week later, the Bundesrat dealt with the law. The Federal Council expressed extensive concerns about the government’s draft law and demanded over 50 specific changes, additions, or deletions. The Bundestag only adopted a small part of these proposals in its decision. As a result, on November 24, 2023, the Bundesrat referred the law for fundamental revision to the mediation committee. An agreement is expected in early 2024, and many of the changes may only be introduced retrospectively from January 1, 2024.
Changes for companies and self-employed professionals
- Investments in climate protection: Introduction of tax incentives for investments in energy efficiency and environmental protection for all companies, regardless of size and legal form.
- Changes in amortization (AfA):
– Raising the low-value asset threshold (GWG-Grenze) for immediate write-offs from €800 to €1,000 per expense.
– Increasing the threshold for Poolabschreibung (multiple amortizations) from €1,000 to €5,000 and shortening the amortization period from five to three years.
– Raising the special amortization according to § 7g paragraph 5 EStG to up to 50% of the investment costs. - More money for gifts: Increasing the tax-free amount for gifts to individuals who are not employees of the taxpayer from €35 to €50.
- VAT prepayments and VAT returns: Raising the threshold for exemption from the obligation to submit VAT returns from €1,000 to €2,000. Small business owners (Kleinunternehmer) should be exempt from submitting VAT prepayments and returns.
- Ist-Besteuerung: The so-called Ist-Besteuerung makes your bookkeeping easier. Now, companies and entrepreneurs can make use of it when their income is under the new threshold of €800,000 instead of previously €600,000. Freelancers who submit an EÜR (profit & loss statement) can always opt for Ist-Besteuerung.
- Bookkeeping requirement: Raising the turnover and profit thresholds for simplified profit determination through EÜR )profit & loss statement) from €600,000 to €800,000 (turnover) and from €60,000 to €80,000 (profit).
Other changes
- Tax exemption threshold for rental and leasing income: Introduction of a tax exemption threshold, where income up to €1,000 in the assessment period remains tax-free.
- Travel expenses: Since 2024, an increased travel expense allowance of €0.38 per kilometer is granted from the 21st kilometer traveled, while it remains at €0.30 per kilometer for distances up to 20 kilometers.
- Meal allowance: Raising the domestic meal allowances to €32 (large allowance) and to €16 (small allowance). The allowance for professional drivers increases from €8 to €9 per calendar day.
- December aid 2022: The government’s takeover of the payment for the costs of natural gas and heating for December 2022 is tax-free. The corresponding sections 123 to 126 of the Income Tax Act (EStG) have been deleted without replacement.
💡Accountable is the tax software for freelancers in Germany. Handle your bookkeeping and all tax returns in one solution and with personal support from our tax coaches. Learn more.
