# German income tax reform and Minijob regulatory changes > Live situation record from CLSTR: https://clstr.news/situations/german-income-tax-reform-proposal > Updated: 2026-08-21T21:30:00.000Z. Sources: 37. Developments: 5. The German federal government is proceeding with an income tax reform scheduled for January 1, 2027. To ensure political and social acceptance, the Ministry of Finance has removed certain planned subsidy cuts from the revised draft, specifically deciding against the abolition of the tax-free allowance for employee discounts. This decision has resulted in a total expected tax revenue reduction of 1.55 billion euros for 2027. The reform includes a two-phase increase of the basic tax-free allowance to 12,564 euros in 2027 and 12,900 euros by 2028. To fund these measures, the government will apply a 45 percent rate from 250,000 euros and a new 47 percent rate for income exceeding 280,000 euros. The Arbeiterwohlfahrt (AWO) has criticized the draft, alleging it increases inequality. AWO President Michael Groß stated the plan disproportionately favors wealthy households, noting that the monthly financial advantage for high-income families with children is projected to grow from 127 euros to 151 euros by 2028. The AWO also noted that the 25-euro ‘Kindersofortzuschlag’ for low-income households will be abolished, calling for funds to be redirected toward poverty reduction. Regarding the ‘Minijob’ system, the special status of marginal employment will be preserved, though costs for employers will rise. Starting in 2027, the flat-rate tax for marginal employment will increase from 2 to 5 percent, and the health insurance flat-rate contribution for commercial minijobs will rise from 13 to 17.5 percent. Broader economic pressures are mounting as net social welfare expenditures rose by 6.1 percent in 2025 to 21.5 billion euros. A significant driver was long-term care assistance, which rose by 13.3 percent to 6 billion euros. Burkhard Jung, President of the German Association of Cities, has called for a fundamental reform of long-term care insurance to relieve municipal budgets. ## Claims - The monthly earnings limit for minijobs rises to 603 euros in 2026. (disputed) - The monthly earnings limit for minijobs rose to 603 euros in 2026. (disputed) - The flat-rate tax for marginal employment will increase from 2 to 5 percent starting in 2027. (corroborated by 8 sources) - The health insurance flat-rate contribution for commercial minijobs will increase from 13 to 17.5 percent in 2027. (corroborated by 8 sources) - The German government has agreed on an income tax reform scheduled to take effect on January 1, 2027. (corroborated by 5 sources) - In 2025, social welfare providers in Germany spent a net of 21.5 billion euros on social assistance benefits. (corroborated by 5 sources) - Net expenditures for care assistance rose by 13.3 percent to 6 billion euros. (corroborated by 5 sources) - The share of basic security for the elderly and those with reduced earning capacity decreased for the third consecutive year. (corroborated by 5 sources) - The reform is planned to provide an annual tax relief of up to ten billion euros. (corroborated by 4 sources) - The AWO claims the income tax reform draft increases inequality between high-income and middle-income families. (corroborated by 4 sources) - By 2028, the monthly advantage for high-income households with children compared to normal-earning families is projected to rise from 127 to 151 euros. (corroborated by 4 sources) ## Timeline ### 2026-08-21: Arbeiterwohlfahrt criticizes German income tax reform plans The Arbeiterwohlfahrt (AWO) criticizes Germany's proposed income tax reform, claiming it unfairly favors high-income families while reducing support for low-income households. 6 sources. https://clstr.news/cluster/arbeiterwohlfahrt-criticizes-german-income-tax-reform-plans ### 2026-08-19: Germany social assistance spending rises to 21.5 billion euros German social assistance spending rose 6.1% to 21.5 billion euros in 2025, driven largely by a 13.3% surge in long-term care costs, prompting calls for nursing care insurance reform. 33 sources. https://clstr.news/cluster/germany-agrees-on-income-tax-reform-starting-in-2027 ### 2026-08-16: Germany to introduce new tax tiers for high earners in 2027 Germany will reform its high-income tax system in 2027, lowering the 45 percent threshold to 250,000 euros and introducing a new 47 percent rate for income above 280,000 euros. 2 sources. https://clstr.news/cluster/germany-to-reform-high-income-tax-rates-starting-2027 ### 2026-08-13: Ifo Institute criticizes Germany's planned 2027 income tax reform The Ifo Institute warns that Germany's planned 2027 income tax reform will fail to stimulate growth, instead increasing the tax burden on high earners and medium-sized enterprises. 2 sources. https://clstr.news/cluster/ifo-institute-criticizes-germanys-planned-2027-income-tax-reform ### 2026-08-10: Germany proposes tax relief for low and middle-income earners Germany has proposed a tax reform for 2027 to provide 10 billion euros in relief to low and middle-income earners by increasing tax-free allowances and adjusting tax brackets. 2 sources. https://clstr.news/cluster/germany-proposes-tax-relief-for-low-and-middle-income-earners --- Cite as: German income tax reform and Minijob regulatory changes. CLSTR, https://clstr.news/situations/german-income-tax-reform-proposal