Tax Relief for high salary earners in 2021

As the ongoing coronavirus pandemic continues to spread, every country is facing their share of troubles regarding their daily functioning. Since most of the countries around the world were under a lockdown, the economy of most of the countries have heavily suffered. Import, export and business in general had almost come to a standstill a couple of months back. Amidst all of this, every Government was under the pressure of regaining the strength of their fallen economies and bring them back with a bang.

Likewise, even the German Federal Government is now coming up with new taxation policies in order to bring back the economy’s strength and ease the financial burden of their citizens. These policies briefly include providing a tax relief of around 42.5 billion Euros by the end of 2024. That is not it, the German Government is also going to raise tax free allowances and increase the child benefits in the country massively.

Trillions of Euros have been pushed into the economy by the German Federal Government in order to maintain a balancing economy in the fight against the coronavirus pandemic. According to the drafted law Federal Finance Minister, Olaf Scholz wants to lessen the burden of heavy taxes from the shoulders of tax payers in Germany.

According to this law, German citizens will be provided with a tax relief of a total of 4.25 billion Euros by the year over the period of 4 years. The breakup of the same is done in a way that the taxes being reduced in the year 2021 will equal to a sum of 7 billion Euros, and around 11- 12 billion Euros in the years 2022, 2023, 2024 each.

Tax Free Allowance

The German Federal Government plans on taking different ways while easing the tax tension and providing tax reliefs to the German public. The amount of money a person needs to earn each year in order to pay taxes is being raised from 9.408 to 9.696 Euros each year in 2021. This basically means, any person earning below this bracket is not liable to pay any income tax.

Experts predict, this policy would give the economy a boost of around 3.1 %. It does not stop here. Individuals earning high salaries have their benefits too. The people who have to pay the top tax rate of 42% will also reduce since the bracket has been reduced to people with annual income of 57.919 Euros whereas the current threshold is 57.052 Euros a year.

The German citizens will be relatively relieved with their financial troubles from the year 2021. The Government has taken a great initiative with helping their citizens to cope with their money troubles. The tax bracket now includes lesser people to pay taxes and that is one of the best things the German Federal Government to do for the welfare of their country. The year 2021 also marks to be the year for the upcoming elections and such great policies being introduced by the current Government can surely give them the edge.

Child Welfare

Not only is 2021 a great year for the working people, German Government also looks at increasing benefits for parents with kids. Married couple with kids earning a high salary are bound to save a lot of money in terms of taxes in the year 2021. Families in Germany are going to have a higher benefit with a higher income. The Federal Government wants to increase child benefits by at least 15 Euros by the year 2021. That basically means that parents will receive around 219 Euros a month for the first and second the child and even more money for the third and more children.

How will these reforms help?

All these measures are being taken to make the economy stabilise after being hit badly by the coronavirus pandemic. One of the world’s biggest economies has too fallen to its knees because of the after effects of the pandemic. In order to bring up people economically, the German Government has thought of introducing reforms such as Tax free allowance and Child welfare by the year 2021.

Talking about tax free allowance, when people earn money and do not spend money on paying taxes, they manage to save surplus money or buy things out of it. While buying things, they put the money in the market and the money circle gets a boost. This is a win-win situation for Germany and the Germans!

The child welfare policy will help couples look after their kids better even if they do not have the money to provide for them. By government’s initiative, kids in Germany will not be ripped off their basic food, clothing and shelter needs. They can also manage getting basic education in that much amount in Germany.

These reforms have massive benefit and will surely aid in strengthening the economy after the bad hit.  By the year 2025 Germany will have the strength to regain all it’s lost economic power. The country will be able to stand back on its feet but this time, even stronger. These reforms will surely bring about a good and impactful change in the functioning of the country.


This article has a gist of the upcoming German taxation policies that are going to be coming into action by the year 2021. The taxation policies of Germany seem pretty confusing but this article will give you a better understanding of it.

Also read about the details about the German job seeker visa here. This can also help you to find your way to the German shores and live a great life ahead.

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