Child benefit or allowances: the test the tax office runs on its own

The Brandts, a married couple assessed jointly, have a nine-year-old daughter and receive 259 € of child benefit every month, 3,108 € over the year. Their tax assessment then shows 9,756 € of allowances deducted from income, and the same 3,108 € appears a second time, now as an addition to the tax. It is not a mistake: this is what a comparison test looks like when it has come out in favour of the allowances.

One purpose, two instruments

The starting point sits in § 31 EStG, and it is more fundamental than most leaflets suggest. An amount of income equal to a child's subsistence minimum is to stay free of tax, including the needs for care, upbringing or training. The idea is shaped by constitutional law; it is not a gift from the legislature.

For this exemption the statute has two instruments, and it uses them as alternatives. Either the allowances under § 32(6) take effect, or the child benefit under Part X of the Act does. Both at once for the same assessment period is not possible.

During the year, child benefit is paid monthly, and expressly as a tax refund. In legal terms it is therefore not a welfare payment in the narrow sense but a tax refund paid in advance, which flows whether or not the family pays any income tax at all.

What happens when the child benefit exceeds the tax the allowances would have saved? Then the subsistence minimum has already been more than exempted. The statute assigns the surplus to the support of the family: the family keeps it, and nobody claims it back.

In practice this gives a simple sequence. During the year child benefit is paid and nobody calculates anything. Only at assessment, after the return has been filed, does the tax office establish whether the allowances would have achieved more. Only in that case does anything change.

Child benefit: one amount, every month

Under § 66(1) EStG, in the version read on 23 September 2026, child benefit is 259 euros a month for each child. The text makes no distinction by the number of children: the third child brings the same amount as the first.

Payment runs from the start of the month in which the conditions are met until the end of the month in which they cease. A child born on the 28th of a month thus brings child benefit for that entire month; an entitlement that ends on the 2nd runs to the end of the month.

Subsection 3 expressly ties the amount to the allowances. If those are raised, child benefit is raised accordingly, rounded commercially to whole euros. The two instruments are meant to move in step, so that the comparison test does not quietly tip over time.

For each child, child benefit is paid to one entitled person only. Where the parents live together, they decide between themselves who receives it; if they cannot agree, the family court decides on application. Where they live apart, it goes to the parent who has taken the child into their household.

If the child lives in neither household, for instance because it lives away, the benefit goes to whoever pays the child a maintenance allowance, and among several to the one paying the most. This allocation is set out in § 64 EStG, and it matters again in the second module for the single-parent relief.

The allowances of § 32(6)

At assessment, for each child that counts, an allowance of 3,414 euros for the child's material subsistence minimum is deducted, which the statute itself calls the child allowance. A second allowance of 1,464 euros is added for the need for care, upbringing or training.

In practice the second amount is usually called by its German abbreviation, the BEA allowance. Both amounts are deducted from income, not from the total of income from all sources: they come at the very end of the chain, just before taxable income.

What matters is whom these amounts are for: one taxpayer, that is, each parent. Where spouses are assessed jointly under §§ 26 and 26b and the child is the child of both, the amounts double. So 3,414 euros become 6,828 euros, and 1,464 euros become 2,928 euros.

The doubled amounts also go to a single parent if the other parent has died or is not subject to unlimited tax liability. The same applies where someone has adopted the child alone or the child is a foster child of that person only.

If the child lives abroad and is not subject to unlimited tax liability, the amounts are deductible only in so far as they are necessary and appropriate by the standards of the child's country of residence. In countries with lower price levels they are reduced accordingly.

For each calendar month in which the conditions are not met, the allowances are reduced by one twelfth. Because a child counts from the month of its birth under subsection 3, a child born in December brings one twelfth of the annual amounts.

Finally, a formal requirement that holds up assessments in practice. Both allowances require the child to be identified by its tax identification number. If the number is issued later, that takes effect back to the months in which the other conditions were met.

The comparison test, sentence by sentence

The actual calculation rule is in § 31 sentence 4 EStG. If the entitlement to child benefit for the whole assessment period does not fully achieve the required exemption, the allowances are deducted at assessment. The scheduled income tax so determined is then increased by the child benefit entitlement for the whole year.

Put plainly: the tax office computes the tax twice, once without and once with the allowances. If the difference between the two results exceeds the annual child benefit, the allowances are applied and the child benefit is added to the tax. If it is smaller or equal, child benefit stands.

