Changes announced by Tax-Hammer: Impact on Investors and Professionals
Laid-Back Lowdown on Germany's Tax Changes
Germany has come rolling with tax updates for investors, professionals, families, and property owners, thanks to the Federal Council's approval of the Annual Tax Act 2024 and the Act on the Tax Exemption of the Minimum Existence on November 22. Here's the scoop:
Loss Offset Freedom for Derivatives
Investors, since 2021, have only had the privilege to offset up to €20,000 in derivatives losses per year. But, cheers to the new act, loss offset restrictions for derivatives are being tossed out the window!
Exit Tax for Funds & ETFs
An "exit tax" will be imposed on funds and ETFs as of January 1, 2025. This new tax will mimic the tax charges applied to held company shares, affecting those who emigrate. Investors may face a "fictitious disposal tax" (max. 27.99%) on the growth accumulated since acquisition, even if they don't actually sell their fund shares. Emigrating investors will pay the tax to the German fiscal authority if the sum of payments into their investment share exceeds €500,000.
Increased Basic Allowance
Single taxpayers can expect a €180 increase in their basic allowance, while married couples on joint assessments will receive a €360 boost, bringing the new standard to €11,784 for singles and €23,568 for couples. Look forward to a fatter December paycheck!
Insights: The Annual Tax Act 2024 will take effect shortly after its approval in late 2024, following the President's signature. Meanwhile, changes to the tax exemption of the minimum existence (garnishment exemption limits) will be implemented from July 1, 2025, through June 30, 2026.[ref1][ref2][ref3]
Simplified PV Systems
The tax exemption for small photovoltaic systems will be standardized, imposing the same maximum permissible gross power of 30 kW (peak) on all types of buildings.
Streamlined Real Estate Tax Reform 2025
In the new real estate tax, taxpayers can present a lower property value if they can prove it's at least 40% below the tax office-set value.
Higher Deductibility of Childcare Costs
The childcare costs tax-deductible as extraordinary expenses will increase to 80%, with a raise in the maximum amount to €4,800.
Simplified Child Benefit Application
From now on, child benefit applications can be made electronically, without the need for a written form.
Effective Dates
The Tax Code Act 2024 and the Act on the tax-exempt minimum subsistence level are effective shortly after approval. However, the exact effective date for the Tax Code Act 2024 is yet to be announced. The Act on the tax-exempt minimum subsistence level will apply retroactively from January 1, 2024.[ref1][ref2][ref3]
Also check out: One Last Chance for Some Extra Cash: How to claim a hefty tax refund in 2024!
[ref1]: (URL of the enrichment data related to the effective dates of the Acts)[ref2]: (URL of the enrichment data related to the garnishment exemption limits)[ref3]: (URL of the enrichment data related to the implementation of global minimum tax rules)
- The Annual Tax Act 2024, which brings changes beneficial to various sectors including investors and businesses, is expected to have an impact on personal-finance, as it will simplify the tax exemption process for small photovoltaic systems, increase the deductibility of childcare costs, and provide a higher basic allowance for taxpayers.
- Business owners and families, especially those with higher income, should take note of the upcoming "exit tax" on funds and ETFs, set to be implemented on January 1, 2025, which may affect personal-finance plans of those who emigrate, by imposing a tax on the growth accumulated since acquisition.
