Should I Apply for Child Benefit or Child Allowance?

Child allowance and child benefit are two financial benefits available to families with children. There are some differences between the two:

• child benefit is paid to one parent every month
• if the income is higher, the child allowance reduces the income tax after submitting the tax return and is not paid out

Get detailed information about the COVID-19 child bonus.

Child Benefit or Child Allowance? You Decide!

You can either use child benefit or child allowance. In any case, you will receive child benefit if you apply for it. The tax exemption is cheaper when calculating the taxes only if you have a certain income. The tax office checks which variant is better for the individual case with the so-called cheaper check (Günstigerprüfung).

You can use the child allowance as long as you are entitled to child benefit.

You are entitled to child benefit until your child has reached the age of 18. Also, it may be continued (on proof) up to the age of 25 if your child:

• is in initial training (studies, school and company training)
• is in a second, advanced training
• is in a transition period between school and training (maximum 4 months)
• has unsuccessfully applied for an apprenticeship (this must be verifiable)

Children with disability are entitled to child benefit beyond the age of 25 only if they cannot provide for their own living. However, the disability must have occurred before the age of 25.

If your child is registered as a job-seeker at a job centre, he/she is entitled to child benefit up to the age of 21.

You must have noticed that due to the COVID-19 pandemic, the federal government has decided on a family bonus of 300 Euros.

This applies to every child entitled to child benefit for at least one month in 2020. The payment is made in two instalments. The state pays an additional 200 Euros in September and 100 Euros in October.

Child benefit increases almost every year. With the third child, there is a higher benefit to relieve the financial burden of having a large family. From the fourth child onwards, the child benefit increases again for each subsequent child.

child benefit 2023:

• 1st child: 237 Euro per month / 2,844 Euro per year
• 2nd child: 237 Euro per month / 2844 Euro per year
• 3rd child: 237 Euro per month / 2,844 Euro per year
• from the 4th child onwards, per child: 250 Euro per month / 3,000 Euro per year

child benefit 2022:

• 1st child: 219 Euro per month / 2,628 Euro per year
• 2nd child: 219 Euro per month / 2,628 Euro per year
• 3rd child: 225 Euro per month / 2,700 Euro per year
• from the 4th child onwards, per child: 250 Euro per month / 3,000 Euro per year

child benefit 2021:

• 1. child: 219 Euro per month / 2,628 Euro per year
• 2nd child: 219 Euro per month / 2,628 Euro per year
• 3rd child: 225 Euro per month / 2,700 Euro per year
• from the 4th child onwards, per child: 250 Euro per month / 3,000 Euro per year

child benefit 2020:

• 1st child: 204 Euro per month / 2,448 Euro per year
• 2nd child: 204 Euro per month / 2,448 Euro per year
• 3rd child: 210 Euro per month / 2,520 Euro per year
• from the 4th child onwards, per child: 235 Euro per month / 2,820 Euro per year

child benefit 2019:

• 1st child: 204 Euro per month / 2.448 Euro per year
• 2nd child: 204 Euro per month / 2.448 Euro per year
• 3rd child: 210 Euro per month / 2.520 Euro per year
• from the 4th child onwards, per child: 235 Euro per month / 2.820 Euro per year

The child allowance is suspended for each parent.

• the care allowance (allowance for care and education or training needs)
• and the child allowance based on the subsistence level of a child.

Development of the child allowance

For each child, the child tax allowance in 2021 is a total of 8,388 Euros. It also increases almost every year. Married people can use it in full if their taxes are assessed together. For unmarried parents, the amount is divided so that each parent can use half of the tax exemption.

If you are expecting a child, you should apply for child benefit. This grant is paid to you every month. You may apply to the responsible family benefits office at your place of residence.

If the child allowance turns out to be more favourable for your taxes, child benefit and allowance are offset against each other, as in the example above.

Cheaper Check: Calculate Tax Advantage With Child Allowance

The tax exemption is only worthwhile for spouses with children who have a joint gross income of around 60,000 Euros, whereas for single people with children, from approx. 30,000 Euros. By the way: parents with higher incomes can also benefit from the family bonus introduced at the onset of the COVID-19 pandemic. According to the Federal Ministry of Family Affairs, parents up to a taxable income of 90,000 Euros and one child should benefit financially through the bonus.

On submitting your tax return, the tax office calculates your taxes first with the child benefit and then with the child allowance. The variant more favourable to your tax return is used to determine your final tax. All you have to do is submit a tax return with the required attachment.

The tax experts with the Taxfix app will help you fill out the annexe.

Entering Child Allowance – How Do I Do it?

If you and your partner have a child, going to the registry office is the first official step. Often, hospitals offer to send all the necessary documents to the registry office for issuing the birth certificate. After a week, you will receive the birth certificate in the mail.

Because all public offices in Germany are closely interlinked, the residents’ registration office and the tax office are aware of the child’s birth. The child allowance is then automatically forwarded to your employer via the ELStAM procedure.

So, you don’t have to do anything to register for the tax exemption. It all happens automatically.

Child Allowance 0.5 on the Income Tax Certificate: What Does That Mean?

It is assumed that parents look after their offspring equally. Therefore, half a child allowance is automatically entered in the wage tax deduction criteria for both parents.

For a child, your income tax certificate usually says:

However, the child allowance does not affect your monthly income tax. On the contrary, it reduces the solidarity surcharge and, if applicable, the church tax.

If you and your spouse jointly assess your taxes, half of your child allowances will be applied to your joint income when you submit your tax return. This means that each of you can benefit from the tax exemption together.

Number of Child Allowance 1.0: Do I Change Child Allowance?

If you and your partner have two children, there is a child allowance of 1.0 in your wage tax deduction criteria. This means that each of you receives an exemption of 0.5 for each child.

If you only have one child, the number of child allowances per parent can be 1.0 under the following conditions:

• One parent lives abroad
• The other parent adopted the child (step-parent)
• The other parent does not meet at least 75 per cent of his or her maintenance obligation
• The child’s father is unknown
• One parent has died

How Can I Transfer the Child Allowance?

According to Section 32, Paragraph 6, Clause 6-11 of the Income Tax Act, you can transfer half of the child allowance to the following persons:

• The other parent
• The grandparents, if they are responsible for maintenance or if the child lives in their household
• The step-parents, if they have to pay maintenance or if the child lives in their household

To transfer the child allowance, you must fill out Appendix K and send it to the responsible tax office responsible.