The addition is where many people have doubts. It prevents a family from receiving both: the child benefit during the year and, on top of it, the tax saving from the allowances. In the end the family receives only the part of the saving that exceeds the child benefit.

The statute looks at the entitlement, not at what was actually paid out. Anyone who forgets to apply for child benefit therefore does not recover it through the allowances at assessment: what is added is what they would have been entitled to.

Sentence 5 makes one exception. Months are disregarded for which the family benefits office set an entitlement but was not allowed to pay it out because of § 70(1) sentence 2. Here, what never flowed is not added.

This becomes practical with a late application. Under § 70(1) sentence 2, child benefit that has been set is paid retroactively only for the last six months before the month in which the application arrived. The entitlement for older months remains but is not paid, and is therefore not added back either.

Payments comparable to child benefit under § 65 are treated the same way for the addition. An entitlement to child payments under foreign law, however, is disregarded in so far as it exceeds German child benefit: at most, what would have been paid in Germany is added back.

For parents who are not assessed jointly, the child benefit entitlement is counted only to the extent of the child allowance. Each parent receives the single allowance, and accordingly only half of the child benefit is set against each of them, whoever actually received it.

A rule of thumb follows directly from the figures. For a jointly assessed couple, 9,756 euros of allowances face 3,108 euros of annual child benefit. The allowances pay off only if they save tax at an average of more than about 32 percent, which happens only at higher incomes.

The wording requires no application for this; the test is part of the assessment itself. Because § 31 refers to the subsistence minimum of a child, it is carried out for each child separately.

Adult children: when they still count

A child first counts in every month at whose start it has not yet completed its 18th year of life. From the month after the 18th birthday this automatic recognition ends, and the cases listed in subsection 4 take over.

The first concerns job seekers. Until completing its 21st year of life, a child still counts if it is not in employment and is registered as a job seeker with an employment agency in Germany. The registration is a condition, not a mere formality.

The second and far more frequent case applies until completion of the 25th year of life. The statute lists four groups, any one of which suffices. The most important is vocational training, which in common understanding also includes university and school-based training.

• the child is being trained for an occupation
• it is in a transition period of at most four months between two stages of training or before a voluntary service
• it cannot begin or continue vocational training for lack of a training place
• it is doing one of the listed voluntary services, such as a voluntary social or ecological year or the federal volunteer service

The transition period is measured strictly. If five full months lie between the school-leaving exam and the start of studies, the entitlement breaks for that gap unless another group applies, for instance a serious but unsuccessful search for a training place.

The third case has no age limit. A child who is unable to support itself because of a physical, mental or psychological disability counts permanently, provided the disability arose before completion of the 25th year of life.

Subsection 5 extends the limits of 21 and 25 for children who performed statutory basic military service, civilian service or an activity exempting from it. The extension goes at most as far as the length of the domestic statutory service and applies only where such service was actually performed.

Subsection 4, in the version read, contains no income limit for the child. It has been replaced by a test of gainful employment, and that test only applies after completion of a first vocational training or a first degree.

From that point on, a child in the cases of number 2 counts only if it is not gainfully employed. Harmless are work of up to 20 hours of regular weekly working time, a training employment relationship, and a mini-job within the meaning of §§ 8 and 8a SGB IV.

For a second degree after a completed first degree, this is the decisive sentence. Working more than 20 hours a week alongside it removes child benefit and allowances; staying below that or holding a mini-job keeps them until completion of the 25th year of life.

Separated parents: who gets the allowances

For parents not assessed jointly, each first receives the single amount. Subsection 6 sentence 6 allows a transfer: on application, the other parent's child allowance passes to the one who substantially meets their maintenance obligation, where the other does not or owes no maintenance for lack of means.

The BEA allowance always moves together with the child allowance. A transfer is ruled out, however, for periods in which payments under the Maintenance Advance Act are made: the state has then already stepped in for the defaulting parent.

For minor children there is a separate rule on the BEA allowance. On application it passes to the parent with whom the child is registered. The other parent can object if they bear childcare costs or regularly look after the child to a not insignificant extent.

Finally, the allowances can pass to a step-parent or grandparent who has taken the child into their household or owes the child maintenance. With the consent of the entitled parent this works without dispute; that consent can be revoked only for future years.

Every transfer also shifts the comparison test. Whoever receives both allowances has the full child benefit entitlement set against them. A transfer therefore pays off only for the parent with the higher marginal tax rate, and only if the calculation confirms it.