Austria to boost tax credits and cut VAT on basic foods from 2026

Starting in 2026 Austria will increase several tax deductions for workers, retirees and families. The yearly traffic allowance for employees rises to €487, the pension allowance to €1,002 (up to €1,476 for low‑income retirees), and additional allowances for low‑income earners and single‑parent households are expanded. Families with children can claim up to €2,000 per child under 18, with further bonuses for adult children and additional children.

From 1 July 2026 the value‑added tax on a list of essential food items will be reduced from 10 % to 4.9 %. The cut applies to products such as fresh milk, yogurt, butter, eggs, fresh and frozen vegetables, selected fruits, rice, wheat flour, pasta, bread and kitchen salt. Austria’s food‑retail sector has invested roughly €6 million to adjust point‑of‑sale systems, pricing displays and accounting software so the lower rate can be passed on to consumers on day one.