Cunning Tax Strategy: Bag Over 175,000 Euros? Here's How to Still Score Parental Allowance!
- By: Nina Ponath
- ⏱️ 6 Min Read
Exceptional Income of Over 175,000 Euros: Eligibility for Parental Benefits Remains Possible! - Earn over 175,000 euros and still receive family allowance benefits.
"Gonna hit the 175k mark?" Tax guru Kim Knopf from the tax consulting firm "TaxItSmart" in Bad Schönborn has seen more of this question cropping up lately. The concern? Parental Allowance eligibility.
- Parental Allowance
- Gross Income
- Revenue Threshold
- Income Tax
With Germany rolling out a revised Parental Allowance system, effective April 1, 2025, eligibility now hinges on a combined total gross (pre-tax) income cap. So, what gives? Here's the lowdown.
Parental Allowance Eligibility Changes (April 2025)Starting April 2025, German families with a combined gross income of 175,000 euros per year are generally disqualified from receiving the standard Parental Allowance, regardless of any other factors.
The Rankle: Gross Income, Not NetMany parents are left scratching their heads, wondering if there's a way around the system with their substantial net income below the 175k mark. The bad news? Calculations for Parental Allowance are based on gross (pre-tax) income, not net. That's right – even if your net income slips below €175,000, if your gross family income remains above it, you're out of luck.
No Bend in the Rules for Net IncomeThere's no sneaky loophole or exception for those families whose net income might be on the lower end, but whose gross income still surpasses the 175k limit. Under the current guidelines, no such provision exists.
The Crème de la Crème: The Uber-RichFor extremely high earners (single parents earning over €250,000 or couples over €500,000 per year gross), there's an absolute ban on Parental Allowance, regardless of other circumstances. Sorry, ultra-wealthy parents – you've beenExcluded from the Parental Allowance party.
Breakdown of Income Limits
| Income Category | Eligibility Limit | Based on ||-----------------|-----------------------------------|------------------------|| Combined Gross | €175,000 (April 2025 onwards) | Both Parents || Individual Gross| Not applicable | — || Net Income | Not relevant | — |
In a Nutshell:The revised Parental Allowance system in Germany excludes families with a combined gross income exceeding €175,000 annually, irrespective of their net income. Income is calculated pre-tax, so even if your net income slips below that number, look for an alternative payday.
- The institutional framework of Germany's revised Parental Allowance system excludes high-income families, as the eligibility now relies on a combined gross income cap of 175,000 euros per year.
- In the realm of personal-finance and business, it is important to note that the institutional framework for the Parental Allowance in Germany is based on pre-tax gross income, leaving no room for loopholes even for families with lower net incomes.
