Germany's 2027 Tax Reform Aims to Save Millions for Families

The coalition government led by Chancellor Friedrich Merz approved a reform package of 34 measures that will take effect from 2027, with full implementation by 2028. Central to the plan is an overhaul of the income‑tax system: the basic tax‑free allowance will rise to €12,900, the child benefit will increase to €272 per month, and the employee expense allowance will be lifted to €1,430. The reform promises an annual fiscal relief of about €10 billion, translating to roughly €600 per year for a typical four‑person household earning €60,000.

To finance the relief, the top‑income tax rate will be raised: the 45 % “rich tax” will now apply from €250,000 and a new 47 % bracket will start at €280,000. Additional measures include raising the flat tax on mini‑jobs from 2 % to 5 %, lowering the deduction rate for hand‑yman services from 20 % to 15 %, and simplifying tax returns with pre‑filled digital forms. Critics warn that higher social‑security contributions and rising living costs could offset the intended benefits, dubbing the plan a “Mogelpackung” (misleading package).