Module 122 min2558 wordsFree — no account
Child benefit or allowances: the test the tax office runs on its own
The module’s worked examples, then cases to attempt before revealing their solution · 1 section · 176 words · 2 min
Practical case
Do the allowances win, and by how much?
A jointly assessed couple has a twelve-year-old son with an entitlement to child benefit for the whole year. Their scheduled income tax is 14,200 euros without deducting the child allowances and 10,900 euros with the full deduction. What income tax does the tax office set, and what advantage do the allowances bring compared with child benefit alone?
Hint: First work out the annual child benefit, then the tax saved by the allowances. Do not forget the addition if the allowances win.
Show the solution
Annual child benefit is 12 times 259 euros, that is 3,108 euros. The allowances, 9,756 euros in total, reduce the tax from 14,200 to 10,900 euros, saving 3,300 euros. Because 3,300 euros is more than 3,108 euros, child benefit does not fully achieve the exemption: the allowances are deducted and the tax is increased by the child benefit entitlement, to 10,900 plus 3,108 euros. Compared with child benefit alone, that yields the difference between 3,300 and 3,108 euros.
Answer: 14,008 euros of income tax, an advantage of 192 euros
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